Santos Limited · ASX:STO
Santos — Investor Day (December 2019)
68 slides from Santos's investor day presentation, Dec 3, 2019
Slide 1: Santos upgrades 2025 production target to 120 mmboe
ASX / Media Release 3 December 2019 Santos upgrades 2025 production target to 120 mmboe Santos today lifted its 2025 production target further to 120 million barrels of oil equivalent (mmboe), more than double 2018’s output. The new target, up from 100 mmboe set in 2018, represents a cumulative annu
Slide 2: Guidance
Guidance Santos has narrowed 2019 production guidance to 74-76 mmboe (previous 73-77 mmboe) and sales volumes guidance to 93-95 mmboe (previous 90-97 mmboe). 2019 upstream unit production cost guidance is lowered to $7.25-7.50/boe (previous $7.25- 7.75/boe). Capital expenditure is expected to be app
Slide 3: Santos 2019 Investor Day
Santos 2019 Investor Day 3 December 2019
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 9:45 Offshore Brett Darley Executive Vice President Offshore Oil & Gas 10:15 Onshore David Banks Executive Vice President Onshore Oil & G
Slide 6: Driving shareholder value
Driving shareholder value Kevin Gallagher Managing Director & CEO
Slide 7: Compelling value proposition
Compelling value proposition Consistent execution of the Transform Build Grow strategy has delivered a high-graded portfolio of five core long-life asset hubs. Our goal is to drive shareholder value through: Brownfield Disciplined growth Strong stable Sustainable Operating building on cash f
Slide 8: Transform Build Grow
Transform Build Grow Clear and consistent strategy since 2016 + 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 pro
Slide 9: Disciplined Operating Model
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 Western Cooper Que
Slide 10: Safety and environment
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 vs activity levels Loss of containment incidents Rate per million hours worked No of onshore wells Count of Tier 1 and Tier 2 1.0
Slide 11: Disciplined Operating Model drives strong free cash flow
Disciplined Operating Model drives strong free cash flow Forecast to generate >$1 billion in free cash flow in 2019 Free cash flow $million 2016 – 19 >385% FORECAST FREE CASH FLOW >$2.8 billion 1,006 >$1 bn 2019 FORECAST FREE CASH FLOW BREAKEVEN $29 per barrel 618 2019 FORECAST 206 FREE CASH FLOW YI
Slide 12: Natural gas and sustainability
Natural gas and sustainability Santos has a long-term aspiration of achieving net-zero emissions by 2050 and in 2020 will release its third annual Climate Change Report consistent with TCFD guidelines Resilience and opportunity in a lower carbon future Climate change governance & risk management + N
Slide 13: Acquisition of ConocoPhillips' interests in northern Australia & Timor-Leste
Acquisition of ConocoPhillips’ interests in northern Australia & Timor-Leste1 Secures operating interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon. On track for completion in 1Q 2020 Operatorship of strategically located LNG infrastructure hub Creates larger business with significant growth o
Slide 14: Consistent execution of strategy has transformed Santos
Consistent execution of strategy has transformed Santos Transform Build Grow strategy has materially improved the portfolio and positioned the company for disciplined growth Production1 Santos today versus 2015 80% core asset hubs now mmboe Santos operated1 Portfolio simplified and high-graded F
Slide 15: Platform for growth
Platform for growth Disciplined Operating Model delivering increased portfolio optionality Santos operated asset hubs Non-operated asset Western Australia Cooper Basin QLD & NSW Northern Australia1 PNG + Dorado FEED targeted + Grow production to + GLNG sales expected + Barossa backfill to + Finalise
Slide 16: Targeting portfolio production of 120 mmboe by 2025
Targeting portfolio production of 120 mmboe by 2025 Disciplined growth from new upstream projects leveraging existing infrastructure. Target increased to 120 mmboe reflecting higher equity in Barossa and stronger Dorado Production growth to 2025 + New 2025 production growth target reflects mmboe + S
Slide 17: Offshore Division
Offshore Division Brett Darley Executive Vice President Offshore Oil & Gas
Slide 18: Offshore Division – Western Australia
Offshore Division – Western Australia High quality portfolio of operated production and near field development and exploration assets Strong operating performance + Integrated operations across Varanus Island, Devil Creek and Macedon domestic gas hubs + High margin with premium to Brent oil producti
Slide 19: Gas supply growth and market opportunities
Gas supply growth and market opportunities Operated gas infrastructure has excess plant capacity and offshore deliverability to meet new domestic contracts and new market opportunities + Ullage at Varanus Island (3-train) and Devil Creek (2-train) facilities: 610 TJ/d combined capacity + Devil Creek
Slide 20: Western Australia - gas and oil tieback opportunities
Western Australia - gas and oil tieback opportunities Near field tieback and infill opportunities across the gas and oil business offer low-cost, short cycle investment options Varanus Island compression project Van Gogh infill Phase 2 + Installation of inlet compression to + Phase 2 infill program
Slide 21: Dorado development
Dorado development Successful appraisal programme has de-risked development options for the field. Preferred concept is FPSO and wellhead platform development, targeting FEED in 2Q 2020 + Preferred development concept is an initial phase of oil and condensate development followed by future phase of
Slide 22: Bedout sub-basin exploration potential
Bedout sub-basin exploration potential Controlling position around the world class Dorado discovery + Dorado discovery proves a world class liquids-rich petroleum system with high quality reservoirs + Sparsely explored permits contain multiple play types, some of which remain untested + Focus on ext
Slide 23: Offshore Division – Northern Australia & Timor-Leste
Offshore Division – Northern Australia & Timor-Leste Reliable LNG production performance from DLNG and liquids production from Bayu-Undan. Further infill drilling under assessment to extend Bayu-Undan production Strong operating performance and reliability + Reliable Bayu-Undan and Darwin LNG plant
Slide 24: Barossa development
Barossa development Barossa project advancing towards FID with a number of material contracts awarded + Project has been de-risked and being advanced for FID around end-1Q 2020 + Advanced stages of finalising LNG SPA + Field development plan is a gas/condensate FPSO with an initial phase of 6 subsea
Slide 25: Northern Australia & Timor-Leste resource
Northern Australia & Timor-Leste resource Discovered resource base offers opportunity for expansion at Darwin LNG and access to Northern Territory and east coast markets + Significant discovered resource base supports Darwin LNG expansion and major growth beyond Barossa + Opportunity to consider res
Slide 26: Low carbon emission initiatives
Low carbon emission initiatives Advancing projects and opportunities to reduce carbon footprint for existing and future operations. Savannah burning will be an important offset program for Barossa Devil Creek power project Darwin LNG battery bank Savannah burning abatement + Replacing existing power
Slide 27: Offshore Division
Offshore Division High quality portfolio of operated production and near field development and exploration assets Strong cash margin, low-cost operating business Portfolio of high quality, low-cost near-field gas and oil tieback opportunities Conventional low-cost of supply growth through Barossa an
Slide 28: Onshore Division
Onshore Division David Banks Executive Vice President Onshore Oil & Gas
Slide 29: Integrated onshore business with market optionality
Integrated onshore business with market optionality Onshore assets connected to domestic gas markets and strong Asian demand for LNG + Growth self-funding within the low cost Australia’s lowest cost disciplined Operating Model onshore operator + Driving capital efficiency to unlock McArthur addition
Slide 30: Cooper Basin targeting >150% reserve replacement in 2019
Cooper Basin targeting >150% reserve replacement in 2019 Horizontal well program in 2020 expected to deliver greater efficiencies and unlock further resources Wells drilled 2P reserves replacement ratio Production Targeting 6 horizontal wells in 2020 Targeting >150% RRR in 2019 Targeting ~17-19 mmbo
Slide 31: Improved capital efficiency to unlock additional resources
Improved capital efficiency to unlock additional resources Low cost operations and advances in drilling technology delivering greater efficiencies Cooper Basin well cost1 Horizontal drilling program Underbalanced drilling ‘UBD’ $million -51% 4.80 4.20 2.59 2.37 2.35 2015 2016 2017 2018 1H19 + Austra
Slide 32: Cooper Basin growth
Cooper Basin growth Significant opportunities to increase production and drive value Moomba South appraisal Successful NFE and oil Cooper oil production (net) program mmboe expected to result in reserve 2.9 ~3 upgrade at year-end + NFE program delivering high + Expect to drill 8-well pilot rate well
Slide 33: GLNG 6.2 mtpa annualised sales expected from 2020
GLNG 6.2 mtpa annualised sales expected from 2020 Strong upstream field performance delivered 6 mtpa annualised sales run-rate in October Strong upstream well delivery and performance Roma East production continues to build Average weekly sales gas rate TJ/d + Roma East first gas February 2019 and n
Slide 34: GLNG cost out and efficiencies drive accelerated development plan
GLNG cost out and efficiencies drive accelerated development plan Well cost performance delivered at long-term target activity pace Days - development drilling Well cost1 Mean time between failure Average days rig release to rig release $million per well Years (Roma) -77% -84% +500% 11.3 5.2 ~3.0 3.
Slide 35: Eastern Queensland growth
Eastern Queensland growth Leveraging the low cost disciplined Operating Model to deliver additional growth opportunities Maximising value using our regional expertise and low cost Operating Model + Towrie block (west of Arcadia) + Rapid, low-cost commercialisation, leveraging nearby GLNG infrastruct
Slide 36: Narrabri gas project
Narrabri gas project Strong demand for natural gas in New South Wales Wilga Park Power Station capacity 22MW 100% of Narrabri gas earmarked for the domestic market + Gas supply MOUs signed with Perdaman, Brickworks and Weston Energy + Near-term supply to local industry + Current Narrabri production
Slide 37: McArthur-Beetaloo and South Nicholson projects
McArthur-Beetaloo and South Nicholson projects Multi-TCF shale gas plays targeting LNG export and domestic market opportunities Environmental approvals / Opportunities 2019 monitoring + Shale gas prospective resource with proven flow Tanumbirini-1 DFIT, 4-stage stimulation and flow-back + Stacked ta
Slide 38: Integrated onshore business with market optionality
Integrated onshore business with market optionality Onshore assets connected to domestic gas markets and strong Asian demand for LNG Low-cost, cash generative, short cycle business McArthur South Nicholson Domestic, GLNG and Darwin LNG routes to market Surat & Bowen Amadeus Cooper Narrabri Leveragin
Slide 39: Midstream Infrastructure and Energy Solutions
Midstream Infrastructure and Energy Solutions Naomi James Executive Vice President Midstream Infrastructure
Slide 40: Midstream Infrastructure and Energy Solutions
Midstream Infrastructure and Energy Solutions Focused on unlocking value and increasing returns from our unique portfolio of assets Run assets more efficiently and at + Unique portfolio of oil, gas, LNG assets lower cost + Focussed cost management and improved reliability + Maximise utilisation of e
Slide 41: Portfolio of strategic infrastructure assets
Portfolio of strategic infrastructure assets A unique portfolio of processing, storage, transport and liquefaction assets with existing unutilised capacity and expansion opportunities to match indigenous and third party demand Moomba & Pt Bonython DLNG DLNG 80% Gas capacity: 400 TJ/d Varanus Island
Slide 42: Unlock value through improved efficiency
Unlock value through improved efficiency Utilisation of Moomba and Port Bonython is at multi-year highs, with further growth potential and building partner alignment to increase LNG utilisation Moomba Port Bonython GLNG DLNG Positioning Cooper midstream for long term operations Building partner alig
Slide 43: Future natural gas infrastructure
Future natural gas infrastructure Santos’ operatorship of strategic infrastructure enables low-cost and low-carbon future gas development LEGACY MODEL FUTURE STATE Greenfield projects ► Low risk, low-cost brownfield projects, backfill Fully integrated upstream & downstream assets ► Multi-user, open
Slide 44: Energy Solutions low-carbon emission initiatives
Energy Solutions low-carbon emission initiatives Over 100,000 tonnes of annual CO2 emissions reduction delivered, with many more opportunities identified Solar-powered beam pumps Port Bonython solar installation + 23 wells expected to be converted + 2MW solar array integrated to solar power and batt
Slide 45: Cooper Basin Carbon Capture and Storage (CCS)
Cooper Basin Carbon Capture and Storage (CCS) Scalable opportunity up to ~20 mtpa CO2 storage potential CO2 capture Injection wells CO2 transmission pipeline Targeting 2020 FEED on 1.7 mtpa CCS project MOOMBA FACILITY OPTIONALITY Central, Della, Tirrawarra + Existing separated industrial CO2 source
Slide 46: Midstream Infrastructure and Energy Solutions
Midstream Infrastructure and Energy Solutions Focused on unlocking value and increasing returns from our unique portfolio of assets Run assets more efficiently and at lower cost Increase utilisation Support expansion around our core asset hubs Transition to low carbon future Santos 2019 Investor Day
Slide 47: Marketing, Trading & Commercial
Marketing, Trading & Commercial Petter Undem Executive Vice President Marketing, Trading & Commercial
Slide 48: Santos sales overview
Santos sales overview Diversified and balanced portfolio providing strong, sustainable revenue with 35% of sales volumes sold at fixed-priced contracts Sep-19 YTD Revenue US$m West Coast LNG Portfolio realised LNG price YTD Sept 2019 US$10/mmBtu GLNG Minimal exposure to volatile spot prices with
Slide 49: Strong global LNG demand growth driven by Asia
Strong global LNG demand growth driven by Asia Lower risk brownfield LNG growth projects, which leverage existing infrastructure, are well placed to meet contestable LNG demand Forecasts for global LNG demand in 2030 have been Global LNG demand growth revised upwards by ~20% in past 4 years mtpa 700
Slide 50: Supporting Domestic Gas Supply
Supporting Domestic Gas Supply Santos is a leading supplier of Australian domestic gas AEMO East Coast Gas Supply & Demand Forecast East coast gas market PJ + Santos to supply ~70PJ of gas in 2019, approximately 14% of demand 600 + AEMO forecasts no domestic market shortfall until ~2024 + Recent gas
Slide 51: Finance & Capital Management
Finance & Capital Management Anthony Neilson CFO
Slide 52: Financial discipline
Financial discipline Strong financial and operating performance driving shareholder value Record underlying earnings and + Free cash flow $852 million for the first nine months of 2019 free cash flow + 2019 forecast free cash flow breakeven reduced to ~$29 per barrel1 + 2019 unit production cost gui
Slide 53: Our Operating Model in action at ≤$40/bbl oil
Our Operating Model in action 2019 upstream unit production cost guidance lowered to $7.25-7.50 per boe including all shutdown and PNG earthquake recovery costs Western Australia Cooper Basin Queensland & NSW production cost production cost production cost DISCIPLINED $/boe $/boe $/boe OPERATING -25
Slide 54: Strong free cash flow generation
Strong free cash flow generation Diversified and balanced portfolio providing strong free cash flow Free cash flow $million + Portfolio sales volumes balanced between >385% + CPI-linked gas contracts – ~35% of 1H19 sales volumes 1,006 >$1 bn + Oil-linked liquids and gas contracts – ~65% of 1H19 sale
Slide 55: Production and sales volumes
Production and sales volumes 2019 production guidance narrowed to 74-76 mmboe and sales volumes to 93-95 mmboe Acquisition of ConocoPhillips’ northern Australia interests to drive production higher in 2020 + 2019 production guidance narrowed to 74-76 mmboe Production volumes guidance mmboe + Major W
Slide 56: Capital expenditure
Capital expenditure 2019 capex guidance ~$1 billion. Base business sustaining capex expected to be stable at $0.9-1.0 billion per annum to 2025 + Base business sustaining capex stable year on year at Capital expenditure guidance $0.9-1.0 billion to 2025 $ million + Includes Cooper Basin and Queensla
Slide 57: Acquisition of ConocoPhillips northern Australia assets
Acquisition of ConocoPhillips northern Australia assets Strongly value accretive acquisition + Effective date 1 January 2019 + Purchase price of $1.39 billion plus a contingent $75 million on Barossa FID + Expected to complete 1Q 2020 subject to third party consents and regulatory approvals PURCHASE
Slide 58: Diversified and balanced portfolio delivering strong margins
Diversified and balanced portfolio delivering strong margins All assets free cash flow positive at <US$40/bbl and EBITDAX margins >50% Pro-forma 2019 First-half results summary1 + Diversified and balanced portfolio Nth Aust Santos Cooper Qld + Northern Australia pro-forma 2019 PNG WA Nth Aust (pro-
Slide 59: Pro-forma debt and liquidity
Pro-forma debt and liquidity Pro-forma net debt $4.5 billion and ample liquidity of $2.8 billion after including ConocoPhillips acquisition + Strong free cash flows. Pro-forma net debt of $4.5 billion Cash, debt and undrawn debt facilities $million (includes $750 million ConocoPhillips acquisition f
Slide 60: Stable cash flows underpin strong de-leveraging and liquidity
Stable cash flows underpin strong de-leveraging and liquidity Targeting medium term gearing ratio of 25-30%, with sufficient flexibility to address all future capital expenditure requirements and maintain sustainable dividend Gearing post growth funding and dividends1 Disciplined capital management
Slide 61: Pro-forma drawn debt maturity profile
Pro-forma drawn debt maturity profile $750 million committed acquisition debt to be repaid with sell-down proceeds or refinanced post completion in 2020 Pro-forma drawn debt maturity profile Pro-forma drawn debt maturity profile1 excluding PNG LNG project finance1 Breakdown of drawn $million $millio
Slide 62: Strategy & Wrap-Up
Strategy & Wrap-Up Kevin Gallagher Managing Director & CEO
Slide 63: Transform Build Grow
Transform Build Grow Clear and consistent strategy since 2016 + 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 pro
Slide 64: 2020 strategic priorities
2020 strategic priorities Business focus aligned to the core strategy Complete COP acquisition and realise synergies FID Barossa Dorado into FEED Complete P’nyang farm-in and PNG LNG expansion into FEED Deliver GLNG sales of ~6.2 mtpa Optimise portfolio through aligned acquisitions, farm-outs and di
Slide 65: Appendix
Appendix Santos
Slide 66: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding reserve and resource 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 reason
Slide 67: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding reserve and resource estimates Notes on reserves and resources statements – Barossa The estimates of petroleum reserves and contingent resources in the presentation are based on and fairly represent information and supporting documentati
Slide 68: Disclaimer and important notice
Disclaimer and important notice Cautionary statement regarding Dorado contingent resources estimates Dorado is located in WA-437-P in which Santos is operator and holds an 80% interest. Dorado-1 confirmed the basis of the discovery by demonstrating the existence of a significant quantity of potentia