Santos : 2021 Shareholder Review

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Shareholder Review 2021

Message from the Chair and

Managing Director and Chief Executive Officer

onlyKEITH SPENCE Chair

useKEVIN GALLAGHER Managing Director and Chief Executive Officer

Dear Shareholder,

personalThe past year has been a truly remarkable one for Santos. The successful merger with

Oil Search Limited, which completed in December 2021, has transformed Santos i to a company with the size and scale ecessary to fund sustainable growth, the transition to a lower carbon future and deliver returns for shareholders.

Santos now has a diversified portfolio of long-life,low-cost assets leveraged to trengthening global demand for energy. Had the merger been in place for all of 2021, the combined asset portfolio would have

g n rated more than US$2.3 billion in free cash flow for the year. This asset portfolio combined with our disciplined, low-cost o erating model and unrivalled growth

o ortunities, support our vision of becoming a global leader in the energy transition.

In 2022, we plan to further optimise the Forpo tfolio, reduce gearing and conduct a review of the capital management framework

including returns to shareholders.

Consistent and successful strategy delivers record cash flow and higher dividends

Our clear and consistent strategy delivered strong results in 2021, including:

• Completion of the merger with Oil Search Limited.
• Record annual production, sales revenue, free cash flow and underlying net profit after tax.
• Final investment decisions on the Barossa LNG and Moomba CCS projects.
• The Board resolved to pay a final dividend of US8.5 cents per share, franked to 70 per cent, bringing the total dividend for 2021 to US14 cents per share, up 97 per cent.

The dividend equates to 20 per cent of full-year proforma free cash flow for the merged entity less dividends paid in the first half by both companies, in-line with Santos' sustainable dividend policy which targets a range of 10 per cent to 30 per cent payout of free cash flow.

Consistent with our strategy, our next stage of growth will be disciplined and phased. In 2021, the Barossa LNG project was sanctioned.

Barossa will supply gas to the Santos-operated Darwin LNG plant and is a world-class LNG project with a very competitive cost of supply into Asian markets. The project remains on track for first production in the first half

of 2025.

Santos is playing a constructive role in the energy transition

The world continues to demand reliable, sustainable and affordable energy. Through decarbonising today's base business while investing in clean fuel projects and technologies of the future, Santos is committed to delivering net-zero equity Scope 1 and 2 emissions by 2040. We will initially focus on lower-carbon technologies

where we have a competitive advantage. Our infrastructure-led carbon capture and storage (CCS) strategy potentially provides more than 30 million tonnes per annum of carbon dioxide storage capacity.

The first critical step was taking the final investment decision on Phase 1 of the Moomba CCS development, located in the Cooper Basin in Australia. This project will inject 1.7 million tonnes of carbon dioxide per year and is on track for first injection to commence in 2024. The Moomba CCS project is one of the world's lowest cost CCS projects and an important enabler in the transition

to cleaner energy and clean fuels such as hydrogen and ammonia as well as potential carbon removal technologies such as direct air capture.

In summary, Santos has now developed into a major Australian energy producer with a portfolio of high-quality,long-life,low-cost assets across Australia, Timor-Leste, Papua New Guinea and North America. The portfolio is diversified, resilient and well positioned to benefit from recovering commodity prices. This portfolio provides a strong platform to deliver both sustainable growth and shareholder returns as we transition to a lower-carbon future.

On behalf of the Board and Management team we acknowledge you, our shareholders, for your continued trust and support.

Yours sincerely,

KEITH SPENCE

Chair

KEVIN GALLAGHER

Managing Director

and Chief Executive Officer

Key growth milestones

		Barossa		Moomba		Oil Search
		Final investment decision		Final investment decision		Successful merger

Cover images (clockwise from left):

Darwin LNG Facility, Australia.

Moomba Processing Facility, Australia.

Hela Province, Papua New Guinea.

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Our Moomba CCS project
	is a critical step in
use	decarbonising natural
gas on the path to
cleaner energy.
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	Port Bonython Processing Facility, Australia
For
	Santos and Oil Search
		are stronger together.
		As one company, we have
		increased scale and capacity
		to drive a disciplined,
		low-cost operating model
		with unrivalled growth
		opportunities over
		the next decade.

Drilling rig, Papua New Guinea.

Financial overview

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		104.2		US$million	4,713
mmboe
Sales volume								Sales revenue
	2017	83.4						2017	3,100
	2018	78.3							2018	3,660
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2019			94.5				2019	4,033
	2020			107.1				2020	3,387
	2021			104.2				2021	4,713
	US$ per barrel			76.1		US$million	1,504
	Average realised oil price								Free cash flow

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2017	57.8			2017	618
	2018	75.1		2018	1,006
	2019	72.0			2019	1,138
	2020	47.7				2020	740
	2021	76.1		2021	1,504

	2021 results
			2017	2018	2019	2020	2021
	Sales volume	mmboe	83.4	78.3	94.5	107.1	104.2
	Production	mmboe	59.5	58.9	75.5	89.0	92.1
	Average realised oil price	US$ per barrel	57.8	75.1	72.0	47.7	76.1
	Net (loss)/profit after tax	US$million	(360)	630	674	(357)	658
	Underlying net profit after tax	US$million	318	727	719	287	946
	Sales revenue	US$million	3,100	3,660	4,033	3,387	4,713
	Operating cash flow	US$million	1,248	1,578	2,046	1,476	2,272
	ree cash flow	US$million	618	1,006	1,138	740	1,504
For
	EBITDAX	US$million	1,428	2,160	2,457	1,898	2,805
	Total assets	US$million	13,706	16,811	16,509	17,656	30,009
	Earnings per share	US cents	(17.3)	30.2	32.4	(17.1)	30.8
	Dividends declared	US cents per share	-	9.7	11.0	7.1	14.0
Number of employees	Number	2,080	2,190	2,178	2,722	3,786

2021 asset performance

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Western Australia

Annual production was 6 per cent higher than the previous year, primarily due to the commencement of a new 12-year contract with Alcoa in June 2020. Crude oil production was 3.5 mmbbl, higher than the previous year due to the Ningaloo Vision FPSO (Van Gogh, Coniston and Novara fields) returning from planned shipyard maintenance combined with initial production from two infill wells drilled on the Van Gogh field.

ASSET KPIs	2021	2020
Production (mmboe)	33.7	31.1
Sales volume (mmboe)	33.2	31.1
Revenue (US$m)	1,105	742
Production cost (US$/boe)	6.38	6.34
EBITDAX (US$m)	851	546
Capex (US$m)	316	171

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Cooper Basin

Cooper Basin sales gas and ethane production of 63.8 petajoules (PJ) was 7 per cent lower than the previous year (68.5 PJ) due to lower drilling activity as a result of the impact of COVID-19 on joint venture budgets. Oil production was also lower due to lower drilling activity and natural field decline. A fourth drilling rig was added to the program in the middle of 2021.

ASSET KPIs	2021	2020
Production (mmboe)	15.3	16.8
Sales volume (mmboe)	20.2	24.2
Revenue (US$m)	1,000	919
Production cost (US$/boe)	9.35	7.80
EBITDAX (US$m)	423	390
Capex (US$m)	329	313

Northern Australia and Timor-Leste

The Darwin LNG plant has a single LNG train with a capacity of

3.7 mtpa. The plant produced 3.2 million tonnes of LNG in 2021, 5 per cent higher than 2020, and shipped 45 cargoes.

In March 2021, Santos announced the final investment decision to proceed with the Barossa gas and condensate project to backfill DLNG. The project was 20 per cent complete at the end of 2021 with first gas production expected in the first half of 2025.

ASSET KPIs	2021	2020
Production (mmboe)	15.2	14.5
Sales volume (mmboe)	15.3	14.6
Revenue (US$m)	903	466
Production cost (US$/boe)	15.37	19.59
EBITDAX (US$m)	728	205
Capex (US$m)	377	93

Queensland and New South Wales

GLNG produced a record 6.3 million tonnes of LNG in 2021 and shipped 109 cargoes. Annual LNG production was higher than the previous year at 6.0 million tonnes due to the ramp-up in GLNG upstream equity gas supply.

Santos is also progressing the proposed Narrabri domestic gas project in NSW. The project received environmental approvals from the state and federal governments in 2020, and Santos plans to commence an appraisal program in 2022.

ASSET KPIs	2021	2020
Production (mmboe)	13.7	13.4
Sales volume (mmboe)	22.1	22.0
Revenue (US$m)	973	793
Production cost (US$/boe)	5.79	5.70
EBITDAX (US$m)	525	428
Capex (US$m)	195	193

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Papua New Guinea

Strong production was maintained from PNG LNG with 8.4 million tonnes of LNG produced and 110 cargoes shipped during the year.

The Papua LNG project is a proposed two-train LNG expansion with a planned capacity of 5.6 million tonnes of LNG per annum. In 2021, the project continued to progress technical, commercial, regulatory, social and environmental planning activities. A decision to enter FEED is planned for 2022.

North America

The merger brought assets in Alaska into Santos' portfolio. The Pikka Phase 1 project is targeting a gross production rate

of approximately 80,000 barrels of oil per day. FEED and assurance activities were nearing completion at the end of 2021.

ASSET KPIs1	2021	2020
Production (mmboe)	14.2	13.2
Sales volume (mmboe)	13.4	12.5
Revenue (US$m)	736	451
Production cost (US$/boe)	4.69	4.21
EBITDAX (US$m)	615	354
Capex (US$m)	34	39

1 Includes the Oil Search PNG assets in the results of the merged company from 11 December 2021.