Santos Limited · ASX:STO
Santos — H1 2005 Earnings Presentation
27 slides from Santos's earnings presentation, Aug 25, 2005
Slide 1: Delivering Growth: 2005 Interim Results
Delivering Growth 2005 Interim Results 25 August 2005 1 Disclaimer & Important Notice This presentation contains forward looking statements that are subjectsubject to risk factors associated with the oil and gas industry. It is believed believed that the expectations reflected in these statements ar
Slide 2: Record First Half Result
Agenda Overview Financial performance Delivering Growth Enhancing existing core areas Maturing emerging core areas Identifying new core areas Q&A 3 Record First Half Result John Ellice- Ellice-Flint CEO & Managing Director Half Year Half Year Change 2005 2004 % A-IFRS Production (mmboe) 26.3 21.2 24
Slide 3: Safety Continues to Improve; Focused Growth Strategy
Safety Continues to Improve …45% reduction over 3 years Total Recordable Case Frequency Rate (recordable injuries per million work hours) 10 Full Year 2002 Full Year 2003 8 Full Year 2004 6 YTD 2005 = 4.9 4 2 0 Jan-03 Jan-04 Jan-05 Jul-05 5 Focused Growth Strategy Identifying New Core Areas North Af
Slide 4: Strong Offshore Development Progress
Growth Strategy is Delivering • Mutineer-Exeter start-up • Cooper oil production +20% • Bayu-Undan condensate Earnings Momentum • Average gas price +10% • Maleo sanctioned • Oyong in development • Casino development drilling above expectations Near Term Growth • Bayu-Undan pipeline completed • John
Slide 5: Strong Offshore Development Progress
Strong Offshore Development Progress Measured progress as at end July 2005 Bayu-Undan Liquids % Mutineer-Exeter 100 Bayu-Undan LNG Delivery Minerva 80 John Brookes Progress (Post sanction) 60 Casino Oyong 40 20 Jeruk Maleo Entry Kipper Sole 8b 5
Slide 6: Underlying Profit Up 48%
Delivering Growth Peter Wasow Chief Financial Officer Overview Financial performance Delivering Growth Enhancing existing core areas Maturing emerging core areas Identifying new core areas Q&A 9 Underlying Profit Up 48%... $m * Non-recurring items detailed in reference slides 48 290 300 105 (27) 242
Slide 7: First Half 2005 Story Board; Production Grows
First Half 2005 Story Board Production momentum Bayu- Bayu-Undan commences Moomba recovered Minerva OMV Mutineer- Mutineer-Exeter Oyong Maleo Tipperary Novus assets acquired start up acquired start up sanctioned sanctioned acquisition Jan 1 Feb Mar Apr May Jun Jun 30 Onshore East Spar Bayu- Bayu-Und
Slide 8: Sales Grow Faster; Production Costs Inch Higher
Sales Grow Faster $m Controllable Items Market 1100 194 (39) 1,019 1000 USD 38 Weakness 900 59 800 48 Liquids 26 Gas Prices 103 693 700 Liquids Prices 590 Mix Gas Volumes 600 Volumes Moomba 500 Incident 400 1st Half 2004 1st Half 2005 13 Production Costs Inch Higher $m Increase in Increased Volumes
Slide 9: Savings Projects Reduce Cost Pressure; Margins Higher
Savings Projects Reduce Cost Pressure June YTD savings $56m, on track to achieve full year target of $120m Key Initiatives: A$m A$m Supply & contracting 17 60 55 Drilling 10 50 45 Organisational redesign 8 40 35 Engineering initiatives 5 30 25 Shared business services 5 20 15 Other savings 11 10 5 5
Slide 10: EBITDAX Surges; Impairment Write-back
EBITDAX Surges $m 900 800 155 (2) (17) 695 700 59 Other Costs 600 111 466 34 500 Liquids 355 Gas Prices 400 Volumes Prices 300 Moomba Incident 200 100 0 1st Half 2004 1st Half 2005 17 Impairment Write-back 1st Half 1st Half 2005 2004 Impairment reversal $98m - After tax impairment reversal $68m - In
Slide 11: Depreciation, Depletion & Amortisation; Exploration Expense
Depreciation, Depletion & Amortisation $m Rate Increased Volumes Increase One-offs 300 (12) 273 275 (18) (19) 250 (23) 16 (13) 225 (13) Impairment (19) 191 Asset 200 172 Reversal New Other Additions 175 Fields YE 04 150 Moomba Acquisitions Reserves East Spar 125 Incident / Disposals & FDC’s shut in
Slide 12: NPAT: Structural Improvement; Cash Flow Growth Strong
NPAT: Structural Improvement $m 350 60 (27) 107 (25) (27) 290 300 Costs Other 250 43 (inc DD&A) Impairment 200 Exploration 64 149 10 Liquids & Evaluation 150 Prices Expense Volumes Gas 85 Prices 100 Moomba 50 Incident 0 1st Half 2004 1st Half 2005 21 Cash Flow Growth Strong Half yearly operating cas
Slide 13: Delivering Growth: Focused Growth Strategy
Delivering Growth John Ellice- Ellice-Flint CEO & Managing Director Overview Financial performance Delivering Growth – Enhancing existing core areas – Maturing emerging core areas – Identifying new core areas Q&A 23 Focused Growth Strategy Production 89% Enhancing 2P Reserves 78% Contingent Existing
Slide 14: Leading position in gas
Leading position in gas mi Established infrastructure Exploitation opportunities Asset diversity Established infrastructure Commercialisation opportunities World class asset Proximity to markets Infrastructure, cost synergies Production growth Increased exploration acreage Santos acreage m= Tipperar
Slide 15: Eastern Gas Commercialisation; Southern Gas Developments
Eastern Gas Commercialisation PNG • Interests in all major supply basins • Extensive infrastructure NT QLD • Gas marketing expertise Wallum -billa Hub • Swap opportunities Moomba Hub • Innovative contracting SA NSW options • Storage infrastructure Vic Otway P-B 500km Hub Hub Tas 27 Southern Gas Deve
Slide 16: Western Australian Oil & Gas; Second Phase
Western Australian Oil & Gas Mutineer-Exeter (33.4%, operator) • Commenced production March 2005 • 3 months early, 10% under budget • Averaged 72,000 bopd in Q2 • Current rate >80,000 bopd • Rapid payback John Brookes (45%) • Successful appraisal drilling • Development drilling completed • CO2 remov
Slide 17: Emerging Core Areas; Northern Australia Gas Developments
Emerging Core Areas Papua New Guinea Gas & Oil West Natuna • 391 mmboe contingent resource, including 25% of Hides Kutei East Java Papua New Guinea Timor Sea Darwin Browse Bonaparte Timor / Bonaparte Gas & Oil Indonesia Gas & Oil • LNG infrastructure • Drilling material prospects • Material portfoli
Slide 18: Indonesia Core Area; Indonesian Gas Developments
Indonesia Core Area Established Acreage Acquisition & Evaluation Development East Java Kutei Oyong North Bali Maleo Production Brantas Kakap Exploration Nyari Appraisal Herbras Jeruk Banjar Panji Hiu Aman 33 Indonesian Gas Developments Oyong (45%, operator) • First phase: oil production to start end
Slide 19: East Java Update; Jeruk Appraisal Timeline
East Java Update Regional Exploration Java Sea • 3D seismic survey acquired • Data being processed Madura Island • Two to three wells planned to Jeruk Oyong Herbras Maleo be drilled during second half Nyari Jeruk (45%, operator) Grati East Java • Jeruk 2 ST5 in progress • Jeruk 2 ST4 data being assi
Slide 20: Kutei Update; Third Phase – New Core Areas
Kutei Update Regional Exploration Kalimantan • Acquired 50% operated interest in Donggala PSC* Popodi PSC Bontang • Three wells drilled YTD Hiu Aman Orca 1 • Discovered gas and oil at Hiu Aman Donggala PSC • 2006 exploration and appraisal drilling program in preparation Papalang PSC Pangkal 1 Palu S
Slide 21: Kyrgyzstan Update; Outlook
Kyrgyzstan Update • Recent farm-in, due Kazakstan diligence review Bishkek in progress • Staged work program 2005 to 2008 Kyrgyzstan • 16,500 km2 in 10 Uzbekistan blocks Fergana Basin Djalal-Abad Fergana • Earning 80% equity China Tarim Basin Tajikistan 39 Outlook • Production - Increased to 55 mmbo
Slide 22: Delivering Growth
Delivering Growth John Ellice- Ellice-Flint CEO & Managing Director Overview Financial performance Delivering Growth Enhancing existing core areas Maturing emerging core areas Identifying new core areas Q&A 41 4 42 22
Slide 23: Reference slides: Upcoming Exploration
Reference slides 43 Upcoming Exploration Well Name Basin / Area Target Upside Resource Potential (mmboe) Santos Interest Timing 1 - 50 50 -100 100 - 250 >250 % Ras Abu Darag Gulf of Suez Oil √ 50 Drilling Caldita Bonaparte Gas √ 40 Drilling Henry Otway Gas √ 50 Drilled Khufu Gulf of Suez Oil √ 20 Th
Slide 24: Prices & Exchange Rates; Cost of Sales
Prices & Exchange Rates Half Year Half Year Change 2005 2004 % Realised Oil Price (US$/bbl) 49.67 31.70 +56.7 Realised Oil Price (A$/bbl) 67.11 45.43 +47.7 Santos Average Gas Price A$/GJ 3.53 3.21 +10.0 A$/US$ Exchange Rate 74.01 69.78 -6.1 (after hedging) 45 Cost of Sales $m Half Year Half Year Cha
Slide 25: 2005 First Half Results; Non-recurring Items
2005 First Half Results $m Half Year Half Year Change 2005 2004 % Gross profit 451 206 Other revenue 13 9 Exploration & evaluation expense (71) (37) Impairment 98 - SG&A expenses (27) (35) Borrowing costs (24) (21) Income tax (132) (39) Foreign currency gains / (losses) (18) 2 Net profit after tax 2
Slide 26: 2005 Capital Expenditure Outlook; Record Development Continues
2005 Capital Expenditure Outlook $m 2005 2004 Exploration 173 126 Delineation 122 91 Development 716 713 TOTAL 1,011 930 Acquisitions 612 127 49 Record Development Continues 1st Half 2005 - $463m 1st Half 2004 - $390m Exploration 79 41 Bayu-Undan liquids 23 35 Bayu-Undan LNG 20 66 Mutineer-Exeter 22
Slide 27: Profit Comparison; 2005 Second Half Sensitivities
Profit Comparison $m 2004 Half Year 2004 Full Year AGAAP Variance AIFRS AGAAP Variance AIFRS Sales 591 - 591 1,501 - 1,501 Operating costs (213) - (213) (527) - (527) Depletion & depreciation (208) 36 (172) (512) 65 (447) Other revenue 9 - 9 194 9 203 Exploration & evaluation - (37) (37) - (119) (11