Santos today outlined its new strategy to drive sustainable shareholder value by becoming a low-cost, reliable and high performance business.
Speaking at the company’s Investor Day in Sydney, Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos will implement a disciplined, three-phase strategy to drive shareholder value.
The strategy will be underpinned by disciplined capital management. Santos will target a US$1.5 billion reduction in net debt to less than US$3 billion by the end of 2019 through increased operating cash flow and releasing capital through non-core asset and infrastructure sales.
Mr Gallagher said substantial progress had been made in 2016 on the Santos turnaround.
“We have reduced the free cash flow breakeven oil price to US$39 per barrel, down from US$47 per barrel at the start of the year,” Mr Gallagher said.
“Capital expenditure and upstream unit production costs have been reduced by 53% and 17% respectively, headcount has been reduced by more than 500 positions, and the business has been free cash flow positive for each of the last seven months.”
2016 sales volumes are expected to be at the top end of the 81-83 mmboe guidance range and upstream unit production costs below US$9/boe (previous guidance range US$9-9.50/boe). 2016 production is expected to be in the top half of the 60-62 mmboe guidance range.
“Our turnaround strategy also brings significant oil price leverage, with operating cash flow forecast to increase by US$300 million in 2017 for a US$10 per barrel oil price move above US$50 per barrel,” Mr Gallagher said.
Santos also announced it has appointed Mr Bruce Clement as Vice President to run the new standalone low-cost business comprising all non-core assets. Mr Clement was previously Chief Executive Officer of AWE Limited and will bring a low-cost mindset to the management of these assets. Mr Clement will be based in Sydney.
Further information on the new Santos strategy is available in the attached presentation. A live webcast of the Investor Day presentation will be available on the company’s website www.santos.com from 9am AEDT today.