Santos reports record first half free cash flow and underlying earnings, and higher shareholder returns
Highlights
- Underlying profit[1] US$1,267 million, up 300%
- Statutory net profit after tax US$1,167 million, up 230%
- EBITDAX[1] $2,731 million, up 122%
- Free cash flow[1] US$1,708 million, up 199%
- Annual merger integration synergies target increased to US$110-125 million
- US$605 million in shareholder returns comprising:
- a 38% increase in the interim dividend to US7.6 cents per share unfranked (US$255 million)
- An increase in the previously announced on-market share buyback from US$250 million to US$350 million
Santos today announced its half-year results for 2022, reporting record free cash flow of US$1.7 billion and underlying profit of US$1.3 billion. The results reflect significantly higher oil and LNG prices compared to the corresponding period due to stronger global energy demand combined with a higher interest in PNG LNG following the Oil Search merger.
Santos intends to return US$605 million to shareholders (equivalent to US18 cents per share) under the company’s capital management framework, comprising a 38 per cent increase in the interim dividend to US7.6 cents per share unfranked (US$255 million) and an increase in the previously announced on-market share buyback from US$250 million to US$350 million.
The US$350 million on-market buyback is inclusive of the US$250 million initial on-market buyback announced in April 2022, of which US$174 million had been completed by the end of June 2022. Santos intends to return the remaining US$176 million to shareholders via on-market share buybacks during the remainder of 2022.
Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos delivered record production, free cash flow and underlying earnings in the first half 2022 as the company benefited from strong customer demand for our products and higher commodity prices.
“Demand for our products has remained strong in both Australia and internationally, due to increased demand and shortages of supply from producing nations due global underinvestment in new supply,” Mr Gallagher said.
“We are seeing these issues play out in the significant shift in global energy policy towards energy security as a key priority.
“Our critical fuels not only play a key role in the energy security of Australia and Asia, but they also provide affordable and reliable alternatives to switch from higher emitting fuels.
“Today’s results demonstrate the strength of Santos, with strong diversified cashflows and capacity to provide sustainable shareholder returns, fund new developments and the transition to a lower carbon future.
“Strong first half free cash flows mean we are in a position to deliver higher shareholder returns through an increase in the interim dividend and on-market buyback, consistent with our disciplined capital management framework.”
Santos also announced today a final investment decision has been taken to proceed with the Pikka Phase 1 oil project located on the North Slope of Alaska. Further detail is available in Santos’ separate ASX announcement on the project dated 17 August 2022.
Santos is also in advanced discussions with shortlisted counterparties for the sale of a five per cent interest in the PNG LNG project. Throughout this process, there has been strong interest from reputable counterparties with expected proceeds in-line with market consensus valuation. Santos intends to retain a 37.5 per cent stake in PNG LNG.
Live webcast
A live webcast for analysts and investors will be held today at 11:00 AEST.
To access the live webcast, register on Santos’ website at www.santos.com.
1 EBITDAX (earnings before interest, tax, depreciation, depletion, exploration, evaluation and impairment), underlying profit and free cash flow (operating cash flows less investing cash flows net of acquisitions and disposals and major growth capital expenditure, less lease liability payments) are non-IFRS measures that are presented to provide an understanding of the performance of Santos’ operations. Underlying profit excludes the impacts of costs associated with asset acquisitions, disposals and impairments, hedging as well as items that are subject to significant variability from one period to the next. The non-IFRS financial information is unaudited however the numbers have been extracted from the financial statements which have been subject to review by the auditor. A reconciliation between net profit after tax and underlying profit is provided in the Appendix of the 2022 half-year results presentation released to ASX on 17 August 2022.
