Methane, despite being odourless, can cause a stink. For Australian oil and gas explorer , its bet on exporting natural gas from underground coal seams has proved expensive. On Monday on Gladstone liquefied natural gas, or GLNG. Newish chief executive Kevin Gallagher had to adjust GLNG’s value on the balance sheet, due to lower oil price estimates. He has also something more pressing than book values on his mind: finding the cash flow to cover the company’s large debts. Results later this week are an opportunity for him to explain just how Santos can go about reducing its leverage.

GLNG produces its gas in basins about 300 miles inland from its coastal LNG facilities, and pipes it north-east to Gladstone. While gas has begun to flow this year, the first project stage (known as a “train”) has had a slow start. tend to flow at a leisurely pace, requiring lots of drilling to get volume up. Santos drilled about 25 wells last year, about a tenth of what UBS analysts think is needed to meet production targets. The company will need to show that drilling has increased substantially this year.

All the same, Santos’ share price has performed well in 2016, up nearly a third, beating locally listed rivals and . The fact that capital spending at GLNG has peaked means that most analysts anticipate that Santos will generate free cash flow starting this year. The Australian explorer desperately needs some: its net debt is achingly high at over four times its estimated earnings before interest, tax, depreciation and amortisation.

Whether Santos shares can track higher depends on what Mr Gallagher says later this week. He had forecast that Santos could meet all its investment needs with oil at $47 per barrel. Deeper cost cuts in its other businesses, together with clarity over the outlook for GLNG’s production, would leave him smelling like roses.

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