Slide 1: Santos doubles half-year underlying profit to $217 million and reinstates dividends
ASX / Media Release 23 August 2018 Santos doubles half-year underlying profit to $217 million and reinstates dividends to shareholders Half-year (US$million) 2018 2017 Change Product sales 1,680 1,449 16% EBITDAX1 883 718 23% Underlying profit1 217 109 99% Net profit/(loss) after tax 104 (506) nm Fr
Slide 2: Strong first half results
“The acquisition is materially value accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.” Strong first half results Mr Gallagher said today’s announcement of half-year results demonstrated strong business performance, with EBITDAX1 up 2
Slide 3: Interim dividend
Interim dividend The Board has resolved to pay a 2018 interim dividend of US3.5 cents per share fully-franked, in line with the company’s sustainable divided policy announced in June 2018 which targets a range of 10% to 30% payout of free cash flow. The interim dividend will be paid on 27 September
Slide 4: Santos 2018 Half-year results
Santos 2018 Half-year results 23 August 2018
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: 2018 Half-year highlights
2018 Half-year highlights Low-cost, diversified portfolio generating strong cash flow. Balance sheet supportive of growth strategy and a return to dividends Strong free cash flow generation and continued cost efficiencies Significant growth options across all 5 core assets Balance sheet supporti
Slide 7: 2018 Half-year highlights
2018 Half-year highlights Clear strategy and disciplined operating model driving strong cash flow and financial strength 22% increase in free cash flow 17% reduction in net debt $ million $ million 367 2.9 + Free cash flow $65 million higher 2.7 + US3.5c interim dividend 302 316 2.4 + PNG free cash
Slide 8: 2018 Continuing to deliver unit cost and efficiency gains
2018 Continuing to deliver unit cost and efficiency gains Focus on unit cost and efficiencies is leading to increased activity within the disciplined Operating Model COOPER BASIN GLNG DISCIPLINED Upstream unit production costs Well costs2 No of wells drilled OPERATING $8.42/boe $850k 2018F ~300 2018
Slide 9: 2018 Growth
2018 Growth Quadrant Energy acquisition offers significant upside and is consistent with Santos’ strategy. Focused development of new upstream projects leveraging existing infrastructure QUADRANT ENERGY ACQUISITION ONSHORE GROWTH Western Australia + Cooper Basin + 100% of Quadrant Energy acquired fo
Slide 10: Acquisition of 100% of Quadrant Energy for $2.15 billion
Acquisition of 100% of Quadrant Energy for $2.15 billion Value accretive acquisition consistent with Santos’ strategy + Consistent with Santos’ growth strategy of building on existing infrastructure around core assets to Strategically aligned deliver sustainable shareholder returns + Value accretive
Slide 11: Strengthening and further diversifying Santos' portfolio
Strengthening and further diversifying Santos' portfolio Quadrant acquisition provides revenue diversification and increased exposure to high margin, CPI linked contracts during period of major growth project delivery 2017 Reserves1 2017 Production1 mmboe mmboe Santos standalone Santos + Quadrant 3%
Slide 12: Safety
Safety On a journey to being the safest and lowest cost onshore operator Lost time injury frequency rate (LTIFR) Personal Safety Rate per million hours worked + ‘Mining the Diamond’ to focus on eliminating incidents with potential for 1.20 significant harm to people, assets or environment 1.00 + Red
Slide 13: Finance & capital management
Finance & capital management Anthony Neilson CFO
Slide 14: Financial discipline
Financial discipline Strong financial and operating performance driving shareholder value + Cultural shift to lean operations with rigorous cost control COST OUT & + Excluding the impact of shutdowns, production costs down 4% to $7.79/boe1 EFFICIENCY GAINS + Cooper Basin production costs down 13% to
Slide 15: 2018 Half-year financial snapshot
2018 Half-year financial snapshot Underlying profit up 99% to $217 million despite impact of PNG LNG shutdown in first half $ million 1H18 1H17 Change Product sales revenue 1,680 1,449 16% EBITDAX 883 718 23% Underlying profit1 217 109 99% Net profit after tax 104 (506) nm Operating cash flow 644 64
Slide 16: Strong underlying earnings
Strong underlying earnings Underlying NPAT up 99% to $217 million Product sales revenue EBITDAX Underlying NPAT1 $ million $ million $ million +16% +23% +99% 1,651 1,680 883 209 217 1,403 1,449 708 718 710 1,191 106 109 491 -31 1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H
Slide 17: Strong free cash flow generation
Strong free cash flow generation Free cash flow up 22% to $367 million despite ~$70 million impact of PNG LNG shut-down Operating cash flow Investing cash flow1 Free cash flow1 $ million $ million $ million +1% +22% 640 644 (391) 367 608 -18% 306 316 549 (338) 302 (292) (277) (243) 291 -100 1H16 2H1
Slide 18: Production and sales volumes
Production and sales volumes Production and sales volumes impacted by earthquake in PNG and one month planned shutdown of Bayu Undan / Darwin LNG Production Sales volume mmboe mmboe 29.5 30.0 28.0 Major 43.3 shutdown 40.1 38.0 Major + PNG shutdown earthquake + PNG impact: earthquake 2 mmboe impact:
Slide 19: Sales revenue
Sales revenue Low cost, diversified portfolio buoyed by higher commodity prices $million 1H18 1H17 Var + Sales revenue up 16% to $1.7 billion + Average realised LNG price up 24% to $8.96/mmbtu Sales Revenue (incl. third party) + Crude oil sales revenue significantly higher due to a 38% average Gas,
Slide 20: Production costs
Production costs 2018 unit production cost guidance lowered to $8.0-8.6/boe; includes impact of shutdown activity + Unit upstream production costs up 8% to $8.69/boe Upstream unit production costs impacted by shutdowns at PNG LNG and Bayu Undan / $/boe Darwin LNG 10.35 + excluding the effect of shut
Slide 21: Financial performance
Financial performance EBITDAX up 23% to $883 million. Underlying NPAT up 99% to $217 million $million 1H18 1H17 Var Total revenue 1,727 1,506 15% + Total revenue up 15% to $1.7 billion due to higher oil and Production costs (243) (239) LNG prices, and higher crude oil volumes 2% Other operating cost
Slide 22: Capital expenditure
Capital expenditure Half-year capex $306 million. 2018 capex guidance maintained at $775-825 million + Capital expenditure of $306 million 1H18 capital expenditure1 + 2018 capital expenditure guidance maintained at $775-825 million Asia PNG $4m + Cooper Basin 4-rig program drilling ~87 wells $15m We
Slide 23: Balance sheet supportive of growth strategy
Balance sheet supportive of growth strategy Targeting medium term gearing ratio <25% Net debt reduced to $2.4 billion. Net debt reduction target to be achieved Rapid de-gearing profile including Quadrant 2H18, >1 yr ahead of schedule Energy acquisition, growth funding and dividends1 Net debt / (Net
Slide 24: Drawn debt maturity profile
Drawn debt maturity profile Gross debt $3.9 billion at June 2018 excluding Quadrant Energy acquisition which is fully funded from existing cash and new committed debt facilities Drawn debt maturity profile as at Breakdown of drawn debt Drawn debt maturity profile excluding 30 June 20181 facilities a
Slide 25: Operations review
Operations review Kevin Gallagher Managing Director & CEO
Slide 26: Papua New Guinea
Papua New Guinea First half production impacted by PNG earthquake in February, full production resumed in April PNG LNG Asset KPIs 1H18 1H17 + Highlands earthquakes in February 2018 Production (mmboe) 4.6 6.2 + Major disruptive events for the people of PNG + PNG LNG expertise and resources were depl
Slide 27: PNG growth through expansion
PNG growth through expansion Potential expansion involves the construction of three additional trains at the PNG LNG site Upstream expansion + Santos farm-in to P’nyang proposal received and under negotiation + Potential P’nyang development could utilise existing PNG LNG infrastructure plus proposed
Slide 28: Northern Australia
Northern Australia Bayu Undan infill well project underway and Barossa enters FEED + Production and sales volumes impacted by scheduled one-month shutdown Asset KPIs 1H18 1H17 in May + Normalised production excluding the shutdown 2.1 mmboe in-line with Production (mmboe) 1.7 2.1 1H17 Sales volume (m
Slide 29: Northern Australia – Barossa Project
Northern Australia – Barossa Project Barossa FEED being advanced to support FID in late 2019 2016 Acquisition of 3D broadband seismic + Major growth opportunity, delivering ~9 mmboe average annual 4Q 2016 Commencement of pre-FEED + production Santos net Develops multi-tcf resource (Santos 25%) 2
Slide 30: Northern Australia – Barossa Project
Northern Australia – Barossa Project 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 and condensate storage Future Development, 4 wells subsea tie
Slide 31: Cooper Basin
Cooper Basin EBITDAX 46% higher due to lower cost operations, improved productivity and higher oil prices + Production volumes 6% higher to 7.5 mmboe Asset KPIs 1H18 1H17 + Sales gas and ethane production up 4% to 29.7 PJ Production (mmboe) 7.5 7.1 + Crude oil production up 7% to 1.4 mmbbls Sales vo
Slide 32: Growing the Cooper Basin
Growing the Cooper Basin Low-cost operating model and efficiencies underpin a focused program expected to deliver increased production and resource conversion over time + Diverse and growing inventory of exploration opportunities + Return to wildcat exploration: 2 wells drilled in 1H 2018 Grow + Red
Slide 33: 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 87
Slide 34: Moomba South growth opportunity
Moomba South growth opportunity One of a number of significant resource opportunities. Progressing appraisal program with fourth rig + Large scale 2C resource in deeper reservoirs beneath Moomba + Moomba 212 success provides line of sight to large scale development along flanks of Moomba South withi
Slide 35: Queensland and New South Wales
Queensland and New South Wales EBITDAX 86% higher due to higher upstream production and higher LNG prices + Production costs up 7% to $6.39/boe primarily due increased activity levels and Asset KPIs 1H18 1H17 installation of electric drive compression capacity at Roma Hub 2 (freeing up more gas for
Slide 36: GLNG capital efficiencies
GLNG capital efficiencies Cost out and efficiencies underpin an accelerated development plan to unlock more gas over time Well cost1 Days - development drilling Wells drilled $million per well Average days rig release to rig release No of wells -84% -77% 5.2 11.3 ~300 3.2 6.3 172 +266 5.3 1.6 3.6 3.
Slide 37: Western Australia
Western Australia Quadrant acquisition to enhance the scale of our core WA business + Low-cost, high margin conventional domestic gas assets generating strong free cash flow Asset KPIs1 1H18 1H17 + Production and sales volumes higher due to strong operating performance Production (mmboe) 5.6 5.0 and
Slide 38: Asia
Asia Sale of non-core Asian portfolio announced. Expected to complete in second half of 2018 + Production and sales volumes lower due to natural field decline Asset KPIs 1H18 1H17 + Revenue in-line due to higher commodity prices Production (mmboe) 2.8 3.5 + Sale of non-core Asian portfolio to Ophir
Slide 39: 2018 Half-year highlights
2018 Half-year highlights Low-cost, diversified portfolio generating strong cash flow. Balance sheet supportive of growth strategy and a return to dividends Strong free cash flow generation and continued cost efficiencies Significant growth options across all 5 core assets Balance sheet supporti
Slide 40: Appendix
Appendix Santos
Slide 41: Significant items
Significant items Reconciliation of half-year net profit to underlying profit $million 1H18 1H17 Net profit/(loss) after tax 104 (506) Add/(deduct) significant items after tax Impairment losses 76 689 Net gains on asset sales (39) (51) Fair value adjustments on hedges 76 (23) Underlying profit1 217
Slide 42: Liquidity and net debt as at June 2018
Liquidity and net debt as at 30 June 2018 $3.5 billion in cash and committed undrawn debt facilities Liquidity ($million) 30 Jun 2018 31 Dec 2017 Cash 1,492 1,231 Undrawn bilateral bank debt facilities 2,020 2,020 Total liquidity 3,512 3,251 Debt ($million) Export credit agency supported loan facili
Slide 43: 2018 Half-year segment results summary
2018 Half-year segment results summary Corporate Cooper Queensland Northern Western US$million PNG Asia explor’n & Total Basin & NSW Australia Australia elimins Revenue 529 469 217 75 172 134 131 1727 Production costs (63) (38) (31) (40) (50) (31) 10 (243) Other operating costs (31) (38) (22) - (8)
Slide 44: 2017 Half-year segment results summary
2017 Half-year segment results summary Corporate Cooper Queensland Northern Western US$million PNG Asia explor’n & Total Basin & NSW Australia Australia elimins Revenue 401 361 251 78 175 128 112 1,506 Production costs (69) (34) (27) (37) (47) (34) 9 (239) Other operating costs (37) (33) (22) - (8)
Slide 45: 2018 Guidance
2018 Guidance Upstream unit production cost guidance lowered to $8.0-8.6/boe Previous guidance Updated guidance Sales volumes 72-76 mmboe No change Production 55-58 mmboe No change Upstream $8.2-8.8/boe $8.0-8.6/boe production costs DD&A $650-700 million No change Capital $775-825 million No change
Slide 46: Oil price hedging
Oil price hedging Oil price hedging provides protection to oil price downside 2018 Zero-cost three-way collar hedge Open oil price positions 2018 2019 Zero-cost three-way collars (barrels) 5,240,250 - $70 Short call Realised Price (US$/bbl) $60.30 Brent short call price ($/bbl) $60.30 - $60 Long put
Slide 47: Impairment
Impairment Non-cash net impairment expense of $76 million before and after tax in first-half 2018 + In determining the carrying value of its assets, Santos Asian assets held for sale: net impairment of $47 million considers a range of asset and macro assumptions, + On completion, Santos expects to b
Slide 48: 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 49: 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