2016 Fourth Quarter Activities Report

Key Highlights

  • Record annual sales volumes of 84.1 mmboe, up 31% and above the upper end of guidance.
  • Record annual production of 61.6 mmboe, up 7% and towards the upper end of guidance.
  • Record annual LNG sales volumes of 2.8 million tonnes, up 89% due to the ramp up of GLNG and strong performance at PNG LNG and Darwin LNG. LNG sales revenue was US$887 million for the year.
  • GLNG produced 4.6 million tonnes of LNG in 2016 and shipped 75 cargoes.
  • Upstream unit production costs US$8.50/boe, down 18% on the prior year.
  • Annual capital expenditure US$625 million, down 51% and below guidance.
  • Net debt reduced to US$3.5 billion as at 31 December 2016.
  • Employee headcount reduced by 580 positions in 2016.
  • Gas discovery at Muruk in Papua New Guinea.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said: “2016 was a year of significant change for Santos and we can be proud of what was achieved.”

“We restructured the business, removed substantial costs and generated free cash flow for the first time in many years. Our production cost per barrel has reduced, and we are free cash flow positive below US$38 per barrel, down from US$47 per barrel at the start of 2016. Production and sales volumes were both at record levels for the company. What is most pleasing is that we have accomplished all this while continuing to perform at record safety levels.

“In addition to our cost out success, we have also implemented a new organisation structure, increased focus on maximising production across our assets, developed a clear, new strategy, enjoyed exploration successes in WA and PNG, sold non-core assets and strengthened our balance sheet for a lower oil price world through the successful institutional placement completed in December.

“All of this represents significant achievements in a very short period of time and demonstrates the commitment all of us at Santos have to turnaround this business. Eligible shareholders currently have the opportunity to participate in Santos’ turnaround strategy through the Share Purchase Plan Offer, which closes on 31 January 2017.

“We enter 2017 with a clear strategy and a solid platform off which we can build and grow. Our business turnaround will continue as we reshape and focus our organisation to support five core, long-life natural gas assets: Cooper Basin, GLNG, PNG, Northern Australia and WA Gas. This singular focus will allow Santos to become a leaner, lower cost and high performing business with significant upside opportunities across our portfolio.

“A recent example of such opportunities was our decision to farm-in to the Muruk-1 prospect in PNG, which successfully discovered gas in December. This takes us into 2017 excited by what this could mean for our PNG business,” Mr Gallagher said.