Santos Limited · ASX:STO
Santos — H1 2021 Earnings Presentation
54 slides from Santos's earnings presentation, Aug 17, 2021
Slide 1: Santos reports record half-year production and sales volumes
ASX / Media Release 17 August 2021 Santos reports record half-year production and sales volumes, strong free cash flow and underlying earnings, and higher interim dividend Half-year (US$million) 2021 2020 Change Production (mmboe) 47.3 38.5 23% Sales volume (mmboe) 53.8 46.9 15% Product sales revenu
Slide 2: CEO commentary on results, merger and projects
“Consistent application of our low-cost disciplined operating model continues to deliver cost reductions and efficiencies despite cost challenges across the industry and COVID-related cost impacts in the base business. “We will remain disciplined and cost focused as we enter our next phase of growth
Slide 3: Live webcast
Live webcast A video presentation on the 2021 half-year results is available on Santos’ website. A live question and answer webcast for analysts and investors will be held today at 12:30pm AEST. To access the live webcast, register on Santos’ website at www.santos.com. This ASX announcement was appr
Slide 4: Santos 2021 Half-year results
Santos 2021 Half-year results 17 August 2021
Slide 5: 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 6: 2021 Strategic priorities
2021 Strategic priorities Base business performing strongly and achieved key milestones on major growth projects 1 Maintain strong base business with FCF breakeven <$25/bbl1 P On track 2 FID Barossa P FID taken in March 2021 3 FID Moomba CCS On track for 2H21 4 FEED Dorado P Achieved in June 2021 5
Slide 7: 2021 Half-year highlights
2021 Half-year highlights Disciplined low cost operating model continues to underpin strong free cash flows from the base business and position the company for growth Strong and diversified base 2021 volume and cost Strong free cash flow and low business P guidance ranges upgraded P free cash flow b
Slide 8: 2021 Half-year results
2021 Half-year results Our disciplined operating model and improving commodity prices have delivered strong first half results FREE CASH FLOW1 REPORTED NPAT2 UNDERLYING PROFIT2 $572 $354 $317 112% 33% 222% 50% million million million SALES REVENUE EBITDAX INTERIM DIVIDEND $2,040 22% $1,231 24% 5.5c
Slide 9: Cash generative base business through the cycle
Cash generative base business through the cycle At current oil prices, forecast to generate over US$1.1 billion in 2021 1H21 sales volume Free cash flow1 Oil price + Diversified and balanced portfolio mmboe $million US$/bbl providing defense through the cycle +33% 700 Average realised oil price + Re
Slide 10: Health, safety and environment
Health, safety and environment Our “Always Safe” value is at the centre of everything we do Injury frequency rates Loss of containment Number of injuries per million hours worked Number of Tier 1 and Tier 2 incidents 1.0 25 0.8 20 0.6 15 0.4 10 0.2 5 0.0 0 2017 2018 2019 2020 12-mth rolling 2017 201
Slide 11: Barossa investment decision announced in March 2021
Barossa investment decision announced in March 2021 Targeting cash cost of production of ~$2.00/mmBtu and first gas in first half 2025 Barossa development + Capex estimated at ~$3.6 billion gross FID to first gas, including a FPSO service contract with upfront pre- payment and option to buy-out + ~8
Slide 12: Moomba CCS provides step change in emission reduction
Moomba CCS provides step change in emission reduction Lowest cost (<US$24/t lifecycle) and one of the largest CCS project globally. Project is FID- ready, subject to Australian Carbon Credit Units eligibility + Low cost CCS project due to Existing CO2 separation units + Existing separation equipment
Slide 13: Dorado Development
Dorado Development FEED commenced, with FID targeted for mid 2022 Phase 1 liquids development + FEED underway with FID targeted for mid 2022 + Estimated capital cost of ~$2 billion, delivering competitive cost of supply1 + Low CO2 (~1.5%) and high-quality fluid expected to earn a premium to regional
Slide 14: Sustainability
Sustainability Sustainability is core to our strategy to drive long-term shareholder value Environmental Social Governance + Reduce Scope 1 and 2 absolute + In 2020, A$17 million invested in + Executive remuneration linked to ESG equity emissions by 26-30% by 2030 community partnerships and local an
Slide 15: Infrastructure-led carbon capture and storage strategy
Infrastructure-led carbon capture and storage strategy Our extensive infrastructure position provides a competitive advantage for decarbonisation with more than 30 mtpa of carbon storage capacity across three Santos-operated hubs Northern Australia and Timor-Leste CCS 1. Cooper Basin CCS 10 mtpa + M
Slide 16: Oil Search merger strategic rationale
Oil Search merger strategic rationale Merger will create a regional champion of scale and provide shareholders with an opportunity to participate in a new company that can optimally fund the development of a diverse portfolio of high-quality O&G assets CREATES A REGIONAL CHAMPION OF P Positioned wit
Slide 17: Merger process update
Merger process update Exclusive mutual due diligence underway. Targeting to execute binding Merger Implementation Deed in September and Scheme vote by late November Complete Due Diligence Merger Implementation Deed Scheme of Arrangement Scheme booklet would be provided by Deed outlines how the Oil S
Slide 18: Proven track record of delivering integration synergies
Proven track record of delivering integration synergies Delivered more than $160 million in synergies from the Quadrant and ConocoPhillips transactions. Substantial potential combination synergies expected from Oil Search merger Quadrant integration pre-tax synergies US$m, net 20% US$50-60m synergie
Slide 19: Delivering incremental value through acquisitions
Delivering incremental value through acquisitions Short-cycle, low-risk, high-value developments delivering production in 2021 and extending life Bayu-Undan Phase 3C Van Gogh Infill Phase 2 2 platform and 1 subsea wells developing gas and 3 dual lateral wells, infilling existing Van Gogh Description
Slide 20: Finance and Capital Management
Finance and Capital Management Anthony Neilson Chief Financial Officer 17
Slide 21: Financial discipline
Financial discipline Strong base business and balance sheet supportive of disciplined and phased growth + Generated $572 million free cash flow in the first half of 2021 + Targeting 2021 free cash flow breakeven oil price of less than $25 per barrel before Strong, cash-generative base hedging busine
Slide 22: 2021 Half-year financial snapshot
2021 Half-year financial snapshot Strong base business generated $572 million of free cash flow $ million 1H21 1H20 Change Product sales revenue 2,040 1,668 22% EBITDAX 1,231 995 24% Underlying profit1 317 212 50% Net profit/(loss) after tax 354 (289) 222% Operating cash flow 942 838 12% Free cash f
Slide 23: Strong free cash flow generation
Strong free cash flow generation At current oil prices, forecast to generate over US$1.1 billion in 2021 Operating cash flow Investing cash flow1 Free cash flow1 Oil price $ million $ million $ million US$/bbl 1,051 (413) (407) Average realised (391) 700 oil price 80 638 942 (370) (338) 600 572 838
Slide 24: Underlying earnings
Underlying earnings Generated >$1.2 billion in EBITDAX predominantly reflecting improved commodity prices and lower unit costs. Higher depreciation, primarily in Western Australia, impacted underling profit Product sales revenue Oil price EBITDAX Underlying profit1 $ million US$/bbl $ million $ mill
Slide 25: Record production and sales volumes
Record production and sales volumes Strong first half performance. Volumes expected to be lower in the second half due to the 25 per cent sell-down in Bayu-Undan and DLNG which completed on 30 April Half year production volume Half year sales volume mmboe mmboe 47.3 53.8 ~39.7-43.7 ~46.2-51.2 45.2 4
Slide 26: Production costs
Production costs Unit production costs lower despite COVID-19 and unfavourable foreign exchange impacts Upstream unit production costs1 + Greater than $100 million of pre-tax synergies have been $/boe delivered in Northern Australia which is reflected in the ~30% reduction in unit costs to US$13.95/
Slide 27: Upstream unit production costs
Upstream unit production costs Synergy cost reductions realised in Northern Australia. Partially offset by COVID-19 related costs and foreign exchange increases in the first half Total unit production cost1 Western Australia Northern Australia $/boe $/boe $/boe Disciplined Operating 8.45 Model 8.07
Slide 28: Cash generative Operating Model continues to drive value
Cash generative Operating Model continues to drive value EBITAX margin improved to 58% due to higher commodity prices and lower unit costs 2021 Half-year results summary1 Cooper Qld Nth Aust PNG WA Santos Basin & NSW & T-L2 Total revenue $million 507 383 264 383 504 2,112 + Cost reductions are occur
Slide 29: Capital expenditure
Capital expenditure 2021 guidance maintained at ~$900m for sustaining capex and ~$700m for major growth with spend expected to be weighted to the second half 1H21 capital expenditure $535 million1 Capex by type $million + Comprising $340m sustaining and $195m major growth, predominantly related to t
Slide 30: Creating value from midstream infrastructure portfolio
Creating value from midstream infrastructure portfolio Unique portfolio of strategic midstream infrastructure assets generating stable and material EBITDA of ~$400 million per annum, excluding GLNG which could add an extra ~$95 million MIDSTREAM INFRASTRUCTURE ASSETS ADDITIONAL Moomba Port Bonython
Slide 31: Debt and liquidity
Debt and liquidity Gearing reduced to 31.8% and balance sheet ready for growth with net debt $3.4 billion and liquidity of ~$4.5 billion Net debt Cash, debt and undrawn debt $million facilities at 30 June 20211 $million + Net debt $3,398 million (includes $417 million AASB 16 lease liabilities) as a
Slide 32: Summary
Summary Disciplined low-cost operating model ensures we can sustain our base business and remain resilient through the cycle + Disciplined, low-cost operating model sets the framework to deliver value + Targeting 2021 free cash flow breakeven of less than $25 per barrel before hedging Disciplined ap
Slide 33: Asset Performance
Asset Performance Santos
Slide 34: Offshore conventional business
Offshore conventional business Santos supplies ~45% of Western Australia’s domestic gas requirements and Northern Australia synergies are reducing upstream production costs + Western Australia EBITDAX margin improved to 77% Strong cash + WA unit production cost $5.94 per boe, margin, low- down 42% s
Slide 35: Growing production and improving efficiency
Growing production and improving efficiency Quadrant and ConocoPhillips acquisitions have transformed the scale of the Offshore business Strong gas production Western Australia production1 Lowered production costs Western Australia upstream mmboe production cost + Domestic gas production and + Produ
Slide 36: High value infrastructure led development
High value infrastructure led development Operated portfolio of infrastructure led gas supply and oil infill development at a low cost of supply, generating high value and delivering incremental production Bayu-Undan Phase Van Gogh Infill Pyrenees Infill Varanus Island Spartan 3C Phase 2 Phase 4 Com
Slide 37: Integrated onshore business with market optionality
Integrated onshore business with market optionality Onshore assets connected to domestic markets and long-term Asian demand for LNG with strong growth options + Growth self-funded within the low cost disciplined Operating Model Australia’s lowest cost + Driving capital efficiency to unlock additiona
Slide 38: Cooper Basin operating model
Cooper Basin operating model Increased activity levels in second half including an additional rig to drill oil wells Wells drilled 2P reserves replacement ratio First half production volume Targeting ~73 wells in 2021 Targeting >100% RRR Number per year % three-year rolling average mmboe Prospective
Slide 39: Strong GLNG upstream production and cost out
Strong GLNG upstream production and cost out Record upstream GLNG production driven by strong ramp-up at Roma and Arcadia supporting higher than 6.2 mtpa LNG run-rate in 2021 Strong GLNG gas production GLNG sales gas production Driving down operating cost Mean time between failure TJ/d (gross) and i
Slide 40: McArthur-Beetaloo and South Nicholson opportunities
McArthur-Beetaloo and South Nicholson opportunities Multi-Tcf shale gas potential in two basins with proven flow at Tanumbirini-1 Strategic Opportunities + Options to satisfy north and east coast gas markets 2021 2 x horizontal wells with fracture stimulation and test McArthur-Beetaloo Project + Str
Slide 41: Tanumbirini 2H ST1 update
Tanumbirini 2H ST1 update Excellent gas shows while drilling. Well cased and suspended for testing in October Tanumbirini 1 GR GAS MCSAN19-01 Amungee Mbr C Shale Depth (m) Gas shows B Shale (Velkerri Formation) A Shale First of two horizontal wells, Tanumbirini 2H ST1, commenced drilling in 2Q21: +
Slide 42: Papua New Guinea
Papua New Guinea PNG LNG is a world-class, low-cost asset consistently delivering above nameplate production with future backfill options + PNG EBITDAX margin improved from 78% Strong cash for FY20 to 81% in 1H21 margin, low- + 1H 2021 production cost $4.04/boe cost operating asset with + Increased
Slide 43: Summary
Summary 1 Strong free cash flow and low free cash flow breakeven oil price 2 Disciplined, low-cost operating model is delivering consistent results 3 Barossa FID and Dorado FEED entry achieved in first half 4 Infrastructure-led carbon capture and storage strategy 5 Proposed Oil Search merger to crea
Slide 44: Appendix
Appendix Santos
Slide 45: Financial performance
Financial performance EBITDAX up 24% to $1,231 million and underlying profit up 50% to $317 million $million 1H21 1H20 Variance Total revenue 2,112 1,728 22% + Total revenue up 22% due to higher realised oil prices and Production costs (377) (284) 33% higher sales volumes, offset by lower average la
Slide 46: Sales revenue
Sales revenue Record sales revenue reflecting improved oil prices and higher sales volumes, offset by lower average lagged oil-linked LNG prices Average realised crude oil price Average realised LNG price $million 1H21 1H20 Variance US$/bbl US$/mmBtu +45% Sales Revenue (incl. third-party) -21% 69.57
Slide 47: Free cash flow
Free cash flow Calculation of 2021 half-year free cash flow $million 1H21 Operating cash flows 942 Deduct Investing cash flows (334) Add Net acquisitions and disposals (169) Add Major growth capex 195 Deduct Lease liability payments (62) Free cash flow 572 Lease liability payments are now treated as
Slide 48: Significant items
Significant items Reconciliation of half-year net profit/(loss) to underlying profit $million 1H21 1H20 Net profit/(loss) after tax 354 (289) Add/(deduct) significant items after tax Net gain on disposal of a group of assets (51) - Impairment losses 6 526 Fair value losses/(gains) on commodity hedge
Slide 49: Drawn debt maturity profile
Drawn debt maturity profile No significant near-term debt maturities until 2024 and $452 million of debt repaid since 30 June 2021. $1 billion raised from recent US144A/Reg-S bond Drawn debt maturity profile1 Breakdown of drawn Drawn debt maturity profile excluding PNG debt facilities1 LNG project f
Slide 50: Liquidity and net debt as at June 2021
Liquidity and net debt as at 30 June 2021 Net debt $3.4 billion and liquidity of $4.5 billion Liquidity ($million) 30 Jun 2021 31 Dec 2020 Cash 2,417 1,319 Undrawn bilateral bank debt facilities 2,065 1,870 Total liquidity 4,482 3,189 Debt ($million) Export credit agency supported loan facilities Se
Slide 51: 2021 guidance
2021 guidance 2021 guidance maintained 2021 guidance item Guidance Production 87-91 mmboe Sales volumes 100-105 mmboe Capital expenditure – base ~$900 million Capital expenditure – major growth ~$700 million Upstream production costs $7.90-8.30/boe Depreciation, depletion and amortisation $1.15-1.25
Slide 52: 2021 Half-year segment results summary
2021 Half-year segment results summary Corporate Cooper Queensland Northern Western US$million PNG explor’n & Total Basin & NSW Australia1 Australia elimins Revenue 507 383 264 383 504 71 2,112 Production costs (70) (37) (25) (139) (99) (7) (377) Other operating costs (48) (57) (21) - (2) (37) (165)
Slide 53: 2020 Half-year segment results summary
2020 Half-year segment results summary Corporate Cooper Queensland Northern Western US$million PNG explor’n & Total Basin & NSW Australia1 Australia elimins Revenue 471 506 273 146 285 47 1,728 Production costs (66) (36) (32) (71) (88) 9 (284) Other operating costs (27) (39) (19) - (2) (45) (132) Th
Slide 54: Oil price hedging
Oil price hedging Open oil price positions as at 30 June 2021 2021 2022 Zero cost collars (barrels) 7,748,792 4,000,000 Average floor price ($/bbl) 42 50 Average ceiling price ($/bbl) 55 66 Re-participating 3-ways (barrels) 2,000,000 Average floor price ($/bbl) 50 Average ceiling price ($/bbl) 60 Av