Santos Limited · ASX:STO
Santos — FY2002 Earnings Presentation
55 slides from Santos's earnings presentation, Feb 19, 2003
Slide 1: Santos: Fuelling The Growth Engine
Santos: Fuelling The Growth Engine 2002 Full Year Results 19 February 2003 1
Slide 2: Santos Delivers In 2002
Santos Delivers In 2002 A strong base business - Record production - Strong operating performance - New gas contracts Proven growth options - Exploration success - Esenjay delivers - Bayu-Undan LNG 2
Slide 3: Strong Shareholder Returns
Strong Shareholder Returns Australian Peers (AUD) 2001 2002 Santos 10% 2% Woodside -3 -2 ASX200 Energy Index -5 -3 ASX200 Index 10 -9 International Peers (USD) Santos 0% 18% US Oil Producers Index -13% -10% Source: Bloomberg Total Return Analysis 3
Slide 4: Finance & Operations Scorecard
Finance & Operations Scorecard 2001 2002 Safety (TRCFR) 9 9 EBITDA ($m) 1,117 1,084 Profit before write-downs ($m) 450 392 Exploration write-offs after tax ($m) 4 70 Leverage (net debt/net debt + equity) 28% 29% Return on capital 14% 9% Dividends (cps) 30 30 4
Slide 5: 2002 Reserves Conveyor Belt
2002 Reserves Conveyor Belt Barrow/ Barrow/ Mutineer/ Mutineer/ Cooper Cooper Oyong Oyong Esenjay Esenjay Cooper Cooper Exeter Exeter Basin Basin Basin Basin 21 1P 1P (57) 7 7 27 6 327 316 Revisions Acquisitions Commercialisation Exploitation Production Exploration 2001 2002 5
Slide 6: Santos: The Fuel To Grow
Santos: The Fuel To Grow Long-term contracts, Gas customer relationships Commercialisation Cash flow Strong Identified Exploration/ stability Base Growth NV portfolio Business Options Interests in Building & all major acquiring basins Demonstrated Capacity Technical Low cost strengths operator Balan
Slide 7: Demonstrated Capacity
Demonstrated Capacity 7
Slide 8: Good Progress On Objectives
Good Progress On Objectives +119% (a) Reserves Growth US$6.78 Lower F&D Cost Production +3% Growth Lower US$3.82 Finding Lower Cost Costs +3% ( b) Cash Flow Growth ROC 9% TSR EPS CPS 2% Growth Growth (a) Proven reserve replacement ratio -29% +15% (b) Operating expenditure per boe 8
Slide 9: Sales Grow
Sales Grow 2002 Sales volume analysis (mmboe) 0.8 0.3 0.3 0.1 (0.8) 1.1 0.9 (1.0) 56.8 55.1 Scotia Scotia East East Other Other Cooper Esenjay Esenjay Cooper Stag Stag Otway Otway Spar Spar Legendre Legendre Basin Basin 3% growth 2001 2002 Sales Sales 9
Slide 10: Operating Costs Under Control
Operating Costs Under Control Overall cash cost of New Cost Base 5 (16) sales per boe 7 14 448 15 8 423 7.89 PRRT/ Insurance Production Insurance Production Savings Savings 7.68 New New PRRT/ other other Optimisation Optimisation 7 Production Production 6 5 $/boe 4 3 3% 2 growth 1 0 2001 2002 2001 2
Slide 11: Low Cost Operator
Low Cost Operator Production cost (US$/boe) 12 10 8 US$/boe 6 Santos 4 2 0 e l on Eq l d y r O c ee r n Do so Ap l M a he n B u tos Qu e o rry ta Pi e a ta bl to ph io ev l r fie oc ob en th Pa Pu ac es ta in Be ng on Nu n ur Un ra ew N ui c id m Sa El M r li N Source: JS Herold 35th Annual Reserve
Slide 12: Drilling Continues To Improve
Drilling Continues To Improve Offshore Onshore USA A$/ft A$/ft US$/ft 2000 250 500 1600 200 400 1200 150 300 800 100 200 400 50 100 0 0 0 1998 2001 2002 1998 2001 2002 Esenjay Santos 12
Slide 13: Improvement Program Delivers Savings
Improvement Program Delivers Savings (A$ million per annum) 100 New Target 90 80 70 60 $ million pa Market 50 Commitment 40 30 Capex 20 10 Opex 0 Mar Jun Sep Dec Mar Jun Sep Dec 2002 2003 13
Slide 14: More Effective Capital Spending
More Effective Capital Spending Cooper gas development spending 200 191 180 157 160 140 135 117 120 105 $ million 100 80 60 40 20 0 2001 Feb 02 Aug 02 Actual Result 2003 Briefing Briefing 2002 2002 Outcome 14
Slide 15: Investment Program
Investment Program (A$ million) 450 433 2002 421 Other 400 Other 129 124 2003 350 300 Bayu- Bayu- Undan Undan 250 140 160 200 146 150 133 Total Total 117 106 Cooper Cooper 100 90 152 149 46 50 0 Exploration Delineation Fixed Assets Development 15
Slide 16: Underlying Profit Strength
Underlying Profit Strength (A$ million) Earnings Before Interest Tax Net Profit After Tax Depreciation & Amortisation 24 24 (5) (5) (5) (5) (26) (26) 1,117 1,117 (21) (21) 1,084 1,084 Prices Other Volume Prices Volume Other Costs Costs Insurance Insurance Claim Claim 446 446 (24) (24) 66 (40) (40) (
Slide 17: Strong Cash Generation
Strong Cash Generation (A$ million) 27 16 (35) 102 (6) 821 717 Insurance Lower Lower Other Interest Sales Proceeds Paid Receipts Lower Tax Paid 2001 2002 Operating Operating Cash Flow Cash Flow 17
Slide 18: The Flexibility To Act
The Flexibility To Act Debt to total capital Target 1000 Gearing 50% Debt 900 Capacity 45% (@ 40% 800 Gearing) 700 40% 600 35% Gearing 500 $million 400 30% 300 25% 200 100 20% 0 15% -100 -200 10% 1998 1999 2000 2001 2002 18
Slide 19: Capital Discipline
Capital Discipline APACHE POGO PENNWEST SANTOS Santos ENCANA TALISMAN OCCIDENTAL FOREST ANADARKO EOG ULTRA % increase to current reserve base, SWIFT assuming a US$6/boe acquisition price OCEAN and net debt to market cap of 50% CAN NAT OIL BURLINGTON 0 5 10 15 20 25 30 % of reserves @ US$6/boe acquis
Slide 20: Exploration Carried Forward
Exploration Carried Forward Contingent resources carried forward $354m Hides Evans Shoal Bentu, Maleo, Oyong Kipper, Casino Exploration assets carried forward $70m Otway PNG Browse US Gulf Coast Total $424m 20
Slide 21: Strong Base Business
Strong Base Business 21
Slide 22: A Strong Australian Franchise
A Strong Australian Franchise Northern Australia Western Australia Central Australia 0 1000 kilometres 22
Slide 23: Eastern Australian Gas Leader
Eastern Australian Gas Leader (Petajoules) 2001 2002 %Change Santos 184 190 2.9 Exxon 158 153 -3.0 BHP 103 98 -4.4 Origin 63 64 1.9 23
Slide 24: Improving Our Base Business
Improving Our Base Business Cooper Basin 2001 2002 Production optimisation 25 TJ/d 75 TJ/d Drilling & completions A$184 A$167 per foot per foot Cycle time 74 days 53 days Source: Company production reports 24
Slide 25: Identified Growth Options
Identified Growth Options 25
Slide 26: Gas Commercialisation Success
Gas Commercialisation Success • 600 PJ new gas contracts • AGL gas contract • Oyong Heads of Agreement. Building SE Asian franchise • Bayu-Undan LNG 26
Slide 27: Building & Acquiring 1
Building & Acquiring 1 Mutineer/Exeter Development options Santos WA-191-P acreage Oil field • 120 mmbbl 2P reserves • FPSO production facility 0 5 Mutineer 2 kilometres Mutineer 1 Norfolk 2 • First production mid 2005 Norfolk 1 Pitcairn 1 • Santos interest 33.4% Exeter 2 Exeter 1 Exeter 3 27
Slide 28: Building & Acquiring 2
Building & Acquiring 2 Bayu-Undan Liquids • First production April 2004 • Total Capex US$1.8 billion • LNG subject to Timor Sea Treaty • Combined peak production over 6 mmboe p.a. (Santos share) • Santos interest 11.8% 28
Slide 29: Building & Acquiring 3
Building & Acquiring 3 Oyong Oil & Gas • Heads of Agreement Feb 2003 • Minimum 40 MMcf/d for 10 years • 2P gas 90 BCF and oil 5 mmbbl • Capex US$80m • Production 2H 2004 • Santos interest 45% 29
Slide 30: Exploration & New Ventures
Exploration & New Ventures Expanding our exploration opportunities 2001 2002 345 leads 407 leads 126 prospects 279 prospects 22 drill ready 37 drill ready 67 MMboe Mean 106 MMboe Mean Discovered Resource Discovered Resource 30
Slide 31: Exploration & New Ventures
Exploration & New Ventures Resource potential (mmboe) 300 P10 Mean P90 200 2001 Result 2003 2002 Result Forecast 100 2000 Result 0 2001 2002 2003 31
Slide 32: Exploration & New Ventures
Exploration & New Ventures 2003 wildcat program Other Indonesia 1 well USA PNG 4 wells 1 well East Java 1 well Carnarvon 4 wells Eastern Queensland 2 wells Cooper Basin 9 wells New Opportunities Deep Water Gippsland Oil Prospects Otway 1 well Gas Prospects 3 wells 32
Slide 33: Identified Growth Options
Identified Growth Options Oyong/ Maleo Mutineer/ Bayu-Undan Exeter LNG Bentu Reindeer/ John Brookes Evans Shoal Bayu-Undan Liquids Barrow Island 2002 2005 2010 2015 $ Hides Patricia Petrel Tern Baleen Kipper Sanctioned project Minerva Near-term project Golden Long-term Development Sole Beach 33
Slide 34: Santos: The Fuel To Grow
Santos: The Fuel To Grow Strong Identified Base Growth Business Options Demonstrated Capacity 34
Slide 35: Reference Slides
Reference Slides 1
Slide 36: Production Volumes
Production Volumes (mmboe) Overseas 70 Offshore 60 Onshore 50 40 30 20 10 0 1998 1999 2000 2001 2002 Ov erseas 2.1 0.6 1.1 1.5 2.4 Offshore 5.0 6.8 13.6 12.9 12.8 Onshore 38.5 41.8 41.3 41.3 42.1 Total 45.6 49.2 56.0 55.7 57.3 2
Slide 37: Production
Production New vs existing (mmboe) New 70 Fields 60 Existing Fields 50 40 30 20 10 0 1998 1999 2000 2001 2002 New Fields 2.6 4.8 10.2 10.0 9.6 Existing Fields 43.0 44.4 45.8 45.7 47.7 Total 45.6 49.2 56.0 55.7 57.3 3
Slide 38: Production Analysis
Production Analysis (mmboe) 1.1 (0.6) (0.9) 2.0 Other 57.3 Legendre Oil Stag Oil 55.7 Gas 2001 2002 Production Production 4
Slide 39: 2002 Oil Prices
2002 Oil Prices 2001 2002 %Change Realised Oil Price USD/bbl 25.22 25.12 -0.4 (after hedging) Realised Oil Price AUD/bbl 45.52 44.74 -1.7 5
Slide 40: Sales Revenue
Sales Revenue ($A million) Overseas 2000 Offshore 1500 Onshore 1000 500 0 1998 1999 2000 2001 2002 Ov erseas 39 32 47 63 79 Offshore 82 150 509 464 459 Onshore 648 763 941 933 940 Total 769 945 1,497 1,460 1,478 6
Slide 41: Sales Revenue Analysis
Sales Revenue Analysis ($A million) 13 (18) 29 (5) Gas Prices 1,478 Liquids Prices Liquids Volumes 1,460 Gas Volumes 2001 2002 Sales Revenue Sales Revenue 7
Slide 42: Operating Expenses
Operating Expenses New vs existing production (A$ million) New 500 Fields Existing 400 Fields 300 200 100 0 1999 2000 2001 2002 New Fields 38 96 111 132 Existing Fields 251 292 312 316 Total 289 388 423 448 8
Slide 43: Operating Expenses
Operating Expenses ($A million) 2001 2002 Operating Costs 288.5 313.2 Pipeline Tariffs / Tolls 31.7 31.0 Royalties / PRRT 102.6 108.7 Third party gas purchases 13.6 4.5 Inventory Movement (13.4) (9.1) Total 423.0 448.3 9
Slide 44: EBITDA
EBITDA ($A million) 1400 EBITDA 1200 1000 800 600 400 200 0 1998 1999 2000 2001 2002 EBITDA 578 693 1,167 1,117 1,084 10
Slide 45: Operating Expenses to EBITDA
Operating Expenses to EBITDA (Percent) 50% OPEX to EBITDA 40% 30% 20% 10% 0% 1998 1999 2000 2001 2002 OPEX to EBITDA 46% 42% 33% 38% 41% 11
Slide 46: Depreciation, Depletion & Amortisation
Depreciation, Depletion & Amortisation ($A million) 2001 2002 Depletion of exploration & development expenditure 277.1 310.9 Depreciation of plant & equipment 119.1 126.1 Depreciation of buildings 3.3 5.3 Future restoration costs 12.4 17.0 Amortisation of capitalised leases 0.4 0.8 Amortisation of g
Slide 47: Earnings Before Interest & Tax (EBIT)
Earnings Before Interest & Tax (EBIT) ($A million) 54 (448) 1,478 Other 1,084 (469) Opex (75) 540 D,D&A Writedown on Exploration EBITDA 2002 2002 Sales Revenue EBIT 13
Slide 48: Cashflow From Operations
Cashflow From Operations Cash from 1200 1.80 Operations ($A million) 1.60 1000 1.40 Cash from Operations 800 1.20 per share 1.00 600 0.80 400 0.60 0.40 200 0.20 0 0.00 1998 1999 2000 2001 2002 Cash from Operations 457.6 530 1023 717 821 ($A million) Cash from Operations 0.76 0.87 1.68 1.17 1.41 per
Slide 49: Cashflow From Operations
Cashflow From Operations ($A million) 27 16 (35) 102 (6) 821 Lower Lower 717 Insurance Other Interest Sales Proceeds Lower Paid Receipts Tax Paid 2001 2002 Operating Cashflow Operating Cashflow 15
Slide 50: Exploration & Delineation, Development & Construction
Exploration & Delineation, Development & Construction ($A million) Exploration & 800 Delineation Development & 600 Construction 400 200 0 1998 1999 2000 2001 2002 Exploration & 181 78 100 151 224 Delineation Development & 324 219 341 509 537 Construction Total 505 297 441 660 761 16
Slide 51: Capital Expenditure
Capital Expenditure ($A million) 2001 2002 Exploration Australia 45.0 63.7 Overseas 48.4 69.5 Delineation Australia 57.4 64.1 Overseas - 26.2 Development (1) Australia 473.1 474.5 Overseas 36.3 62.7 Total 660.2 760.7 (1) Includes construction and fixed assets expenditure 17
Slide 52: Net Debt & Gearing
Net Debt & Gearing A$ million 1400 45% Net Debt 1200 40% Net Debt/(Net 35% Debt + Equity) 1000 30% 800 25% 600 20% 15% 400 10% 200 5% 0 0% 1998 1999 2000 2001 2002 Net Debt 1280 1301 867 1061 1163 Net Debt/(Net Debt + 40% 39% 27% 28% 29% Equity) 18
Slide 53: Interest Cover
Interest Cover A$ million Times 100 12 Interest 90 Expense 10 80 Net Interest 70 Cover (times) 8 60 50 6 40 4 30 20 2 10 0 0 1998 1999 2000 2001 2002 Interest Expense 75.30 78.60 88.70 70.50 66.40 Net Interest Cover 4.38 5.22 9.05 9.66 8.06 (times) 19
Slide 54: Returns
Returns (Percent) 25% Return on Av erage Equity 20% Return on Av erage Capital Employ ed 15% 10% 5% 0% 1998 1999 2000 2001 2002 20
Slide 55: Earnings Per Share (EPS)
Earnings Per Share (EPS) (Cents per share) 90 80 EPS 70 60 50 40 30 20 10 0 1998 1999 2000 2001 2002 EPS 29 51 80 73 51 21