meeting the challenge 2004 interim results · meeting the challenge 2004 interim results 24 august...

1

1

Meeting the Challenge2004 Interim Results

24 August 2004

2

Disclaimer & Important Notice

This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a variety of variables which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, gas commercialisation, development progress, operating results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates.

All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated.

2

3

Program

• Overview - John Ellice-Flint

• Harvesting value from existing assets - Jon Young

• Financial performance - Peter Wasow

• Creating value from new assets - John Ellice-Flint

• Q&A

4

Meeting the Challenge

John Ellice-FlintManaging Director

OverviewOverview

Harvesting value from existing assets

Financial performance

Creating value from new assets

Close

Q&A

3

5

Safety - Recordable Injuries Reduce

• Major focus

• Embedding new culture

• Applying a range of programs

Total Recordable Case Frequency Rate(12 month rolling average)

0

2

4

6

8

10

Jun02

Month / Year

TRC

FR(p

er m

illio

n ex

posu

re h

ours

)

Aug02

Oct02

Dec02

Feb03

Apr03

Jun03

Aug03

Oct03

Dec03

Feb04

Apr04

Jun04

Full Year2002 Full Year

2003

6

Positioned for High Oil PricesTapis (AU$)

0

10

20

30

40

50

60

70

80

1992 1994 1996 1998 2000 2002 2004

A $/

bbl

Average $26.5/bbl

Average $48.9/bbl

1st half 2003

average $45.91

1st half 2004

average $46.76

4

7

Results Reflect Moomba

Produced volume (mmboe) 21.2 26.8

Sales volume (mmboe) 22.0 26.5

Net profit after tax & write downs ($m) 86.5 135.6

Operating cash flow ($m) 192.6 421.7

Gearing (% net debt/net debt + equity) 28.7 25.3

Dividend (cents) 15 15

TSR (% annualised) 6.8 1.2

Half Year Half Year2004 2003

8

ProductionProductionCommercialisationCommercialisation

BruceWood

VPStrategic Projects

Reshaping the Organisation

John Ellice-FlintManaging Director & Chief Executive Officer

JacquesGouadain

VP Geoscience

RickWilkinson

VP Gas Marketing

PaulMoore

VP Dev Projects

JonYoungExec VP

Operations

PeterWasow

ChiefFinancialOfficer

ExplorationExploration DevelopmentDevelopment CashCash

5

9

Value From New Assets

Developments start to contribute

Gas commercialisation progress

Exploration portfolio management

Value from acquisitions and divestments

10


Jon YoungExecutive Vice President

Operations

Overview

HarvestingHarvesting value from existing assetsvalue from existing assets



Close

Q&A

6

11

1H 2004 Productionmmboe

10

12

14

16

18

20

22

24

26

28

30

21.2

(4.0)26.8

New Projects

(1.6)25.20.3

Natural Decline

(0.3)

Field Performance

1st Half 2003 1st Half 2004

MoombaIncident

12

January JuneFebruary March April May

Stage 1 & 2• Storage gas

3 Jan (100 TJ/d)

• Storage + field gas 4 Jan (200 TJ/d)

Stage 3• Gas rate

500 TJ/d

• Oil at 90%

Stage 4• Full gas

processing capacity

• LRP rebuild

Stage 5 • LRP A

resumes May

• Liquids at 70%

July

Stage 6• Complete

recovery August

August

Moomba Incident

• Liquids Recovery Plant (LRP) B recommissioning underway• Minimal production impact in 2nd half• Minimal impact on longer term costs• No reserves impact

Moomba re-streaming is nearing completion

7

13

• Decline in deliverability due to water breakthrough

• Recent drilling outcomes

• Accelerated John Brookes development

East Spar

14

Stag

• Field decline increased

• Mechanical reliability

• Workovers commenced

• Infill sidetracks imminent

• Waterflood optimisation ongoing

8

15

Cost ManagementSantos Continuous Improvement Program is on track to deliver substantial cost savings through process redesign

• Strategic sourcing

• Maintenance strategy

• Drilling and completions

• Asset utilisation

• Engineering

• Headcount reduction

Improvement10% 20% 30% 40%

SantosPre-2001

SantosNow

Santos2005

1st tier

2nd tier

3rd tier

4th tier

Continuousprocess

improvement

Process Benchmarking

16

• Pinpoint fraccing

• Coiled tubing underbalanced drilling

• Improved real time production data capture

• Moomba plant control systems upgrade

• Wellhead telemetry

… to increase reserves, productivity and reduce costs

New technologies continue to be implemented…

Technology

9

17

…is on track to deliver ~ $100 million NPV 10

Moomba HubLeveraging Moomba’s commercial and infrastructure position…

• Gas swaps

• Spot sales

• Third party processing

• Price review

Spot sales

Peaking services

3rd party gas

Gasswaps

3rd party oil

HUB

18


Overview


Financial performanceFinancial performance


Close

Q&APeter Wasow

Chief Financial Officer

10

19

200

250

300

350

400

450

500

550

600

650

700

750 71688

590Gas Volumes

Moomba Incident

Aust Gas

Prices

(103)*693

Sales Revenue

Liquids Prices

(30)(5)

USA Gas

Prices

1st Half 20041st Half 2003

Bayu-Undan

start-up

16

Natural DeclineControllable

ItemsCommodity

Prices

Liquids Volumes

(20)

$m

* Reflects the 2004 volume variance based on 2003 prices

20

50

60

70

80

90

100

110

120

130

140

150

1st Half 2003Production Cost

$4.78/boe


$6.18/boe

128 (8) 131

Moomba Incident

1238

Cost savings

Production Costs

(3)

Bayu-Undan

start-up

$m


$4.88/boe

11

21

($/boe)

15

16

17

18

19

20

21

US$Commodity

Prices MoombaIncident

18.66

(1.93)2.03

1st Half 2003 1st Half 2004

Market Movements

FX

18.76

17.78

19.13 (1.35)

Bayu-Undan

Start up

0.37(0.66)

AustGas

Prices

Volume/Mix

0.30

Cost savings

0.36

Netback

Controllable Items

22

0

25

50

75

100

125

150

175

200

225

250 230209

11 20

Moomba Incident

229

Depreciation, Depletion & Amortisation

1st Half 2004$9.86/boe

1st Half 2003$8.58/boe

Volume 2003 Revisions

(24)

AppraisalSuccess

14

2003 Reserve Movements

$m

12

23

0

25

50

75

100

125

150 31

Aust gas prices

Moomba Incident

136(62)

87

(28)

Field decline

5Write-downs

NPAT

(14)

Restructure

2

Other

1st Half 20041st Half 2003

Bayu-Undan start-up

77

Cost savings

149

Commodity prices

3

$m

24

Capital Expenditure

1st Half 2003 - $344m1st Half 2004 - $390m

0 20 40 60 80 100100 80 60 40 20 0

Exploration

Bayu-Undan Liquids

Bayu-Undan LNG

Mutineer-Exeter

Cooper Gas Devt

Cooper Oil D&D

Moomba LRP Rebuild

USA

Southern Aust

Corporate & Other

41

35

66

53

64

26

36

25

10

36

61

81

20

3

9913

0

21

11

35

13

25

750

875

1,000

1,125

1,250

Operating cash flow ($m)

150

250

350

450

MoombaIncident

422

193

(106)Sales

volumes

(49)

(74)

Working capital & tax

payments

299

1st Half 2003 1st Half 2004 Year End 2003

Gearing 22.5%

1st Half2004

Gearing 28.7%

898

142

1,097

MoombaIncident

120

Net Cash flow

79

FX on Debt

1,239

1st Half 2004(exc. Moomba)Gearing 25.9%

Net Debt ($m)

Cash Flow & Net Debt

26

Capital Management

• Funding the growth program

• Redeeming existing Resets of $350m

• Offering FUELS $500m

• FUELS more equity-like

• Improves capital structure

14

27

“Grandfathering” issued as a standard?

International Accounting Standards (IFRS)

time elapsed

IFRS half year reports – including

comparatives

1 Jan 04 30 Jun 04 30 Jun 05 31 Dec 05

parallel accountsrequired

Effective 1 January 2005

“Grandfathering” exposure draft issued

ED6

IFRS full year reports – including

comparatives

31 Dec 04

No extractive industry standard

available

28


Overview



Creating value from new assetsCreating value from new assets

Close

Q&AJohn Ellice-Flint

Managing Director

15

29

Production commences

Bayu-Undan Liquids

Minerva

Developing New AssetsProject Start-ups 2004–2006

2004

Mutineer-Exeter

John Brookes

Maleo

2005

Bayu-Undan LNG

Casino

Oyong

2006

Sanctioned Pre-sanctioned

100%

90%

60%

20%

10%

50%

20%

10%

1Q

4Q

Mid

4Q-05/1Q-06

1Q

1Q

1Q

1Q

Mid

30

• Sole

• Golden Beach

• Kipper

• US exploration

• Onshore Aust oil

• Onshore Aust gas

• Hides

• Indonesia exploration

• Otway exploration

• Petrel-Tern

• Evans Shoal

• Indonesia exploration

• Egypt exploration

• Otway exploration

Developing New AssetsPotential Projects 2007–2010+

2010+2008 - 20092007

16

31

Bayu-Undan

• Liquids project complete ahead of schedule, on budget

• LNG project over 50% complete on schedule on budget

32

Mutineer-Exeter

• On track for mid 2005

start-up

• FPSO topsides

construction and

installation in progress

• Subsea equipment

ready for delivery from

September

17

33

• Gas Sales Agreement signed

• Major facilities contracts in place

• Platform fabrication commenced

John Brookes – Varanus Hub

John BrookesJohn BrookesWellhead PlatformWellhead Platform

(water depth ~ 47m)(water depth ~ 47m)

East SparEast Spar

East Spar Gas PlantEast Spar Gas PlantGas ProcessingGas Processing& Compression& Compression

Varanus IslandVaranus Island

PipelinePipelineto Mainlandto Mainland



East SparEast Spar






East SparEast Spar




34

• Project close to sanction

• Low environmental impact

• Facilitates further exploration

Casino

18

35

MaleoMaleo

• MOPU bids under evaluation

• Gas securitisation issues nearing completion

• Planned project sanction 3Q-04

OyongOyong

• Reviewing recoverable oil reserves

• Reviewing development plan options

• Gas securitisation issues under negotiation

Indonesian Gas

50

kilometres

0 50

kilometres

0

Brantas PSC Brantas PSCArea lll

ArealV

AreaV

Area ll

Area lBrantas PSC

Sampang PSCMadura Island

J a v a S e a

Oyong MaleoSurabaya

Madura Offshore PSC

Grati

BaweanIsland

Bawean 1PSC

Porong

NorthBali lPSC

East Java

Bali

B a l i S e a

KangeanIslands

CentralJava

J a v a S e a

Madura Offshore PSC

B a l i S e a

KangeanIslands

Legend

Santos acreage

Novus acreage

Oyong Maleo

50

kilometres

0 50

kilometres

0


ArealV

AreaV

Area ll

Area lBrantas PSC


J a v a S e a

Oyong MaleoSurabaya

Madura Offshore PSC

Grati

BaweanIsland

Bawean 1PSC

Porong

NorthBali lPSC

East Java

Bali

B a l i S e a

KangeanIslands

CentralJava

J a v a S e a

Madura Offshore PSC

B a l i S e a

KangeanIslands

Legend

Santos acreage

Novus acreage

50

kilometres

0 50

kilometres

0


ArealV

AreaV

Area ll

Area lBrantas PSC


J a v a S e a

Oyong MaleoSurabaya

Madura Offshore PSC

Grati

BaweanIsland

Bawean 1PSC

Porong

NorthBali lPSC

East Java

Bali

B a l i S e a

KangeanIslands

CentralJava

J a v a S e a

Madura Offshore PSC

B a l i S e a

KangeanIslands

Legend

Santos acreage

Novus acreage

Legend

Santos acreage

Novus acreage

Oyong Maleo

36

0 20

kilometres

Novus Acquisition

• Cost US$110mm

• Reserves 22 mmboe(mainly gas)

• Production 2 mmboein 2005

• Fits well with existing acreage

SumatraSumatra

KalimantanKalimantan

SarawakSarawakMalaysiaMalaysia

SingaporeSingapore

JakartaJakarta

IndonesiaIndonesia

JavaJava

Java SeaJava SeaBawean 1

PSC (45%)Bawean 1

PSC (45%)Madura OffshorePSC (75%)Madura OffshorePSC (75%)

SampangPSC (45%)

SampangPSC (45%)

North Bali 1PSC (40.1%)North Bali 1PSC (40.1%)

Flores SeaFlores Sea

Indian OceanIndian Ocean

PapalangPSC (20%)Papalang

PSC (20%)

PopodiPSC (20%)

PopodiPSC (20%)

SulawesiSulawesi

Kakap*PSC (9%)

BrantasPSC (18%)*

0 20

kilometres

LegendSantos acreage (Showing Santos Group Interests)

Novus acreage* Kakap PSC and Brantas PSC subject to

conclusion of Santos Agreement with Medco

19

37


Overview




Close

Q&AJohn Ellice-Flint

Managing Director

38

Exploration: The Journey So Far

2001 2003 2004 2005 2006 20072002

Maximise valueof existing portfolio

New Ventures core areasUS/Indonesia/Australia

New Ventures InternationalEgypt/Middle East/Nth Africa

Basin Excellence Building a portfolioof opportunities

Portfoliostrength,

value+

optionality

Drilling thenew opportunities

20

39

“Start with the rocks”

Leader in technical understanding

Establish substantial acreage position

Early entrant/low cost

Balance technical and commercial risk to builda strong portfolio

Select partners with complementary skills

Basin Excellence

Identifybasins where we can build niche

competitive advantages

Examples

East Java Total/Mitsui

Kutei Unocal

Gulf of DevonSuez

Southern Unocal/Margins Inpex

Timor ConocoSea Phillips

40

East JavaEast Java Timor SeaTimor Sea

Gulf of MexicoGulf of MexicoGulf of SuezGulf of Suez

Active Portfolio ManagementExploration first half 2004

Jeruk

NT/P61NT/P61

Timor Sea

East Java

NthBali l

Area lll

ArealV

AreaV

Area ll

Area l

Jeruk 1Gulf ofMexico

Torres 1ATorres 1A

TexasTexas

WoodbineWoodbine

CougarCougarRas Abu

Darag

S.E. JulyN. Zeit Bay

Egypt

Khefren 1Khefren 1

Gulf of Suez

21

41

Exploration FocusIndonesia

* Novus acreage subject to conclusion of Santos agreement with Medco* Novus acreage subject to conclusion of Santos agreement with Medco

Kutei BasinKutei Basin

East Java BasinEast Java Basin

Brantas PSC*Brantas PSC*

Sampang PSCSampang PSC

East Java

Java SeaJava Sea

Madura Offshore PSCMadura Offshore PSC

Nth Bali lNth Bali lAgung

ProspectAgung

Prospect

Jeruk ProspectJeruk Prospect

42

Sampang PSC

Top Kujung LimestoneDepth Structure Map

Jeruk prospectJeruk 1Jeruk 1

TD5300m MD

TD5300m MD

Jeruk 2Jeruk 2Jeruk 1Jeruk 1

Top KujungLimestone

22

43

4km

North Bali l PSC

Proposed Agung 1Proposed Agung 1

Top KujungLimestone

AgungAgung

Proposed Agung 1Proposed Agung 1

Agung prospect

N

44

Kutei BasinKutei Basin

Exploration Focus

Bontang

Samarinda

Makassar StraitMakassar Strait

Indonesia

Papalang PSCPapalang PSC

Popodi PSCPopodi PSC

Pandu ProspectPandu ProspectEast Java BasinEast Java Basin

Pohon ProspectPohon Prospect

23

45

TasmaniaVictoria

Otway Basin

Sorell Basin

Australia

Exploration Focus

T/35PT/35P

Amrit ProspectAmrit Prospect

Callister ProspectCallister Prospect

VIC/P52VIC/P52

VIC/P44VIC/P44

Otway & Sorell BasinsOtway & Sorell Basins

VIC/L22VIC/L22VIC/RL7VIC/RL7

VIC/P51VIC/P51

T/32PT/32P

T/33PT/33P

T/36PT/36P

Casino

46

Otway Deep Water

VIC/P 51

Amrit prospect

5km

VIC/P 52

AmritAmrit

VIC/P 51

VIC/P 52

ProposedAmrit 1

ProposedAmrit 1

24

47

Exploration FocusEgypt

Egypt

North Zeit BayNorth Zeit BaySouth East JulySouth East July

Ras Abu DaragRas Abu Darag

Khefren 1Khefren 1

Egypt

Osage 1XOsage 1X

Gulf of SuezGulf of Suez

48

Gulf of Suez

Khefren 1Khefren 1

Khefren 1BP Saqqara discovery

2003, 80 mmbo

BP Edfu discovery2001, 63 mmbo

Khefren 1Khefren 1

25

49


Harvesting value from existing assetsHarvesting value from existing assets

Price

Costs

Technology


Development projects

Exploration

50


Overview




Close

Q&AQ&AJohn Ellice-Flint

Managing Director

1

1

Reference slides

215 August, 2000Reference No.

Prices & Exchange Rates

+3.12.943.03Australian Gas Prices (AUD/gj)

-4.36.075.81USA Gas Price (USD/mcf)

+1.945.9146.76Realised Oil Price (AUD/bbl)

-11.90.62360.6978AUD/USD Exchange Rate

(after hedging)

+14.028.6332.63Realised Oil Prices (USD/bbl)

Half Year Half Year Change2004 2003 %

2


Cost Definition US Peer Oil Companies* Santos Group Reporting

* Source: J S Herold 36th Annual Reserve Replacement Cost Analysis** Includes selling and corporate administration expenses*** Plus exploration expense for successful efforts companies

Other Income /Expenses **

Write downs

Sales Revenue

Borrowing Costs

Production Costs

Tariffs & TollsRoyalties, Excise & RRT

DD&A

Product Stock Movements

Income taxes

Net Profit After Tax

Gas Purchases

Operating Costs

Sales Revenue

Production Costs

Transport’n/Handling Expenses

Taxes other than Income

DD&A***

Write downs

Other Operating Income / Expenses

Income taxes

Profit fromOil & Gas Operations

Exploration Expensenet back

cost of sales


Cost of Sales

-3.6442426Cost of Sales

-8.7230210D,D&A

(6)-Inventory Movement

23Gas Purchases

-1.4216213Total Operating Costs

2526PRRT

4639Royalties

1717Pipeline Tariffs

2.3128131Production Costs


3


2004 First Half Results

-36.013687Net Profit after Tax(34)(4)Write downs (after tax)

-46.517091Net Profit after Tax before Write Downs

(82)(42)Income Tax(20)(14)Borrowing Costs(18)**(36)SG&A Expenses1118Other Revenue

5-Profit on Sale of Non-Current Assets

274165Gross Profit

** including restructuring costs of $22 million



2004 First Half Capital Expenditure

343.7390.1Total Exploration, Delineation& Development Expenditure

22.512.1Overseas

244.2292.7Australia

Development (1)

3.115.6Overseas

13.028.6Australia

Delineation40.525.4Overseas

20.415.7Australia

Exploration

(1) Includes construction & fixed assets expenditure

2004 2003(A$ million)

4


Non producing (A$ million)

Capitalised Exploration & Development at June 2004

455Total

6Other

Exploration permits6Perth Basin

Exploration permits11Browse Basin

Deepwater exploration prospects23Otway Basin

Exploration leases acquired with Esenjay acquisition; Woodbine/Cougar prospects

28USA Gulf Coast

Interests in Kipper, Sole and Golden Beach gas fields

59Gippsland Basin

Commercialisation activity81Evans Shoal Gas

Oyong and Maleo discoveries and North Bali exploration acreage

117Indonesia

PNG Gas Project124Hides Gas


2004 Second Half Sensitivities

• US$1 change in the unhedged oil price per barrel leads to

change of A$7 million in profit after tax

• One cent movement in the exchange rate will cause a profit

after tax movement of A$2 million

• A 1% change in interest rates will cause a profit after tax

movement of A$3 million

5

9

Quarterdrilling

Expected tostart

SantosInterest

%

Upside ResourcePotential (mmboe)unrisked

TargetBasin/AreaWell

Upcoming Exploration

Fourth5050OilGulf of SuezNZB 1X

Fourth50340OilGulf of SuezOsage 1X

Fourth40615GasBonaparteCaldita/Melville

Fourth33715Oil/GasOtway deep-waterAmrit

Fourth20165OilKutei (Papalang PSC)Pandu

Fourth3011GasEast TexasWoodbine/Knight

Fourth8088Gas/OilOtway offshoreCallister

Fourth3352OilDampierCharlemagne

Fourth10029GasGOM-Texas State Waters

Cougar

Fourth605GasCooper SWQPlasma

Fourth608GasCooper SWQYangtse

Fourth608GasCooper SWQStilton

Third20450Oil/GasKutei (Popodi PSC)Pohon

Third604GasCooper SAVenus

Third40550OilEast Java Agung

Drilling50170OilEast JavaJeruk 2

Drilling20120OilGulf of SuezKhefren 1

10

Popodi PSCPohon prospect

Upper Miocene

Middle MiocenePohon

Middle Miocene depth structure

Proposed Pohon 1Proposed Pohon 1

6

11

Otway OffshoreCallister Prospect

Callister

ProposedCallister 1ProposedCallister 1

12

Gulf of Suez – Osage 1X

OsageOsageOsage

Proposed Osage 1XProposed Osage 1X

meeting the challenge 2004 interim results · meeting the challenge 2004 interim results 24 august...

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