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Barossa Gas Project: Learn more

Santos Managing Director and Chief Executive Officer Kevin Gallagher said: “Santos’ first quarter results highlight the benefits of a diversified portfolio of natural gas assets underpinned by a disciplined operating model focused on cash generation.”

  • Santos is now reaping the benefits of its new low cost, high efficiency operating model, with forecast free cash flow breakeven remaining at ~$36/bbl1 in 2018 and free cash flow generation strong.
  • During the quarter, Santos generated $246 million in free cash flow. Surplus cash is being applied to reduce net debt and Santos is well ahead of plan to achieve its end-2019 net debt target of $2 billion.
  • First quarter production of 13.8 million barrels of oil equivalent (mmboe) was 1.2 mmboe lower than the prior quarter due to planned maintenance at facilities in Moomba and in Queensland, and the temporary outage of PNG LNG following major earthquake activity in February. Production at PNG LNG recommenced ahead of forecast and Santos has revised 2018 production guidance to 55-58 mmboe.
  • As at 31 March 2018, Santos had cash and cash equivalents of $1.5 billion and total debt of $4 billion, resulting in net debt of $2.5 billion.
  • Net debt has reduced by 8% since the start of 2018 and by 47% since the start of 2016.
  • The Barossa Caldita Offshore Project Proposal was approved by NOPSEMA. A FEED decision is imminent. Barossa Caldita is the lead candidate to underpin the long-life extension of Darwin LNG and would more than double Santos’ current Northern Australian production.
  • In PNG, Santos along with the other PNG LNG parties has commenced discussions with both the PRL 3 (P’nyang) and PRL 15 (Papua LNG) joint ventures to build alignment for the proposed construction of three additional LNG trains at the PNG LNG site.
  • In Queensland, the Scotia CF1 project is in the final stages of commissioning, we commenced the 430-well Roma East development and positive drilling results were announced at Mahalo.
  • Indicative and non-binding US$4.98 per share (A$6.502 per share) cash acquisition proposal (Harbour Proposal) to acquire 100% of Santos shares received from Harbour Energy, as previously announced on 3 April 2018.
  • Harbour Energy has commenced confirmatory due diligence as part of an engagement process to determine if a proposal can be developed that is capable of being recommended by the Santos Board to shareholders.
  • No certainty that the Harbour Proposal will result in an offer for Santos capable of being recommended by the Board for consideration by shareholders. Santos Directors reiterate that shareholders should take no action in relation to the Harbour Proposal.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said: “Santos’ first quarter results highlight the benefits of a diversified portfolio of natural gas assets underpinned by a disciplined operating model focused on cash generation.”

“In the first quarter of 2018, we generated $246 million in free cash flow, reduced net debt by 8% to $2.5 billion and maintained our 2018 forecast free cash flow breakeven at ~US$36/bbl, despite the significant increase in drilling activity in Queensland and the Cooper Basin, and the temporary shutdown in PNG following major earthquake activity.”

“This clearly demonstrated the resilience of our diversified portfolio of core assets and we are now beginning to enjoy the sustained benefits of our low cost, high efficiency operating model, with strong free cash flow generation further strengthening our balance sheet and setting us up for future growth.”

1 Free cash flow breakeven is the average annual oil price in 2018 at which cash flows from operating activities (including hedging) equals cash flows from investing activities. Excludes one-off restructuring costs and asset divestitures and acquisitions.

2 Based on an AUD/USD exchange rate of 0.7662 as referenced in the Harbour Proposal.


“As a result of our strong cash flows that enabled net debt to be reduced by a further 8% to $2.5 billion over the quarter, Santos is now set up to reap the benefits of higher oil prices and continue to build value for our shareholders. If current oil price levels continue throughout 2018 then we will achieve our end-2019 net debt target sometime in the second half of 2018, more than a year ahead of plan.”

“In late February, we were deeply saddened by the loss of life and personal injury suffered by communities in Papua New Guinea as a result of the severe earthquake in the region. Our PNG LNG expertise and resources were deployed to assist the humanitarian relief effort and Santos donated US$200,000 to help provide urgently needed food, water and medical supplies to more than 30,000 people isolated in remote villages.”

“PNG LNG has now safely resumed LNG production, ahead of ExxonMobil’s eight-week estimate, with LNG exports expected to resume shortly. Santos carries appropriate property damage and business interruption insurance for its assets.”

“I would like to thank ExxonMobil, our joint venture partners and the PNG Government for all their efforts in safely resuming production. Santos looks forward to continuing to work with our local communities in PNG who still have a long road to recovery following the loss of life, homes and crops caused by the earthquake,” Mr Gallagher said.

The temporary PNG LNG shutdown, combined with planned maintenance at our facilities in Moomba and in Queensland, reduced first quarter production by 1.2 mmboe to 13.8 mmboe. Excluding these shutdowns, production would have been in line with the prior quarter.

On 3 April 2018, Santos announced it had received an unsolicited, non-binding and indicative proposal from Harbour Energy to acquire 100 percent of Santos shares by way of a scheme of arrangement.

“We will engage with Harbour Energy on its proposal to determine whether an offer for the company that is capable of recommendation by the Board for consideration by shareholders, can be developed,” Mr Gallagher said.

“Regardless of the outcome of engagement with Harbour, our strong free cash flows, sustainable low cost base, stable production out to at least 2025 and the resilience of our diverse natural gas asset portfolio mean Santos is very well positioned to drive value for our shareholders going forward. When combined with the continued progress of our key growth projects in Northern Australia and PNG and our strong opportunity set built around existing infrastructure and our core natural gas assets, Santos is in a great position to increase its value over the medium and longer term.”


Board renewal

Mr Keith Spence was appointed an independent non-executive Director on 1 January 2018 and became Chairman on 19 February 2018 following the retirement of Mr Peter Coates AO.

Mr Spence has over 40 years’ experience in managing and governing oil and gas operations in Australia, Papua New Guinea, the Netherlands and Africa.


2018 Annual General Meeting

The 2018 Annual General Meeting will be held on Thursday 3 May 2018 at the Adelaide Convention Centre commencing at 10:00am ACST. Registrations for the webcast are now open at