Santos Limited · ASX:STO
Santos — Investor Day (September 2018)
88 slides from Santos's investor day presentation, Sep 26, 2018
Slide 1: Santos targets production of more than 100 mmboe by 2025
ASX / Media Release 26 September 2018 Santos targets production of more than 100 mmboe by 2025 Santos today outlined its plans to grow production to more than 100 million barrels of oil equivalent (mmboe) by 2025, almost doubling current levels of production. Speaking at the company’s Investor Day i
Slide 2: Santos 2018 Investor Day
Santos 2018 Investor Day 26 September 2018
Slide 3: Disclaimer and important notice
Disclaimer and important notice This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variables which c
Slide 4: Agenda
Agenda Session 1 Topic Presenter Title 9:00 Welcome Andrew Nairn Head of Investor Relations 9:05 Strategy Kevin Gallagher Managing Director & CEO 9:50 Marketing, Trading & Commercial Philip Byrne Executive Vice President Marketing, Trading & Commercial 10:05 Finance & Capital Management Anthony Neil
Slide 5: Strategy
Strategy Kevin Gallagher Managing Director & CEO
Slide 6: Compelling value proposition
Compelling value proposition Santos has transformed into a low-cost, reliable and high performance business. Our goal is to drive shareholder value through: Diversified and balanced portfolio of long-life assets Strong stable cash flows Disciplined Operating Model Sustainable dividends Platform for
Slide 7: Transform Build Grow
Transform Build Grow Clear and consistent strategy + Execute and bring on-line growth opportunities across the core portfolio + Focused exploration strategy to identify new high-value targets and unlock future core assets Grow + Generate new revenue through low-carbon Energy Solutions projects + Dev
Slide 8: Successfully delivering the strategy
Successfully delivering the strategy Strategy supportive of Santos’ purpose to provide sustainable returns for our shareholders Balance sheet repaired Dividend reinstated Transform Five core, long-life natural gas assets generating free cash flow at ≤$40/bbl oil price Australia’s lowest cost
Slide 9: Safety and sustainability
Safety and sustainability Our vision is to be the safest and lowest-cost operator Safety & Environment + ‘Mining the Diamond’ to focus on eliminating incidents with potential for significant Lost time injury frequency rate (LTIFR) harm to people, assets or environment Rate per million hours worked +
Slide 10: Diversified and balanced portfolio
Diversified and balanced portfolio Diversified and balanced portfolio generates strong stable cash flows that are leveraged to oil price upside 2017 Reserves1 mmboe + Diversified and balanced portfolio of 5 core long-life Santos standalone Santos + Quadrant 3% natural gas assets 4% 13% 31% 31% + Ass
Slide 11: Disciplined Operating Model
Disciplined Operating Model Santos’ disciplined Operating Model provides the framework to drive value Asset lifecycle Portfolio & portfolio rules Disciplined capital management Diversified portfolio of five core long-life, natural gas assets Exploration Debt repayment Western Cooper Queensland North
Slide 12: Platform for growth
Platform for growth Significant growth opportunities in all five core assets Santos operated assets Non-operated assets Western Australia Cooper Basin QLD & NSW Northern Australia PNG Dorado oil development Growth self-funding GLNG growth self-funding Barossa backfill to PNG LNG expansion within the
Slide 13: Targeting portfolio production >100 mmboe by 2025
Targeting portfolio production >100 mmboe by 2025 Disciplined growth from new upstream projects leveraging-off existing infrastructure Diversified and disciplined production growth to 2025 + Strong growth outlook across all 5 core assets + Santos operated assets account for ~80% of Santos operated a
Slide 14: 2018-19 strategic priorities
2018-19 strategic priorities Business focus aligned to the core strategy Complete P’nyang farm-in in PNG and enter FEED for expansion FID Barossa backfill to Darwin LNG Complete Quadrant acquisition and realise synergies Ramp-up GLNG sales to ~6 mtpa run-rate by 2019 year-end Deliver Dorado appraisa
Slide 15: Marketing, Trading & Commercial
Marketing, Trading & Commercial Philip Byrne Executive Vice President Marketing, Trading & Commercial
Slide 16: A leading domestic gas provider
A leading domestic gas provider Santos continues to demonstrate its commitment to the domestic gas market with supply exceeding 120 PJ in 2018 Darwin EAST COAST WEST COAST Expect to supply Expect to supply Devil Creek > 70 PJ of > 50 PJ of McArthur Varanus domestic sales domestic sales Island Queens
Slide 17: West Coast domestic gas
West Coast domestic gas The WA market is well-supplied in the near-term but significant long-term opportunities present as a result of contract roll-offs + Santos expects to supply over 50 PJ of sales gas to the west coast domestic market in 2018 + Incremental growth from mining (lithium, gold and i
Slide 18: East Coast domestic gas
East Coast domestic gas AEMO forecast no supply gaps before 2030 under expected market conditions + Santos expects to supply over 70 PJ of sales gas and ethane to the east coast domestic market in 2018 + Santos is committed to ensuring that the East Coast domestic market is well supplied and industr
Slide 19: East coast dual-market strategy
East coast dual-market strategy Santos positioned to benefit from commitment to domestic natural gas markets and strong Asian demand for LNG + Australia’s lowest-cost onshore operations focused on freeing-up reserves for the SANTOS domestic market and increased throughput at PORTFOLIO GAS Commitment
Slide 20: Global LNG outlook
Global LNG outlook The LNG market needs new supply from 2022. Supply gap of 65 mtpa forecast in 2025, aligning with Santos’ LNG portfolio growth opportunities Global LNG supply and demand + Demand has strengthened between 2H 2017 and 1H 2018 mtpa + Only 10 projects (36 mtpa) have reached FID since 5
Slide 21: Strong contracted LNG position
Strong contracted LNG position 90% of 2019 LNG portfolio linked to long-term contracts with strong slopes Santos LNG contract pricing + Q2 2018 realised LNG price of US$9.74/mmBtu1 US$/mmBtu FOB + Minimum exposure to volatile pricing 16 + PNG LNG entered mid-term sales agreements with PetroChina and
Slide 22: LNG portfolio set for growth
LNG portfolio set for growth Opportunities to increase Santos equity LNG sales to ~5 mtpa by mid-2020s Santos LNG portfolio growth mtpa GLNG growth 0.7 + GLNG sales to ramp-up to ~6 mtpa run-rate by the end of 20191 0.4 + Opportunity to utilise incremental plant capacity up to 8.4 mtpa 0.2 0.9 Baros
Slide 23: Santos LNG netback advantage
Santos LNG netback advantage Santos’ assets take advantage of lower shipping costs to supply the Asian market with cost competitive LNG Shipping costs from Australia/PNG to Asia are 60-70% less than shipping from the Gulf of Mexico1 Geographical Advantages + Reduced shipping costs due to proximity t
Slide 24: Global oil outlook
Global oil outlook While the market appears well-supplied, the potential impact of geopolitical issues may result in tighter markets Global oil supply and demand million barrels per day + While global oil demand continues to grow, the market is expected to remain tightly balanced Supply + OECD inven
Slide 25: Valuable and growing liquids sales portfolio
Valuable and growing liquids sales portfolio High-value liquids portfolio at premium prices 2017 Liquids sales1 + Santos crude oil sales attract a premium to Brent prices mmboe 25 + Portfolio realised oil price in H1 2018 of $75/bbl a Crude ~7% premium to Brent Condensate + Proposed Quadrant Energy
Slide 26: Marketing & Trading summary
Marketing & Trading summary A leading provider Brownfield LNG Valuable and M&T organisation of domestic gas in volumes available growing liquids resourced to meet Australia with in mid 2020s portfolio trading the challenges of 120 PJ supply when market is at a premium to this growing expected in 201
Slide 27: Finance & Capital Management
Finance & Capital Management Anthony Neilson CFO
Slide 28: Financial discipline
Financial discipline Strong financial and operating performance driving shareholder value Continued cost efficiencies and + Excluding the impact of shutdowns, production costs $7.79/boe in 1H18 savings being delivered through + Cooper Basin production costs continue to decline to $8.42/boe in 1H18 l
Slide 29: Our Operating Model in action
Our Operating Model in action Disciplined process around cost savings and efficiencies Cooper Basin well cost1 Cooper Basin unit production cost $million $/boe DISCIPLINED -50% -34% 12.7 OPERATING 4.8 4.2 10.7 9.3 8.4 MODEL 2.6 2.4 + Core portfolio free cash flow breakeven at 2015 2016 2017 1H18 ≤$4
Slide 30: Capital expenditure
Capital expenditure 2018 capex guidance $775-825 million. Activity is increasing and we are doing more for less 2018 capital expenditure guidance $775-825 million1 Capex activities looking ahead + Cooper Basin 4-rig program drilling 85-90 wells + Activity levels increasing to a new stable level cons
Slide 31: Strong free cash flow generation
Strong free cash flow generation Diversified portfolio with strong free cash flow and EBITDAX margin across all our assets 2018 Half-year segment results summary Free cash flow1 $ million +22% Cooper QLD & Northern Western $million PNG Basin NSW Australia Australia 367 306 302 316 Revenue 529 469 21
Slide 32: Strong liquidity maintained to provide flexibility
Strong liquidity maintained to provide flexibility Liquidity of ~$2.5 billion expected at completion of Quadrant acquisition Cash, debt and undrawn debt facilities + Net debt reduced to $2.2 billion at end August. Sale proceeds of $million $144m from Asia received in Sept. Net debt reduction target
Slide 33: Rapid de-gearing profile post Quadrant acquisition
Rapid de-gearing profile post Quadrant acquisition Strong stable cash flows underpin rapid de-gearing. Targeting medium-term gearing ratio of <25% addressing all future capital expenditure requirements for the combined business and dividends Gearing post growth funding and dividends1 Disciplined cap
Slide 34: Proforma drawn debt maturity profile
Proforma drawn debt maturity profile Proforma gross debt $5.1 billion at 31 August 2018 including new committed debt facilities associated with Quadrant Energy acquisition (subject to completion) Proforma drawn debt maturity profile as at Proforma drawn debt maturity profile 31 August 20181 Proforma
Slide 35: Quadrant acquisition
Quadrant acquisition Strongly value accretive acquisition PURCHASE PRICE & EFFECTIVE MATERIAL COMBINATION STRONG FINANCIAL DATE SYNERGIES ACCRETION + Effective date 1 January 2018 + Targeting combination synergies of + Materially accretive on all key valuation $30-50 million per annum (pre-tax)1 met
Slide 36: Morning Tea
Morning Tea Santos
Slide 37: Onshore upstream development
Onshore upstream development David Banks Vice President Onshore Upstream Projects
Slide 38: Cooper Basin - a new era and focus
Cooper Basin - a new era and focus Strong fundamentals supportive of Cooper Basin growth as a high-value swing producer Cooper Basin growth enablers Dual-market east coast strategy Growing east coast market demand1 PJ Basin master position; Australia’s lowest-cost onshore operator 2,083 ‘Super b
Slide 39: Cooper Basin transformation to growth
Cooper Basin transformation to growth Low-cost, efficient drilling improved capital efficiency and higher production and reserves enables…… more wells leading to…… additions over time. Well cost1 Wells drilled Production $ million no of wells kboe/d Crude oil Sales gas, ethane & NGLs 30% -50% 4.8 85
Slide 40: Cooper Basin – more than 2P
Cooper Basin – more than 2P Strong resource and reserve position supports future growth 2P field life Strong conversion success 2P + 2C field life ~10 years rate1 >20 years mmboe % mmboe 44 100% 78% 44 100 100 2P reserves 2C resource 2P undeveloped 2C resource2 2P reserves to developed to developed
Slide 41: Targeting ~17-19 mmboe production by 2025
Targeting ~17-19 mmboe production by 2025 Low-cost operating model and efficiencies underpin a focused program expected to deliver increased production and resource conversion over time Cooper Basin production mmboe drill count 20 150 Strong dual-market demand 125 15.5 15.1 15 14.4 Technical experti
Slide 42: Cooper Basin
Cooper Basin Chad Wilson Vice President Upstream Cooper Basin
Slide 43: Delivering on our commitments
Delivering on our commitments Ambitious plans to further transform and grow the Cooper Basin were articulated at the 2017 Investor Day Long term production decline arrested and now growing again Drilling activity increased to 85-90 wells in 2018 Well costs reduced to $2.4 million1 Unit product
Slide 44: Cooper Basin oil growth
Cooper Basin oil growth Oil production at levels not seen since early 2009 Cooper oil Daily production bopd (month average) + Santos’ ~150 oil fields continue to deliver upside results 12,000 through innovation and low costs +51% + 20 oil wells drilled in 2017 + only 32% of volume developed booked a
Slide 45: Cooper Basin - more than 2P Reserves
Cooper Basin - more than 2P Reserves High success rate from non-2P drills Drilling program project composition + Reserve replacement ratio growing YOY 2018F + ~50% of 2018 program targeting Prospective & 2C project opportunities + ~75% of our 2017 prospective and 2C projects were connected, adding P
Slide 46: Moomba South Patchawarra update
Moomba South Patchawarra update First of several available large scale project appraisal programs + Moomba South appraisal program was the first large scale appraisal program selected given scale and proximity + Moomba 212 success has provided line of sight to commercial development of up to 42 mmbo
Slide 47: Enhanced oil recovery
Enhanced oil recovery Matching proven technologies with Santos’ capabilities and existing footprint to develop opportunities that boost oil sales, drive productivity and economically reduce emissions Enhanced oil recovery using CO2 + Pathway defined to assess incremental recovery from CO2 miscible e
Slide 48: Cooper Basin summary
Cooper Basin summary Cost and efficiency setting the stage for future growth Lowest cost onshore Develop and appraise Explore and grow operations + Free cash flow positive at + Production growing year on + Renewed focus on high graded ≤$40/bbl oil price year exploration + Well costs down 50% since +
Slide 49: Queensland
Queensland Rob Simpson Vice President Upstream Queensland
Slide 50: Delivering on our commitments
Delivering on our commitments Strategy in place to grow equity gas production and unlock further resources Ramp-up GLNG sales to ~6 mtpa run-rate by YE2019 Drilling activity increased to ~300 wells in 2018 Roma well costs reduced to $0.85 million1 Equity gas production growing Increase Fairv
Slide 51: GLNG ramp-up on track
GLNG ramp-up on track GLNG on track to meet ~6 mtpa annualised sales run-rate including LNG volumes redirected to the domestic market GLNG LNG equivalent sales by gas supply source mtpa Building equity gas supply + Increasing drilling activity consistent with the Santos 6 disciplined operating model
Slide 52: Activity ramping-up and lower unit costs maintained
Activity ramping-up and lower unit costs maintained Cost out and efficiencies underpin an accelerated development plan to unlock more gas over time Days - development drilling Wells drilled Well cost1 Average days rig release to rig release No of wells $million per well -77% -84% 11.3 ~300 5.2 172 3
Slide 53: Roma – strong production growth
Roma – strong production growth Roma production continues to ramp-up Roma production Roma development Average weekly sales gas rate (TJ/d) 80 60 40 20 0 Aug-17 Dec-17 Apr-18 Aug-18 Sales Field capacity Production + Roma production continues to ramp-up + ~30% higher YTD August + Well count growth of
Slide 54: Roma East development well-progressed
Roma East development well-progressed Roma East well lease Trunk line Roma nodal compressor station Coiled tubing drilling rig Santos 2018 Investor Day 53
Slide 55: Fairview – GLNG’s world-class asset
Fairview – GLNG’s world-class asset Focus on well availability Fairview production Fairview development Average weekly sales gas rate (TJ/d) 600 400 200 0 Aug-17 Dec-17 Apr-18 Aug-18 Sales Field capacity Production + World-class CSG reservoir + Well availability focus + Pump installations in free-fl
Slide 56: Scotia – execution excellence
Scotia – execution excellence Disciplined execution Scotia Production Scotia Development Average weekly sales gas rate (TJ/d) 60 40 20 0 Aug-17 Dec-17 Apr-18 Aug-18 Sales Field capacity Production + Disciplined execution and cost management of recent development program + 85 wells + Delivered 16% un
Slide 57: Scotia CF1 project delivered ahead of schedule and under budget
Scotia CF1 project delivered ahead of schedule and under budget Scotia production facility - before Scotia production facility - after 28 TJ/d >55 TJ/d and growing Santos 2018 Investor Day 56
Slide 58: Arcadia – Our latest development
Arcadia – Our latest development Arcadia Phase 1 development sanctioned May 2018 Arcadia Arcadia development Average weekly sales gas rate (TJ/d) 10 8 6 4 2 0 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Sales Field capacity Production Steady production from existing Accelerated Depletion Pilot
Slide 59: Eastern Queensland
Eastern Queensland Eastern Queensland portfolio to capture domestic gas opportunities while maintaining gas supply to GLNG + Continued focus on a disciplined low cost operating model + Realising value from previously marginal project areas Mahalo + Santos aims to be the operator of choice, enabling
Slide 60: GLNG summary
GLNG summary Proven cost performance allows higher activity and future growth Lowest cost onshore Develop and appraise Explore and grow operations + Free cash flow positive at + Equity gas production growing + Develop new plays ≤$40/bbl oil price year on year + Progress exploration and + Roma well c
Slide 61: Conventional Oil & Gas
Conventional Oil & Gas Bruce Clement Executive Vice President Conventional Oil & Gas
Slide 62: Papua New Guinea
Papua New Guinea Strong acreage position in highly prospective region. Santos’ strategy is to build partner alignment and participate in expansion opportunities at PNG LNG PNG LNG + Continued optimisation of the facilities has resulted in record instantaneous rates >9 mtpa + Partner alignment contin
Slide 63: PNG growth through expansion
PNG growth through expansion PNG LNG expansion and upstream opportunities being progressed Upstream opportunities + P’nyang farm-in proposal received and under negotiation + Potential P’nyang development could utilise existing PNG LNG infrastructure plus proposed Train 3 + Opportunity to utilise cap
Slide 64: Northern Australia
Northern Australia Bayu Undan infill well project underway and Barossa enters FEED Excellent DLNG plant performance and progress with Bayu Undan infill project + Darwin LNG plant performance continues to be excellent, with gross production exceeding plan + Successful completion of major shutdown at
Slide 65: Northern Australia – Barossa Project (Santos 25%)
Northern Australia – Barossa Project (Santos 25%) Barossa to be developed using subsea wells tied back to an FPSO for gas processing and condensate export. 260 km export pipeline to transport gas to existing Bayu Undan pipeline Gas FPSO for processing + Major growth opportunity expected to and conde
Slide 66: Western Australia
Western Australia Low-cost, high margin conventional domestic gas assets generating strong free cash flow Strong operating performance + Collaborative joint-venture engagement has resulted in greater efficiencies, higher production and lower upstream unit production costs in 2018 Future Varanus Isla
Slide 67: Conventional Oil and Gas assets delivering growth
Conventional Oil and Gas assets delivering growth Rebalancing the portfolio to high margin conventional production Conventional assets production growth to 2025 Santos operated assets >70 mmboe + Targeting 170% growth in three core assets by 2025 Non-operated assets + Quadrant acquisition provides S
Slide 68: Operations
Operations Vince Santostefano COO Operations
Slide 69: Operational excellence
Operational excellence Safer, better, cheaper Annual Improvement Plans Disciplined Process Cost Control Safety Operations Excellence Operated Value Protect Area Reset Demand Management Santos 2018 Investor Day 68
Slide 70: Process safety
Process safety Process safety is integral to our journey to be the safest onshore operator in Australia Major process loss of containment Loss of containment categorisation Count Count 12 40 12 36 + Major process loss of containment events 11 35 actively reduced within Operations since 10 -50% 2014
Slide 71: Value protect
Value protect Actively managing the integrity and value of our facilities + We are continuing to invest in activities that create a safe and resilient operation + Shut down activity has included Cooper Train 7, 2 LRPs and GLNG propane exchanger + Continuing to manage reliability and integrity across
Slide 72: Cooper production costs
Cooper production costs Disciplined focus on continuous cost efficiencies Total production costs + On track to deliver $20 million (10%) reduction in $ million gross $/boe production cost over 2017 actual 500 20 + Demonstrated step-change in production cost across Cooper 450 16.1 + Contractor collab
Slide 73: Curtis Island performance
Curtis Island performance Disciplined focus on continuous cost efficiencies + Disciplined focus on continuous improvement and lean operations + 10% improvement in conversion costs in 2018 on historical performance + GLNG costs reducing in absolute terms, which together with volume increase will driv
Slide 74: Operated area reset
Operated area reset Operational Excellence framework in place to deliver best in class levels of performance + Continuing to reduce production cost in a systematic way by eliminating waste and inefficiency + Setting standards and establishing new ways of working + Reducing our footprint + Controlled
Slide 75: Operational excellence
Operational excellence Safer, better, cheaper Annual Improvement Plans Disciplined Process Cost Control Safety Operations Excellence Operated Value Protect Area Reset Demand Management Santos 2018 Investor Day 74
Slide 76: Exploration and New Ventures
Exploration and New Ventures Bill Ovenden Executive Vice President Exploration & New Ventures
Slide 77: Papua New Guinea exploration and appraisal
Papua New Guinea exploration and appraisal PNG LNG upstream growth alignment with key partners in the western foldbelt; new eastern foldbelt exploration presence Western Foldbelt acreage alignment (Santos 20%) + Joint-venture alignment in highly prospective fold belt acreage from Hides to P'nyang (M
Slide 78: Onshore Northern Australia – McArthur Basin
Onshore Northern Australia – McArthur Basin Deliverability test of multi-TCF McArthur shale gas play. Target Northern Australian and East Coast export and domestic market opportunities + Largest and most promising shale gas opportunity in Australia Gove Darwin DARWIN LNG PLANT + +/- 500 TCF OGIP pot
Slide 79: Onshore Northern Australia – Amadeus Basin
Onshore Northern Australia – Amadeus Basin Conventional sub-salt play with material running room Southern Amadeus + Wildcat test of regional sub-salt play: multi-TCF potential + Proven hydrocarbon system (Mt Kitty 1, Magee 1) + Presence of elemental He and H offers potential value-add + Extensive pl
Slide 80: Offshore Northern Australia exploration
Offshore Northern Australia exploration Emerging NT domestic gas and LNG ullage markets. Oil upside potential Discovering new resources to complement potential new production hubs Dili + Consolidation of operated exploration acreage footprint across multiple plays + Complements commercialisation pla
Slide 81: Western Australia
Western Australia Consolidated domestic gas operatorship, new oil and running room Santos Evaluation + 2018 high value inventory build in the Carnarvon underpin 2019, 2020 NFE drill programme targeting Varanus Island and Devil Creek back-fill Quadrant Acquisition + Consolidates exploration inventory
Slide 82: Cooper growth escalation
Cooper growth escalation Leverage experienced, low cost operatorship to exploit deep resource opportunity inventory + Ongoing build of a deep inventory of wildcat, NFE and high-impact appraisal opportunities + Discover new high-quality resource options + Accelerate maturation of large contingent res
Slide 83: 2019 Exploration and appraisal program summary
2019 Exploration and appraisal program summary PAPUA NEW GUINEA MURUK-2 APP KAROMA-1 LLI GREATER JUHA 2D SEIS KALANGAR 2D SEIS NORTHERN AUSTRALIA LLI BEEHIVE-1 MCARTHUR BASIN 2D SEIS T-1 DFIT CAMPAIGN EXP VELKERRI HZ WELLS x2 EXP WESTERN AUSTRALIA PILOT PLANNING EXP/APP APP CORVUS-2 APP DORADO x2 (Q
Slide 84: Wrap-up
Wrap-up Kevin Gallagher Managing Director & CEO
Slide 85: Targeting portfolio production >100 mmboe by 2025
Targeting portfolio production >100 mmboe by 2025 Disciplined growth from new upstream projects leveraging-off existing infrastructure Diversified and disciplined production growth to 2025 Santos operated assets >100 mmboe Diversified and balanced core asset Non-operated assets portfolio Disciplined
Slide 86: Appendix
Appendix Santos
Slide 87: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding reserve estimates This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but the
Slide 88: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding reserve estimates Notes on reserves statements – Quadrant Energy Information on the reserves in this presentation relating to the Quadrant Energy assets are based and fairly represent an independent assessment conducted by RISC Advisory