Positioned for success onlyuse
personalFor
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.
only | ||
Our Moomba CCS project | ||
is a critical step in | ||
use | decarbonising natural | |
gas on the path to | ||
cleaner energy. | ||
personal | ||
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$million | 1,504 | ||||||||||||||
Average realised oil price | Free cash flow |
personal | |||||||||||
2017 | 57.8 | 2017 | 618 | ||||||||
2018 | 75.1 | 2018 | 1,006 | ||||||||
2019 | 72.0 | 2019 | 1,138 | ||||||||
2020 | 47.7 | 2020 | 740 | ||||||||
2021 | 76.1 | 2021 | 1,504 | ||||||||
2021 results | ||||||||
2017 | 2018 | 2019 | 2020 | 2021 | ||||
Sales volume | mmboe | 83.4 | 78.3 | 94.5 | 107.1 | 104.2 | ||
Production | mmboe | 59.5 | 58.9 | 75.5 | 89.0 | 92.1 | ||
Average realised oil price | US$ 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.
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Santos Ltd. published this content on 15 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 February 2022 21:48:37 UTC.