Santos Limited · ASX:STO
Santos — Investor Day (November 2017)
74 slides from Santos's investor day presentation, Nov 9, 2017
Slide 1: ASX / Media Release
ASX / Media Release 9 November 2017 Santos 2017 Investor Day Santos today outlined how its new strategy had transformed the company into a business that generates significant free cash flow in the current oil price environment. Speaking at the company’s Investor Day in Sydney, Santos Managing Direct
Slide 2: Guidance and live webcast
“Our primary objective is to safely deliver production and reserves growth across the core assets, and discover new resources to grow the business, all within the constraints of our disciplined operating model,” Mr Gallagher said. Guidance 2017 production and sales volumes are expected to be towards
Slide 3: Santos 2017 Investor Day
Santos 2017 Investor Day 9 November 2017
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 Strategy Kevin Gallagher Managing Director & CEO 10:00 Marketing & Trading Philip Byrne Executive Vice President Marketing & Trading 10:15 Finance & Capital Management Anthony Neilson CFO 10:30 Morning T
Slide 6: Strategy
Strategy Kevin Gallagher Managing Director & CEO
Slide 7: Transform, Build & Grow
Strategy Transform, Build & Grow + 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 + Identify and develop
Slide 8: Driving sustainable shareholder value
Driving sustainable shareholder value Focus on becoming a low-cost, reliable and high performance business DISCIPLINED FIVE CORE LONG-LIFE MAXIMISE FREE OPERATING MODEL GAS ASSET PORTFOLIO CASH FLOW + Core portfolio free cash flow breakeven + Positioned to provide at ≤$40/bbl oil price stable produc
Slide 9: 2017 Strategy report card
2017 Strategy report card In December 2016, we said we would…… Reduce debt Deliver a core portfolio that targets free cash flow breakeven in a US$35-$40/bbl oil price range Target Australia’s lowest-cost onshore operations Identify and develop growth opportunities across the 5 core long-life n
Slide 10: Transform: significant turnaround in business performance
Transform Significant turnaround in business performance ahead of plan TRANSFORM1 FREE CASH FLOW BREAKEVEN2 UPSTREAM UNIT PRODUCTION COSTS WELL COSTS3 $32 per barrel, down 32% $8.08 per boe YTD, down 22% Cooper $2.8 million, down 42% FREE CASH FLOW NET DEBT GROSS DEBT GLNG (Roma) $659 million $2.8 b
Slide 11: Build: strategic core asset positions strengthened
Build Strategic core asset positions strengthened. Focus on maximising margins BUILD PAPUA NEW GUINEA QUEENSLAND + Western Area farm-in executed + Agreements executed to evacuate uncontracted Eastern Queensland gas + JV alignment continues to strengthen NORTHERN AUSTRALIA NARRABRI + Enters core port
Slide 12: Grow: bring on-line growth opportunities
Grow Execute and bring on-line growth opportunities across the core portfolio GROW NORTHERN AUSTRALIA PNG LNG GLNG + Barossa field identified + Further debottlenecking + Ramp-up to 6 mtpa by the as lead candidate for of existing plant end of 2019 Darwin LNG backfill. FEED targeted for 2Q 2018 + PNG
Slide 13: Northern Australia
Northern Australia Significant resource base well positioned for backfill or expansion of existing infrastructure + Darwin LNG delivered its 600th cargo in Barossa September Caldita Bayu-Undan + Excellent reliability and availability + Barossa two-well appraisal campaign strengthens position as lead
Slide 14: PNG
PNG PNG LNG operating well above nameplate. Joint venture alignment continues to strengthen along the Hides-P’nyang trend + PNG LNG maximum day rate of 8.9 mtpa achieved (30% above nameplate capacity) P’nyang Muruk & Karoma Juha Hides + Western area farm-in announced Angore Kutubu + Aligned explorat
Slide 15: WA Gas
WA Gas Low cost operations with capacity and reserves to meet short and long-term demand + Low cost operations well positioned against other suppliers + Uncontracted reserves to meet demand + Wesfarmers re-contracted 27 PJ for 3 years Reindeer + Spar-2 tied back to existing infrastructure in 2017 pr
Slide 16: Onshore Australia – Cooper Basin and Queensland
Onshore Australia – Cooper Basin and Queensland Australia’s lowest-cost onshore operations + Sustainable structural cost reductions now embedded + Lower Cooper Basin costs and increased exploration expected to deliver reserves additions over time + 2018 drilling activity expected to increase1 Queens
Slide 17: New operating model embedded
New operating model embedded Santos Operating Model sets a disciplined framework to drive value Asset lifecycle Portfolio & portfolio rules Priorities for cash allocation Five core long-life natural gas assets Exploration Debt repayment Northern Cooper Basin Queensland PNG WA Gas Australia Developme
Slide 18: Sustainability
Sustainability SAFETY & ENVIRONMENT LOST TIME INJURY FREQUENCY RATE Three year rolling average (2012 – October 2017) + Aspiration: “We all go home without injuries or illness” rate per million hours worked 1.2 + Increased focus on process safety and incidents with potential for significant harm 1.0
Slide 19: Summary
Summary Driving sustainable shareholder value by becoming a low-cost, reliable and high performance business DISCIPLINED FIVE CORE LONG- MAXIMISE FREE OPERATING MODEL LIFE GAS ASSETS CASH FLOW + Core portfolio free cash flow breakeven + Positioned to provide at ≤$40/bbl oil price stable production f
Slide 20: Marketing and Trading
Marketing and Trading Philip Byrne Executive Vice President Marketing & Trading
Slide 21: Marketing and trading 2017 highlights
Marketing and trading 2017 highlights Domestic gas LNG and liquids Projects Executed agreements to deliver over Positive buyer response to marketing of Agreements executed to evacuate 125 PJ of gas to southern markets over mid-term PNG LNG volumes uncontracted Combabula gas 2H17-2020 (~1.3 mtp
Slide 22: Global oil – supply and demand outlook
Global oil – supply and demand outlook Global oil demand growth continues to strengthen, the market is expected to remain tightly balanced Global oil supply and demand Forecast million barrels/day Supply +1.6% pa 100.2 99.9 Demand Demand growth 98.0 98.2 97.2 96.7 96.9 95.3 2015 2016 2017 2018 Sourc
Slide 23: Global LNG – supply and demand outlook
Global LNG – supply and demand outlook Opportunities exist for new LNG supply as the market tightens in the early-to-mid-2020s Global LNG supply and demand mtpa Santos opportunities 500 Market well supplied + Barossa-Caldita Darwin LNG backfill + PNG Expansion 450 130 400 mtpa 350 300 250 200 150 10
Slide 24: Secured value through strong contracted LNG position
Secured value through strong contracted LNG position Underpinned by long-term high-value contracts with quality Asian buyers Santos LNG cargoes by type percent + Santos’ portfolio has a strong weighting to long-term, oil indexed contracts + LNG contracts have no price caps + PNG LNG operating above
Slide 25: Well positioned in both Eastern and Western Australia
Well positioned in both Eastern and Western Australia One of the largest suppliers of domestic gas and ethane, supplying ~120PJ into the domestic market in 2017 Western Australia Eastern Australia + Supply deficit emerging + Santos is committed to from early 2020s delivering increased gas supply to
Slide 26: Moomba can provide strategic gas storage
Moomba can provide strategic gas storage Santos operated Moomba strategic storage is well placed to provide security of supply to support emergencies and peak gas or power requirements Darwin + Centrally located with access to major transmission pipelines connected to all east coast capital cities C
Slide 27: Finance & Capital Management
Finance & Capital Management Anthony Neilson CFO
Slide 28: Financial priorities
Financial priorities Significant progress in 2017 on our financial priorities REDUCING INCREASING REDUCING DEBT CAPITAL COSTS FREE CASH FLOW MANAGEMENT + EURO 1 billion Subordinated Notes redeemed + Unit upstream + Forecast free cash and replaced by + Net debt production costs flow breakeven $800 mi
Slide 29: Production and sales volumes
Production and sales volumes 2017 production and sales volumes expected to be toward the upper end of guidance. Five core assets expected to deliver higher production in 2018 and stable production for the next decade Production volume 2018 guidance Sales volume 2018 guidance mmboe mmboe + Core asset
Slide 30: Capital expenditure and production cost guidance
Capital expenditure and production cost guidance Increased activity driven by cost efficiencies Sustainable cost out now embedded in our operations Capital expenditure guidance1 Upstream unit production cost guidance1 $ million $/boe produced 825-875 2018 guidance 2018 guidance 8.20-8.80 Cooper Basi
Slide 31: Net debt reduced to $2.8 billion
Net debt reduced to $2.8 billion Target $2 billion in net debt by the end of 2019 + Net debt reduced to $2.8 billion1 through a 2017 movement in net debt to 30 September 2017 combination of free cash flow, previously announced $ million asset sales and proceeds from the Share Purchase Plan 3,492 (92
Slide 32: Drawn debt maturity profile
Drawn debt maturity profile Euro hybrid redeemed and replaced with more efficient long-term debt funding. $600 million of 2019 ECA supported loan facility prepaid in 2017 Drawn debt maturity profile as at 8 November 20171 Breakdown of drawn debt facilities $million as at 8 November 20171 $350 millio
Slide 33: Drawn debt maturity profile excluding PNG LNG
Drawn debt maturity profile excluding PNG LNG Senior debt profile $2.2 billion ex PNG LNG non-recourse project finance Drawn debt maturity profile as at 8 November 20171 Breakdown of drawn debt facilities $million as at 8 November 20171 1,200 $350 million pre-payment made 8 November 2017 900 815 808
Slide 34: Summary
Summary In 2018 the focus remains on reducing costs, increasing free cash flow, reducing debt and disciplined capital management REDUCING INCREASING REDUCING DEBT CAPITAL COSTS FREE CASH FLOW MANAGEMENT + Forecast 2018 group + Cost out continuing free cash flow + Capital management + Target $2 billi
Slide 35: Morning Tea
Morning Tea Santos
Slide 36: Onshore upstream development
Onshore upstream development Brett Woods Executive Vice President Onshore Upstream Developments
Slide 37: Overview
Overview STABILISE ONSHORE DEVELOP AND EXPLORE AND GROW OPERATED ASSETS APPRAISE FOOTPRINT Invest in high graded growth options Build inventory and + Leverage the free cash flow Set-up assets to be cash execute efficiently generated by the assets generating throughout the oil price cycle + Increase
Slide 38: Lowest-cost onshore Australian operations
Lowest-cost onshore Australian operations Cooper & GLNG transformed to low cost, efficient drill-complete-connect-operate businesses Disciplined operating Relentless drive for Organisational focus model cost and efficiency + Engaged with North American + Disciplined approach to + Focus on design-to-
Slide 39: Cooper Basin drilling – a structural transformation
Cooper Basin drilling – a structural transformation Improved cycle time performance has led to embedded and sustainable cost reductions Cooper Basin drilling cycle times + Cooper Basin drilling cycle times halved Average days (rig release to rig release) 27 + Rig move efficiencies 24 19 + Skidding b
Slide 40: Cooper Basin oil development
Cooper Basin oil development Lean well design and disciplined operating model has lowered the minimum economic pool size from 100 kbbl to <40kbbl/well Oil well capex1,2 Ensign 950 - Shallow wells rig $m per well + Lower cost enables shallow oil development, -46% initial 10 well program 1.6 1.5 with
Slide 41: Cooper gas reserves replacement and reserves life
Cooper gas reserves replacement and reserves life The Cooper Basin continues to generate new gas reserves. Renewed focus in exploration to target further growth + Cooper Gas Reserves Replacement Ratio (RRR) has averaged 82% since 2006 + Santos now refocusing on Cooper Basin exploration + 2013-2016 a
Slide 42: Cooper Basin gas development
Cooper Basin gas development Appraisal drilling in the Namur Field proved a significant gas resource in the previously un-proven Patchawarra sands + Namur field discovered 1976, originally produced from Namur sandstone. Ceased production in 1984 + Drill Stem Test from original development identified
Slide 43: GLNG upstream onshore transformation
GLNG upstream onshore transformation Proven cost performance now allows GLNG to increase drill, complete and connect activities Roma drill, complete, connect + Now lowest cost operator in Queensland $ million per well 5.2 + Plan to ramp up drilling while maintaining cost discipline Drilling & Comple
Slide 44: GLNG drilling transformation
GLNG drilling transformation Improved cycle time performance has led to embedded and sustainable cost reductions Roma drilling cycle times Average days (rig release to rig release) + Roma drilling cycle times reduced by more than 50% -68% + Change in rig execution strategy to lightweight hybrid coil
Slide 45: GLNG upstream onshore transformation: well leases
GLNG upstream onshore transformation Well leases before and after transformation BEFORE AFTER Santos 2017 Investor Day 43
Slide 46: GLNG upstream onshore transformation: surface kit
GLNG upstream onshore transformation Surface kit before and after transformation BEFORE AFTER Santos 2017 Investor Day 44
Slide 47: GLNG upstream onshore transformation: drilling footprint
GLNG upstream onshore transformation Drilling footprint before and after transformation BEFORE AFTER Santos 2017 Investor Day 45
Slide 48: Roma development
Roma development Moving to the high graded Roma acreage in the next phase of development + Cost base reset ready for development (down 83% on 2014 costs) + Solids management and pump reliability issues mitigated through modified completion design + Subsurface led optimisation of reservoir developmen
Slide 49: Fairview development
Fairview development Fairview continues to perform Fairview production Average monthly sales gas rate (TJ/d) + Ongoing programme of production optimisation activity to maximise production from existing wells + Programme of fill clean outs, liner installs and artificial lift system (ALS) re-installs
Slide 50: Eastern Queensland
Eastern Queensland Eastern Queensland portfolio to capture domestic gas opportunities while maintaining gas supply to GLNG + Santos has delivered cost reductions more rapidly in operated assets than observed in non-operated assets + Opportunity to deliver additional value into these assets with the
Slide 51: Operations
Operations Vince Santostefano COO Conventional Oil & Gas and LNG Operations
Slide 52: Cooper & GLNG operations
Cooper & GLNG operations Discipline, Cost and Volume remain the strategic focus for operations DISCIPLINE COST VOLUME + Fit for purpose standards to + $52 million (21%) reduction + Excellent continued enable low cost operations in Cooper Basin total operations at Curtis Island and maintenance produc
Slide 53: Curtis Island operations
Curtis Island operations 153 LNG cargoes delivered as at end of October 2017 + 8.9 mtpa maximum day rate achieved cf. 7.8mtpa nameplate capacity + 99% production reliability across the plant + Train 1 and 2 shutdowns completed successfully + Collaboration with other LNG plants + New Marine Operation
Slide 54: Curtis Island conversion cost reductions
Curtis Island conversion cost reductions On track to deliver disciplined, sustainable and best in class cost performance GLNG conversion costs1 $m gross (real) + Two trains fully operational in 2017 96 92 89 -7% + Lean operations delivering cost performance + Optimisation and consolidation of site w
Slide 55: Cooper operations
Cooper operations Sustainable cost out being delivered whilst maintaining exemplary Process Safety performance Total production costs $m gross $/boe + 21% cost reduction in Cooper production costs 500 20 450 + Cooper Basin operating philosophy rollout 16.1 400 15 + Employee support for EBA renegotia
Slide 56: Moomba plant third party oil
Moomba plant third party oil Increased third party throughput enabled by competitive access agreements Forecast third party oil – Moomba Plant1 kbbl/month 800 + Increased third party throughput incentivised by 700 competitive access agreements 600 + Pass through pricing mechanism 500 + Incremental v
Slide 57: Moomba re-set initiative
Moomba re-set initiative Rejuvenate and re-life the core hub of Moomba + Moomba town plan - minimise footprint and maximise efficiency + Project commenced and is a key focus for 2017/18 + 24% annual cost reduction from camp tender + 43% reduction in light vehicle fleet + Warehouse consolidation ongo
Slide 58: Santos operations excellence
Santos operations excellence Operations Excellence is core to our operating philosophy + What it is: Operating Cost + Is built up by key results areas Model + Clarity of expectations and standards + Enables measurement against performance standards Operations Maintenance Excellence Process Safety +
Slide 59: Process safety and reliability
Process safety and reliability Improved visibility and focus on key metrics Standing alarms1 Master data change requests1 Moomba plant inherent availability Count Count> 90 days Target >98.5% 99.1% 98.9% 99.0% 82% -90% Oct-16 Sep-17 Oct-16 Sep-17 2016A 2017F 2018F 1 Santos operated assets Santos 201
Slide 60: Exploration and Appraisal
Exploration and Appraisal Bill Ovenden Executive Vice President Exploration & Appraisal
Slide 61: Exploration and Appraisal: activity themes
Exploration and Appraisal Activity themes + Deepen the exploration inventory across all assets + Consolidate and align our exploration acreage around our infrastructure ownership + Disciplined and balanced allocation of risk capital Exploration and appraisal highlights (last 12 months) + PNG Muruk d
Slide 62: Papua New Guinea
Papua New Guinea Align and pursue gas resource options that offer commercialisation optionality through existing and expansion infrastructure. Grow short cycle-time opportunities 2018 2019 2020 2021 2022 Western farm-in licenses* Muruk 2 P’nyang Barikewa 3 * * * * Karoma Muruk * Angore Pandora Hides
Slide 63: Papua New Guinea growth
Papua New Guinea growth Building aligned PNG LNG expansion optionality Muruk appraisal + 2016-2017 discovery of 2 gas pools in greater Muruk structure + Multi-Tcf contingent resource potential + Planned activity + Delineation 2D seismic (2017-18) + Muruk 2 appraisal (1Q 2018) + 21 km tieback to Hide
Slide 64: Northern Australia growth
Northern Australia growth Powerful discovered resource position across 3 potential future upstream production hubs Barossa: Gross 4.3 Tcf, net 1.1 Tcf 2C raw gas recoverable resource Backfill of Darwin LNG LNG ullage + Multi-Tcf 2C resource ownership across and Expansion multiple geologic provinces
Slide 65: Northern Australia growth
Northern Australia growth Successful de-risking of DLNG backfill candidate Barossa and systematic exploration inventory build around all discovered resource hubs Browse (Santos 30%) Petrel-Tern-Frigate (Santos 35-40%) Bonaparte – Barossa (Santos 25%) + Consolidated resource ownership - retention + M
Slide 66: Cooper Basin exploration
Cooper Basin exploration Resurgent exploration effort in a mature production province + Leverage deep basin knowledge and drill-complete-connect cost out + Focused on reserves replacement and value Deepened Inventory build + 100+ oil and gas opportunities identified (multiple proven plays) + Balance
Slide 67: McArthur Basin EP exploration program
McArthur Basin EP 161 exploration program Demonstrate productivity of Velkerri Shale gas resource and acquire critical data for appraisal planning + Focus on EP 161 in the Greater Beetaloo sub-basin + Multi-Tcf prospective resource + Santos 75% and operator + Forward activity plan + 3D seismic acqui
Slide 68: Amadeus Basin exploration
Amadeus Basin exploration Frontier sub-salt play – Multi-TCF gas potential + 2D seismic acquisition Dec17/Jan18 to supplement multiple phases of regional reconnaissance seismic (2014 and 1H 2017 campaigns) – prospect delineation + Geologic concept on farm-in - regional sub-salt central basin arch ho
Slide 69: 2018 exploration & appraisal program summary
2018 exploration & appraisal program summary Activity focused around core asset hubs Muruk-2 Karoma-1 Barikewa-3 2D Seismic 2D Seismic 3D Seismic T-1 T-2H, T3H drill1 3D Seismic 3D Processing Coreholes (ATP1191) 2D Seismic Tinowon-2 & EPT Mira and Mahalo Workovers 2 Wildcats 13-18 NFEs 3D Seismic Re
Slide 70: Wrap-up
Wrap-up Kevin Gallagher Managing Director & CEO
Slide 71: Transform, Build & Grow
Strategy Transform, Build & Grow + 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 + Identify and develop
Slide 72: Delivering the strategy
Delivering the strategy Disciplined growth initiatives in the core assets and reducing debt further TODAY’S ANNOUNCEMENTS + Farm-ins to + Barossa + Evacuation + Further + Narrabri gas five confirmed as route secured reduction in asset in NSW prospective lead candidate for Combabula gross debt to joi
Slide 73: 2018 strategic priorities
2018 strategic priorities Business focus aligned with the core strategy Focus on business improvement to further reduce costs and maximise operating cash flow Disciplined allocation of free cash to repay debt and build production levels across core assets Disciplined inventory build around core asse
Slide 74: Santos 2017 Investor Day
Santos 2017 Investor Day 9 November 2017