Santos Limited · ASX:STO
Santos — H1 2004 Earnings Presentation
31 slides from Santos's earnings presentation, Aug 24, 2004
Slide 1: Meeting the Challenge: 2004 Interim Results
Meeting the Challenge 2004 Interim Results 24 August 2004 1 Disclaimer & 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
Slide 2: Program
Program • Overview - John Ellice-Flint • Harvesting value from existing assets - Jon Young • Financial performance - Peter Wasow • Creating value from new assets - John Ellice-Flint • Q&A 3 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from
Slide 3: Safety - Recordable Injuries Reduce
Safety - Recordable Injuries Reduce • Major focus Total Recordable Case Frequency Rate (12 month rolling average) 10 • Embedding new (per million exposure hours) culture 8 Full Year TRCFR 6 2002 • Applying a range Full Year 2003 of programs 4 2 0 Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun 0
Slide 4: Results Reflect Moomba
Results Reflect Moomba Half Year Half Year 2004 2003 Produced volume (mmboe) 21.2 26.8 Sales volume (mmboe) 22.0 26.5 Net profit after tax & write downs ($m) 86.5 135.6 Operating cash flow ($m) 192.6 421.7 Gearing (% net debt/net debt + equity) 28.7 25.3 Dividend (cents) 15 15 TSR (% annualised) 6.8
Slide 5: Value From New Assets
Value From New Assets Developments start to contribute Gas commercialisation progress Exploration portfolio management Value from acquisitions and divestments 9 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A Jon You
Slide 6: 1H 2004 Production / Moomba Incident
1H 2004 Production mmboe Natural Field New Moomba Decline Performance Projects Incident 30 28 26.8 (1.6) 26 (0.3) 0.3 25.2 (4.0) 24 21.2 22 20 18 16 14 12 10 1st Half 2003 1st Half 2004 11 Moomba Incident Moomba re-streaming is nearing completion • Liquids Recovery Plant (LRP) B recommissioning unde
Slide 7: East Spar / Stag
East Spar • Decline in deliverability due to water breakthrough • Recent drilling outcomes • Accelerated John Brookes development 13 Stag • Field decline increased • Mechanical reliability • Workovers commenced • Infill sidetracks imminent • Waterflood optimisation ongoing 14 7
Slide 8: Cost Management / Technology
Cost Management Santos Continuous Improvement Program is on track to deliver substantial cost savings through process redesign • Strategic sourcing Process Benchmarking 1st tier • Maintenance strategy Continuous process improvement • Drilling and completions 2nd tier Santos 2005 • Asset utilisation
Slide 9: Moomba Hub
Moomba Hub Leveraging Moomba’s commercial and infrastructure position… • Gas swaps Spot sales • Spot sales • Third party processing 3rd Peaking party services • Price review gas HUB 3rd Gas party oil swaps …is on track to deliver ~ $100 million NPV 10 17 Meeting the Challenge Overview Harvesting val
Slide 10: Sales Revenue / Production Costs
Sales Revenue $m Commodity Controllable Natural Decline Prices Items 750 716 (30) 693 (103)* (20) (5) 8 16 700 8 650 Gas USA Aust Bayu- 590 600 Volumes Liquids Liquids Volumes Prices Gas Gas Undan 550 Prices Prices start-up Moomba 500 Incident 450 400 350 300 250 200 1st Half 2003 1st Half 2004 * Re
Slide 11: Netback / Depreciation, Depletion & Amortisation
Netback ($/boe) Market Movements Controllable Items 21 2.03 (1.93) 20 0.37 19.13 (1.35) 18.66 0.36 19 18.76 (0.66) 0.30 Bayu- 17.78 18 US$ FX Cost Undan Commodity Volume Aust savings Start up Prices /Mix Gas Moomba 17 Incident Prices 16 15 1st Half 2003 1st Half 2004 21 Depreciation, Depletion & Amo
Slide 12: NPAT / Capital Expenditure
NPAT $m 2 149 (62) 150 136 (28) 31 Other 125 (14) 7 5 3 7 Write- 100 Field decline Bayu- 87 Aust gas Undan downs Restructure Cost prices start-up 75 Comm savings Moomba odity Incident prices 50 25 0 1st Half 2003 1st Half 2004 23 Capital Expenditure 1st Half 2004 - $390m 1st Half 2003 - $344m Explor
Slide 13: Cash Flow & Net Debt / Capital Management
Cash Flow & Net Debt Operating cash flow ($m) Net Debt ($m) 1,239 450 422 1,250 142 (49) (74) 79 1,097 1,125 350 Sales volumes 120 Moomba 299 (106) Incident 1,000 FX on Working Debt 898 250 capital & tax 193 875 payments Net Cash flow Moomba Incident 150 750 1st Half 2003 1st Half 2004 Year End 1st
Slide 14: International Accounting Standards (IFRS)
International Accounting Standards (IFRS) Effective 1 January 2005 No extractive IFRS half year IFRS full year industry standard reports – including reports – including available comparatives comparatives parallel accounts required time elapsed1 Jan 04 30 Jun 04 31 Dec 04 30 Jun 05 31 Dec 05 “Grandf
Slide 15: Developing New Assets
Developing New Assets Project Start-ups 2004–2006 2004 2005 2006 Bayu-Undan Liquids Mutineer-Exeter Bayu-Undan LNG 1Q 100% Mid 60% 1Q 50% Minerva John Brookes Casino 4Q 90% Mid 20% 1Q 20% Maleo Oyong 4Q-05/1Q-06 10% 1Q 10% 1Q Production commences Sanctioned Pre-sanctioned 29 Developing New Assets Po
Slide 16: Bayu-Undan / Mutineer-Exeter
Bayu-Undan • Liquids project complete ahead of schedule, on budget • LNG project over 50% complete on schedule on budget 31 Mutineer-Exeter • On track for mid 2005 start-up • FPSO topsides construction and installation in progress • Subsea equipment ready for delivery from September 32 16
Slide 17: John Brookes – Varanus Hub / Casino
John Brookes – Varanus Hub • Gas Sales John Brookes Wellhead Platform East Spar Gas Plant Agreement signed (water depth ~ 47m) Gas Processing & Compression • Major facilities contracts in place Varanus Island • Platform fabrication East Spar Pipeline to Mainland commenced 33 Casino • Project close t
Slide 18: Indonesian Gas / Novus Acquisition
Indonesian Gas Maleo • MOPU bids under evaluation • Gas securitisation issues nearing completion • Planned project sanction 3Q-04 Oyong • Reviewing recoverable oil Bawean 1 PSC 0 0 50 50 kilometres kilometres reserves Bawean Island Legend Santos acreage Java Sea Novus acreage • Reviewing development
Slide 19: Exploration: The Journey So Far
Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A John Ellice-Flint Managing Director 37 Exploration: The Journey So Far Basin Excellence Building a portfolio of opportunities New Ventures International Portfolio Egypt
Slide 20: Basin Excellence / Active Portfolio Management
Basin Excellence “Start with the rocks” Examples Leader in technical East Java Total/ understanding Mitsui Identify Establish substantial Kutei Unocal basins where we acreage position Gulf of Devon can build niche Suez competitive Early entrant/low cost advantages Balance technical and Southern Unoc
Slide 21: Exploration Focus: Sampang PSC
Exploration Focus Indonesia Java Sea Madura Offshore PSC Sampang PSC Jeruk Prospect Nth Bali l Brantas PSC* Agung Kutei Basin East Java Prospect East Java Basin * Novus acreage subject to conclusion of Santos agreement with Medco 41 Sampang PSC Jeruk prospect Jeruk 1 Jeruk 1 Jeruk 2 Top Kujung Limes
Slide 22: North Bali I PSC / Exploration Focus
North Bali l PSC Agung prospect Proposed Agung 1 N 4km Proposed Agung 1 Top Kujung Limestone Agung 43 Exploration Focus Indonesia Popodi PSC Pohon Prospect Bontang Makassar Strait Samarinda Papalang PSC Kutei Basin East Java Basin Pandu Prospect 44 22
Slide 23: Exploration Focus: Otway Deep Water
Exploration Focus Australia Callister Prospect VIC/P44 VIC/P51 Casino VIC/L22 VIC/RL7 Victoria Amrit Prospect Tasmania VIC/P52 Otway Basin T/35P T/32P Sorell Basin T/33P T/36P Otway & Sorell Basins 45 Otway Deep Water Amrit prospect Amrit VIC/P 51 VIC/P 52 Proposed Amrit 1 5km VIC/P 52 VIC/P 51 46 2
Slide 24: Exploration Focus: Gulf of Suez
Exploration Focus Egypt Osage 1X Ras Abu Darag Gulf of Suez Egypt Egypt South East July Khefren 1 North Zeit Bay 47 Gulf of Suez Khefren 1 BP Edfu discovery BP Saqqara discovery 2001, 63 mmbo 2003, 80 mmbo Khefren 1 Khefren 1 48 24
Slide 25: Meeting the Challenge
Meeting the Challenge Harvesting value from existing assets Price Costs Technology Creating value from new assets Development projects Exploration 49 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A John Ellice-Flint
Slide 26: Reference slides: Prices & Exchange Rates
Reference slides 1 Prices & Exchange Rates Half Year Half Year Change 2004 2003 % Realised Oil Prices (USD/bbl) 32.63 28.63 +14.0 AUD/USD Exchange Rate 0.6978 0.6236 -11.9 (after hedging) Realised Oil Price (AUD/bbl) 46.76 45.91 +1.9 USA Gas Price (USD/mcf) 5.81 6.07 -4.3 Australian Gas Prices (AUD/
Slide 27: Cost Definition / Cost of Sales
Cost Definition US Peer Oil Companies* Santos Group Reporting Sales Revenue Sales Revenue Production Costs Production Costs Operating Transport’n/Handling Expenses Tariffs & Tolls Costs Taxes other than Income Royalties, Excise & RRT net back Gas Purchases Exploration Expense Product Stock Movements
Slide 28: 2004 First Half Results
2004 First Half Results Half Year Half Year Change 2004 2003 % Gross Profit 165 274 Profit on Sale of Non-Current - 5 Assets Other Revenue 18 11 SG&A Expenses (36) (18)** Borrowing Costs (14) (20) Income Tax (42) (82) Net Profit after Tax before Write 91 170 -46.5 Downs Write downs (after tax) (4) (
Slide 29: 2004 Second Half Sensitivities
Capitalised Exploration & Development at June 2004 Non producing (A$ million) Hides Gas 124 PNG Gas Project Indonesia 117 Oyong and Maleo discoveries and North Bali exploration acreage Evans Shoal Gas 81 Commercialisation activity Gippsland Basin 59 Interests in Kipper, Sole and Golden Beach gas fie
Slide 30: Upcoming Exploration / Popodi PSC
Upcoming Exploration Well Basin/Area Target Upside Resource Santos Quarter Potential Interest drilling (mmboe) % Expected to unrisked start Khefren 1 Gulf of Suez Oil 120 20 Drilling Jeruk 2 East Java Oil 170 50 Drilling Agung East Java Oil 550 40 Third Venus Cooper SA Gas 4 60 Third Pohon Kutei (Po
Slide 31: Otway Offshore / Gulf of Suez – Osage 1X
Otway Offshore Callister Prospect Proposed Callister 1 Callister 11 Gulf of Suez – Osage 1X Proposed Osage 1X Osage 12 6