Santos Limited · ASX:STO
Santos — Investor Day (December 2020)
72 slides from Santos's investor day presentation, Dec 1, 2020
Slide 1: ASX / Media Release: Santos upgrades 2020 guidance
ASX / Media Release 1 December 2020 Santos upgrades 2020 guidance Santos today upgraded its 2020 production guidance to 87-89 million barrels of oil equivalent (mmboe) and lowered its production cost guidance to $8.00-8.50/boe. The upgrade in production guidance, from 83-88 mmboe, is due to strong o
Slide 2: Live webcast
Live webcast A live webcast of the Investor Day will be available on Santos’ website at www.santos.com from 9:00am AEDT today. This ASX announcement was approved and authorised for release by Kevin Gallagher, Managing Director and Chief Executive Officer. Santos Limited ABN 80 007 550 923 GPO Box 24
Slide 3: Santos 2020 Investor Day
Santos 2020 Investor Day 1 December 2020
Slide 4: 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 5: Agenda
Agenda Session 1 Topic Presenter Title 9.00 Welcome Andrew Nairn Head of Investor Relations 9.05 Driving Shareholder Value Kevin Gallagher Managing Director & CEO 9.40 Market Outlook Jane Norman VP Strategy 10.00 Strong Base Business: Offshore and Onshore David Banks Chief Operations Officer 10.35 M
Slide 6: Driving Shareholder Value
Driving Shareholder Value Kevin Gallagher Managing Director & CEO 4
Slide 7: Today's headlines
Today’s headlines 2020 production and cost New emissions reduction Barossa toll agreed guidance targets & roadmap + Production guidance upgraded to 87-89 mmboe + Net zero emissions by 2040 + DLNG has approved all agreements to transport + Production cost guidance + Transition roadmap and process Bar
Slide 8: Santos investment proposition
Santos investment proposition 1 Consistent and successful strategy 2 Disciplined Operating Model 3 Sustainable and resilient base business generating significant free cash flow 4 Disciplined and phased growth 5 Energy transition to clean fuels Santos 2020 Investor Day 6
Slide 9: Transform, Build & Grow
1 Transform, Build & Grow Consistent and successful strategy providing stability in volatile times + Execute and bring on-line growth opportunities accessing asset infrastructure + Exploit M&A opportunities to strengthen core assets Grow + Generate new revenue through low-carbon Energy Solutions pro
Slide 10: Safety and environment
1 Safety and environment Santos is committed to being the safest oil and gas operator in Australia and preventing harm to people and the environment Injury frequency rates Loss of containment incidents Rate per million hours worked Count of Tier 1 and Tier 2 1.0 35 30 0.8 25 0.6 20 0.4 15 10 0.2 5 0
Slide 11: Disciplined Operating Model
2 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 asset hubs Exploration Returns to shareholders Cooper Queenslan
Slide 12: Sustainable and resilient base business
3 Sustainable and resilient base business Five core long-life asset hubs Santos operated asset hubs Non-operated asset Northern Australia Western Australia Cooper Basin QLD & NSW PNG and Timor-Leste + 2020 forecast production + 2020 forecast production + 2020 forecast production + 2020 forecast prod
Slide 13: Delivering strong free cash flow through the cycle
3 Delivering strong free cash flow through the cycle Diversified and balanced portfolio supportive of strong, sustainable free cash flow through the oil price cycle Free cash flow Oil price $million US$/bbl 2016 – 20 forecast free 80 cash flow >$3.6 billion 1,100 FCF breakeven oil price Average real
Slide 14: Disciplined growth to 120 mmboe
4 Disciplined growth to 120 mmboe Stable base business production (excluding Bayu-Undan) and phased growth to 120 mmboe Production mmboe 130 + Stable base business production (excluding Bayu- Dorado Phase 1 Undan) natural field decline + Major growth projects all Santos-operated: 100 + Barossa: FID
Slide 15: Market-led energy transition to cleaner fuels
5 Market-led energy transition to cleaner fuels Santos is a clean fuels business that will transition from natural gas to hydrogen as our customers transition over the next two decades + Zero-emissions hydrogen expansion to dedicated hydrogen pipelines Future state: + Hydrogen exports from Port Bony
Slide 16: Net zero by 2040
5 Net zero by 2040 Emissions reduction targets designed to support Australia’s Paris Agreement commitments. 26-30% reduction by 2030 2025 target 2030 target 2030 Scope 3 2040 target emissions target + Reduce emissions >5% + Reduce Scope 1 and 2 + Santos will actively work + Net zero Scope 1 and 2 ac
Slide 17: Roadmap to net zero
5 Roadmap to net zero CCS and hydrogen are the pathway to net zero emissions by 2040 2020 2040 Planned activities + Land-based offsets include the existing savanna burning program in Arnhem Land ~5 mtCO2e + Energy Solutions to deliver 0.6 mtCO2e pa emission reduction projects by 2025 + Moomba CCS Ph
Slide 18: Environmental, social and governance
5 Environmental, social and governance For over 65 years, Santos has been safely and sustainably exploring and developing Australia’s natural gas resources Environmental Social Governance + New emissions reduction targets + 140 community organisations supported by Santos + EHSS and PRC Board Committ
Slide 19: Market Outlook
Market Outlook Jane Norman VP Strategy 17
Slide 20: The role of cleaner fuels in the future
The role of cleaner fuels in the future Natural gas will have a place in the global energy mix for decades to come with a ~25% share of global energy demand. Natural gas is the affordable cleaner fuel Global primary energy demand by fuel source1 % IEA Stated Policies Scenario IEA Sustainable Develop
Slide 21: Oil market opportunity remains attractive
Oil market opportunity remains attractive Deferred capital spending will impact oil supply whilst demand is expected to recover Global liquids demand1 Oil prices are expected to recover as demand mmbbl/d returns following COVID 115 + The impact on supply is expected to be longer lasting than the imp
Slide 22: LNG demand remains strong
LNG demand remains strong LNG demand growth remains strong with 4% CAGR forecast to 20351. Market expected to tighten as new supply delayed with projects impacted by COVID-19 pandemic Global LNG supply and demand1 mtpa 800 Operational Global LNG demand forecast to grow Under Construction ~3% in 2020
Slide 23: LNG prices strengthening
LNG prices strengthening Santos’ low-cost LNG projects and low shipping costs provide a competitive advantage Nominal price forecast for spot LNG in North East Asia1 US$/mmBtu LNG price drivers 12 External forecast range + LNG market prices expected to continue to diverge from oil prices 10 + LNG pr
Slide 24: Australian domestic gas markets outlook remains strong
Australian domestic gas markets outlook remains strong Santos is Australia’s largest domestic gas producer and the only producer with a nation-wide footprint. ~70% of Santos’ total Australian gas production is supplied to the domestic market Western Australia domestic gas East Coast domestic gas Sup
Slide 25: Maintaining a balanced and diversified portfolio
Maintaining a balanced and diversified portfolio Diversified and balanced portfolio providing strong, sustainable revenue with ~30% of sales volumes sold at fixed-priced contracts Q3 YTD 2020 sales volume Balance of fixed-price and oil-linked revenues mmboe + Domestic gas predominantly sold on long
Slide 26: Strong Base Business
Strong Base Business David Banks Chief Operations Officer 24
Slide 27: 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 Australia’s lowest cost disciplined Operating Model onshore operator + Driving capital efficiency to
Slide 28: Cooper Basin
Cooper Basin Operating Model is delivering higher production, cost discipline and self-funded growth Strong gas production Cooper Basin production Targeting >100% 2P RRR Reserves replacement ratio (RRR) mmboe % three year rolling average + Gas and associated liquids + Growth self-funded within ~16.8
Slide 29: Strong GLNG upstream production and cost out
Strong GLNG upstream production and cost out Record upstream GLNG production driven by strong ramp at Roma and Arcadia supporting ~6.2 mtpa LNG run-rate from 2021. Maintaining cost discipline and improving performance Strong gas production GLNG sales gas production Driving down operating cost Mean t
Slide 30: Onshore value-add integrated projects
Onshore value-add integrated projects Phased development of onshore resources close to existing infrastructure Moomba South Cooper transformation Arcadia Phase 2 Scotia Phase 2 Description Development of large potential Reduce gathering system Next phase of development of Second development phase of
Slide 31: McArthur-Beetaloo & South Nicholson opportunities
McArthur-Beetaloo & South Nicholson opportunities Multi-Tcf shale gas potential in two basins with proven flow at Tanumbirini-1 Strategic Opportunities Tanumbirini 1 4-stage fracture 2019-20 stimulation and test + Options to satisfy north and east coast gas markets 2 x horizontal wells with 2021 fra
Slide 32: Offshore conventional business
Offshore conventional business Following commencement of the 12-year, fixed-price US$ denominated Alcoa contract in mid June, Santos now supplies ~45% of Western Australia’s domestic gas requirements + WA EBITDAX margin maintained at 72% Strong cash highlighting benefit of fixed price domestic margi
Slide 33: 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 production Lowered production costs Western Australia upstream mmboe production cost + Western Australia’s largest + Unit p
Slide 34: 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 in 2021 Varanus Island Bayu-Undan Phase 3C Van Gogh Infill Phase 2 Spartan Development Compres
Slide 35: Bayu-Undan infill development
Bayu-Undan infill development Accelerated project delivering incremental production and reserves at a low cost of supply realising field extension for Bayu-Undan and Darwin LNG + Value realisation beyond what was premised in ConocoPhillips transaction + Accelerated project definition, procurement an
Slide 36: Van Gogh infill development – Phase 2
Van Gogh infill development – Phase 2 Short-cycle, low-risk, high-value development wells targeting ~10 mmbbl gross reserves + Drilling, completion and tie-in of three horizontal, dual-lateral production wells + 14km of reservoir exposure across the three wells + First phase drilled in 2019 was succ
Slide 37: 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 82% in 1H 2020 Strong cash margin, low- + Production cost $4.85/boe cost operating asset + Increased cash flow ~2026 once project finance rep
Slide 38: Midstream Infrastructure and Low Carbon Operations
Midstream Infrastructure and Low Carbon Operations Brett Woods EVP Midstream Infrastructure and Low Carbon Operations 36
Slide 39: Midstream Infrastructure & Low Carbon Operations
Midstream Infrastructure & Low Carbon Operations Established Midstream business to operate assets with an infrastructure mindset, delivering increased efficiency, utilisation and reducing emissions + Delivered 14% processing cost reductions and improved asset utilisation in the Cooper Basin Run asse
Slide 40: 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 MIDSTREAM INFRASTRUCTURE ASSETS Moomba Port Bonython DLNG Varanus Island Devil Creek FUTURE PORTFOLIO OPPORTUNITIES Capacity Gas
Slide 41: Creating midstream infrastructure value and optionality
Creating midstream infrastructure value and optionality Established Midstream Infrastructure business to realise cost-out and operating efficiency benefits. Targeting a further 30% reduction in processing costs ($60m pa net) across portfolio by 2025 Phase 1: 2019 - 2020 Phase 2: 2021+ Operate proces
Slide 42: Improved operating performance in the Cooper Basin
Improved operating performance in the Cooper Basin Increased utilisation and efficiency has lowered unit processing costs year-on-year Moomba and Port Bonython1 Moomba (MBA) and Port Bonython (PB) Unit cash processing costs Capacity utilisation $/boe % -14% MBA Indigenous MBA Third Party PB Indigeno
Slide 43: Delivering improved results at DLNG
Delivering improved results at DLNG Implementation of Santos’ disciplined operating model, reducing opex and life extension project capex Current Operations DLNG Life Extension (DLE) DLNG operating costs + Project scope: $m (gross) + Installation of a new tie-in point at the Bayu-Undan -14% to Darwi
Slide 44: Energy Solutions
Energy Solutions Energy Solutions projects have delivered or offset ~1 mtCO2e across Santos’ operations since inception in 2017 Reduce Supply Reduce FFV Emissions & Clean Emissions Waste Energy + Since 2016 Cooper Basin annual emissions + NT savanna burning (WALFA1) has offset + Initiated Cooper Bas
Slide 45: Moomba CCS project
Moomba CCS project Lowest cost (<A$30/t lifecycle) and second largest CCS project globally. Pathway to further lowering cost. Project is FID-ready, subject to Australian Carbon Credit Units eligibility + Low cost CCS project due to + Leveraging off existing CO2 separation equipment which is Existing
Slide 46: CCS enables a clean hydrogen future
CCS enables a clean hydrogen future Santos has a natural competitive advantage in delivering zero emissions hydrogen with line of sight to delivering Australia’s goal of hydrogen at <$2/kg H2 to sales Santos has a natural advantage in delivering zero Well advanced on hydrogen pathway emissions hydro
Slide 47: Major Growth Projects
Major Growth Projects Kevin Gallagher Managing Director and CEO 45
Slide 48: Major project assurance process
Major project assurance process Assurance is provided centrally comprising commercial, technical, financial and risk reviews Board provides oversight for key investment decisions Board Executive management team review Executive Committee Committees provide functional review and assurance Contracts C
Slide 49: Major growth projects
Major growth projects Major growth projects all Santos-operated Moomba Carbon Narrabri Gas Project Dorado Barossa Capture and Storage Phase 1 Phase 1 Description Low-cost brownfield LNG Lowest cost and second Phased onshore domestic gas World-class shallow water oil project largest CCS project globa
Slide 50: Barossa LNG is a low cost project
Barossa LNG is a low cost project Barossa is a globally-competitive, low-cost brownfield project Long run marginal cost of supply, DES Japan1 US$/MMBtu, 2020$ 10 Barossa is a world-class, low-cost LNG project DES Japan break even cost + Predominantly an upstream, brownfield project US Long run cost
Slide 51: Barossa
Barossa Barossa is a world-class LNG project targeting a cash cost of production ~$2.00/mmBtu. Gross capex reduced to $3.6 billion gross through value engineering and a leased FPSO Barossa development FID-ready + Project recycled to deliver value improvement, acquisition synergies and implementing d
Slide 52: Barossa
Barossa Barossa is a world-class LNG project targeting a cash cost of production ~$2.00/mmBtu. Gross capex reduced to $3.6 billion gross through value engineering and a leased FPSO Element Milestones to FID Project metrics Technical Assurance P Internal assurance and cost reviews complete Gross cape
Slide 53: Moomba carbon capture and storage
Moomba carbon capture and storage 1.7 mtpa project is FID-ready, subject to Australian Carbon Credit Units eligibility Element Milestones to FID Project metrics P CO2 injection trial to prove injectivity complete Gross capex: Subsurface Unchanged at $125-155 P Containment and injectivity lab tests c
Slide 54: Narrabri gas project
Narrabri gas project Phased development with 100% of Narrabri gas committed to the domestic market Phase 1 development to Phase 2 development to 2021-2 ~2 years appraisal 2023+ 2026+ 80 TJ/day 150 TJ/d + NSW IPC (Sept 2020) and + FID targeted 1H 2023 + Phase 2 development from 2026+ Commonwealth EPB
Slide 55: Bedout Basin potential
Bedout Basin potential Seismic reprocessing has identified numerous opportunities on-trend with Dorado. Pavo and Apus high-graded as potential material tie-back development opportunities Total basin potential 990 mmboe gross risked prospective resource, >50% liquids + 6 main reservoir units, 10 play
Slide 56: Phased greater Dorado development
Phased greater Dorado development Phased and disciplined development to ensure optimised FPSO and infrastructure design to realise potential material value uplift + Phase 1 Dorado liquids development (150 mmbbl liquids gross 2C + Liquids or wet gas fields have the potential to materially resource, 1
Slide 57: Dorado phase 1 liquids project
Dorado phase 1 liquids project Dorado FEED entry targeted in 1H 2021 and FID in 1H 2022 on phase 1 liquids development Phase 1 development concept + Shallow water depth allows for simple wellhead platform (WHP) and FPSO + Initial phase of oil and condensate development with gas re-injection to suppo
Slide 58: Finance & Capital Management
Finance & Capital Management Anthony Neilson Chief Financial Officer 56
Slide 59: Financial discipline
Financial discipline Strong base business and disciplined approach to capital allocation + Generated $574 million free cash flow for the first nine months of 2020 + Targeting 2020-21 free cash flow breakeven oil price of <$25 per barrel before hedging Strong, cash-generative base and ~$20 per barrel
Slide 60: Our Operating Model in action
Our Operating Model in action Strong focus on cost & efficiency improvements has established a robust sustainable business. 2020 production cost guidance lowered to $8.00-$8.50/boe Western Australia Cooper Basin Queensland & NSW production cost production cost production cost DISCIPLINED $/boe $/boe
Slide 61: Diversified and balanced portfolio delivering strong margins
Diversified and balanced portfolio delivering strong margins Diversified portfolio of core assets delivering strong margins despite lower prices 2020 First half results summary1 Cooper Qld Nth Aust PNG WA Santos + Strong free cash flows generated by the base Basin & NSW & T-L2 business Total revenue
Slide 62: Base business generates strong free cash flow
Base business generates strong free cash flow Targeting 2021 forecast free cash flow breakeven <$25 per barrel. Forecast 2020 free cash flow yield ~8%1 Forecast 2021 free cash flow $million ~30% + Generated $574 million of free cash flow to September 2020 ~1,000 + Targeting 2020-21 free cash flow br
Slide 63: Production and sales volumes
Production and sales volumes 2020 production guidance upgraded to 87-89 mmboe. 2021 guidance of 84-91 mmboe assumes 25% sell-down of interest in Bayu-Undan in 1H 2021 Production volumes guidance mmboe + 2020 production guidance upgraded to 87-89 mmboe from 83-88 mmboe 87-89 84-91 + 2020 sales volume
Slide 64: Capital allocation process
Capital allocation process Rigorous and disciplined approach to capital allocation + Transform Build Grow strategy has not changed since 2016 Corporate Strategy + Five core long-life asset hubs + Disciplined, low-cost operating model sets the framework to drive value: + Operating Model and portfolio
Slide 65: Capital expenditure
Capital expenditure 2020 capex guidance unchanged at ~$750 million sustaining and ~$150 million major growth + Base business sustaining capex is stable year-on-year at $0.9-1.0 billion to 2025 Capital expenditure guidance $ million + Includes Cooper Basin and Queensland drilling, Western Australia,
Slide 66: Capital management
Capital management Disciplined capital management consistent with strategy and Operating Model + Maintaining cost control and driving FCF breakeven oil price lower than <$25/ bbl + Reviewed phasing of major project expenditure. Dorado FID deferred to 1H 2022 to Disciplined approach allow for planned
Slide 67: Drawn debt maturity profile
Drawn debt maturity profile Successful refinance of ConocoPhillips acquisition facility means that there are no significant near-term debt maturities until 2024 Drawn debt maturity profile1 Breakdown of drawn Drawn debt maturity profile excluding PNG debt facilities1 LNG project finance1 $million %
Slide 68: Wrap-up & Q&A
Wrap-up & Q&A Kevin Gallagher Managing Director & CEO 66
Slide 69: Today's headlines
Today’s headlines 2020 production and cost New emissions reduction Barossa toll agreed guidance targets & roadmap + Production guidance upgraded to 87-89 mmboe + Net zero emissions by 2040 + DLNG has approved all agreements to transport + Production cost guidance + Transition roadmap and process Bar
Slide 70: 2021 strategic priorities
2021 strategic priorities 1 Maintain strong base business with FCF breakeven <$25/bbl 2 FID Barossa 3 FID Moomba CCS 4 FEED Dorado 5 Commence appraisal drilling at Narrabri Santos 2020 Investor Day 68
Slide 71: Q&A
Q&A Santos
Slide 72: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding reserve and resource estimates The estimates of petroleum reserves and contingent resources contained in this presentation are as at 31 December 2019. Santos prepares its petroleum reserves and contingent resources estimates in accordanc