Third Quarter Activities Report
For period ending 30 September 2018
ASX: STO | ADR: SSLZY
18 October 2018
Key Highlights
Strong production and revenue growth
Third quarter production up 6% to 15 mmboe due to strong performance across the core assets
Sales revenue up 10% to $973 million, including record quarterly LNG revenues of $405 million
PNG LNG achieved record daily rates equivalent to ~9.2 mtpa annualised production
Cooper Basin growth
Cooper Basin oil production up 17%, including the highest monthly production rates since 2009
Fourth rig commenced operations. Expect to drill 85-90 wells in 2018
Moomba South Phase 1 appraisal drilling initiated
Strong balance sheet to support growth
Net debt reduction target achieved at quarter-end, more than a year ahead of plan
As at 30 September 2018, Santos had cash and cash equivalents of $1.8 billion and total debt of
$3.8 billion, resulting in net debt of $2 billion.
Dividend reinstated
Dividends to shareholders reinstated with the US3.5 cent per share fully-franked interim dividend paid
Value accretive Quadrant Energy acquisition announced for $2.15 billion 1
Low-cost, long-life gas and oil assets with stable cash flows and significant near-term development and
exploration upside
Sale of non-core Asian assets completed
In September, Santos received $144 million in cash proceeds from the sale of its Asian assets
Santos Managing Director and Chief Executive Officer Kevin Gallagher said: “Santos’ third quarter results serve to
highlight the benefits of a cash generative core asset portfolio and our low-cost, disciplined Operating Model. During
the quarter we paid our first dividend in two and a half years and achieved our net debt target of $2 billion more than
a year ahead of plan.”
“With a balance sheet now supportive of growth, we also announced the value accretive acquisition of Quadrant Energy’s
high quality portfolio of low-cost, long-life conventional natural gas assets in Western Australia that will further reduce
our free cash flow breakeven oil price and importantly, significantly enhance our operating capability. The acquisition
will also give us a leading position in the highly prospective Bedout Basin, including the recent significant Dorado-1 oil
discovery.”
“Santos is now positioned for growth with a number of upstream brownfield development opportunities leveraging
existing infrastructure positions across each of our five core assets and is targeting production of more than 100 mmboe
by 2025, almost doubling current levels of production.”
“Strong operating performance during the third quarter saw sales, production and sales revenues all higher than the
previous quarter,” Mr Gallagher said.
1 Quadrant Energy acquisition is subject to customary consents and regulatory approvals and is expected to complete by the end of 2018
Comparative performance
Santos share Units Q3 2018 Q2 2018 Change 2018 YTD 2017 YTD Change
Production mmboe 15.0 14.2 +6% 43.1 44.5 -3%
Sales volume mmboe 20.3 19.0 +7% 58.3 61.6 -5%
Average realised oil price US$/bbl 81.1 78.6 +3% 77.1 54.3 +42%
Sales revenue US$million 973 885 +10% 2,653 2,246 +18%
Capital expenditure 1
US$million 180 167 +8% 487 478 +2%
1 Capital expenditure including restoration expenditure and acquisition of exploration assets but excluding capitalised interest.
Media enquiries Investor enquiries Santos Limited ABN 80 007 550 923
Daniela Ritorto Andrew Nairn GPO Box 2455, Adelaide SA 5001
+61 8 8116 5167 / +61 (0) 455 319 770 +61 8 8116 5314 / +61 (0) 437 166 497 T +61 8 8116 5000 F +61 8 8116 5131
daniela.ritorto@santos.com andrew.nairn@santos.com www.santos.com
Sales volumes (Santos share)
Product Unit Q3 2018 Q2 2018 Q3 2017 2018 YTD 2017 YTD
LNG 000 t 738.6 630.9 743.4 2,011.8 2,227.2
Domestic sales gas and ethane PJ 55.7 52.6 59.6 162.0 168.1
Crude oil 000 bbls 2,296.7 2,863.9 2,589.3 7,594.5 7,360.6
Condensate 000 bbls 1,063.3 811.6 1,202.3 2,952.9 3,240.6
LPG 000 t 41.3 43.8 62.7 106.6 132.2
Sales
Own product mmboe 15.0 13.5 15.2 42.3 44.3
Third party mmboe 5.2 5.6 6.3 16.0 17.3
Total sales volume mmboe 20.3 19.1 21.5 58.3 61.6
Third quarter sales volumes were higher than the prior quarter primarily due to a full quarter of production from PNG
LNG following the impact of the earthquake in the first-half and the planned one-month maintenance shutdown of the
Bayu Undan/Darwin LNG facilities in May, partially offset by lower crude oil sales volumes due to the cessation of
production from the Mutineer Exeter/Fletcher Finucane asset in Western Australia in the second quarter and the
completion of the sale of the non-core Asian assets on 6 September 2018.
Sales revenues (Santos share)
Product Unit Q3 2018 Q2 2018 Q3 2017 2018 YTD 2017 YTD
LNG US$m 405 323 293 1,004 855
Domestic sales gas and ethane US$m 272 254 271 788 762
Crude oil US$m 186 225 137 586 399
Condensate US$m 84 61 64 216 170
LPG US$m 25 23 27 60 59
Sales
Own product US$m 724 598 557 1,881 1,618
Third party US$m 249 288 236 772 628
Total sales revenue US$m 973 886 793 2,653 2,246
Third party product purchases US$m 197 209 189 605 467
Third quarter sales revenues were higher than the prior quarter primarily due to higher commodity prices, a full quarter
of production from PNG LNG following the impact of the earthquake in the first-half and the planned one-month
maintenance shutdown of the Bayu Undan/Darwin LNG facilities in May.
Average realised prices
Unit Q3 2018 Q2 2018 Q3 2017 2018 YTD 2017 YTD
LNG price US$/mmBtu 10.43 9.74 7.50 9.50 7.31
Domestic sales gas price US$/GJ 4.89 4.83 4.56 4.86 4.54
Oil price US$/bbl 81.09 78.61 53.28 77.10 54.26
Condensate price US$/bbl 78.78 74.52 52.72 73.02 52.38
LPG price US$/t 616.89 525.03 421.27 561.57 445.42
Santos Ltd l Third Quarter Activities Report l 18 October 2018 Page 2 of 15
Production (Santos share)
Product Unit Q3 2018 Q2 2018 Q3 2017 2018 YTD 2017 YTD
Sales gas to LNG plant PJ 32.4 26.6 32.0 86.0 94.1
Domestic sales gas and ethane PJ 40.2 40.9 39.7 119.5 117.7
Crude oil 000 bbls 1,457.8 1,555.9 1,576.1 4,648.2 4,875.9
Condensate 000 bbls 865.9 727.4 795.9 2,279.1 2,462.3
LPG 000 t 34.5 37.8 36.8 106.8 107.4
Total production mmboe 15.0 14.2 15.0 43.1 44.5
Third quarter production was higher than the prior quarter due to strong production across the core assets, including
PNG LNG producing at record rates following the earthquake-related shutdown in the first half and the planned one
month maintenance shutdown of the Bayu Undan/Darwin facilities in May. Santos ceased recording production from the
non-core Asian assets following the completion of their sale to Ophir Energy plc effective 6 September 2018. The Asian
asset sale combined with the cessation of production from the Mutineer Exeter/Fletcher Finucane asset in Western
Australia in the second quarter resulted in lower oil production in the third quarter, notwithstanding higher Cooper Basin
oil production.
2018 Guidance
Production and sales volumes guidance for 2018 has been narrowed by lifting the lower end of both ranges, reflecting
strong performance by the company’s core assets and despite the sale of the Asian assets completed in early September.
Capital expenditure guidance has been lowered to reflect current internal forecasts and timing of expenditures. There
is no change to well guidance for the Cooper Basin and GLNG for 2018, which is maintained at 85-90 and ~300 wells,
respectively.
Guidance shown in the table below excludes any potential impact from the acquisition of Quadrant Energy.
Item Previous guidance Updated guidance
Sales volumes 72-76 mmboe 74-76 mmboe
Production 55-58 mmboe 56-58 mmboe
Upstream production costs US$8.0-8.6/boe No change
Depreciation, depletion and amortisation (DD&A) US$650-700 million No change
Capital expenditure (incl exploration, evaluation & restoration, excl cap. int.) US$775-825 million US$725-775 million
Further detail of 2018 year-to-date capital expenditure, including exploration and evaluation expenditure, is reported in
the table on page 10 of this report.
Santos Ltd l Third Quarter Activities Report l 18 October 2018 Page 3 of 15
Oil price hedging
3.2 million barrels of oil hedging expired in the third quarter under the zero-cost three way collar hedges.
The following oil price hedging positions were in place as at 8 October 2018.
2018 Open oil price positions 2018
Zero-cost three-way collars (barrels) 1
3,151,000
Brent short call price ($/bbl) US$60.30
Brent long put price ($/bbl) US$48.48
Brent short put price ($/bbl) US$40.80
When Brent price is above the weighted average short call price, Santos realises short call price. When Brent price is between the long put price and the
weighted average short call price, Santos realises Brent price. When Brent price is between the long put price and the short put price, Santos realises the
long put price. When Brent price is below the short put price, Santos realises Brent price plus the difference between the long put price and the short put
price.
2019 Open oil price positions 2019
Zero-cost collars (barrels) 1 3,431,000
Ceiling ($/bbl) US$79.27
Floor ($/bbl) US$45.00
When Brent price is above the weighted average ceiling price, Santos realises ceiling price. When Brent price is between the floor and ceiling price,
Santos realises Brent price. When Brent price is below the floor price, Santos realises floor price.
Santos Ltd l Third Quarter Activities Report l 18 October 2018 Page 4 of 15
Cooper Basin
Santos share Units Q3 2018 Q2 2018 Q3 2017 2018 YTD 2017 YTD
Sales volume
Sales gas and ethane
Own product PJ 18.0 14.2 17.5 47.7 52.6
Third party PJ 1.3 0.6 0.7 2.8 2.0
Total PJ 19.1 14.8 18.2 50.1 54.6
Condensate
Own product 000 bbls 429.3 314.8 534.5 1,184.8 1,242.2
Third party 000 bbls 58.0 52.6 85.4 209.9 164.0
Total 000 bbls 487.3 367.4 619.9 1,394.7 1,406.2
LPG
Own product 000 t 33.8 41.6 42.6 81.7 94.2
Third party 000 t 4.2 2.9 7.3 13.1 11.3
Total 000 t 38.0 44.5 49.9 94.8 105.5
Crude oil
Own product 000 bbls 558.2 604.1 583.7 1,634.9 1,663.8
Third party 000 bbls 1,205.2 1,489.9 1,048.8 3,750.7 2,849.6
Total 000 bbls 1,763.4 2,094.0 1,632.5 5,385.6 4,513.4
Total sales volume mmboe 5.8 5.4 5.7 16.1 16.1
Total sales revenue US$million 306 278 212 808 591
Production
Sales gas and ethane PJ 15.3 15.4 14.4 45.0 43.0
Condensate 000 bbls 253.1 240.8 219.9 701.8 633.8
LPG 000 t 30.2 35.2 29.1 93.1 82.5
Crude oil 000 bbls 901.9 769.1 644.0 2,329.8 1,976.6
Total production mmboe 4.0 3.9 3.6 11.5 10.7
Capital expenditure US$million 57 48 54 165 138
Third quarter production was higher compared to the prior quarter driven predominantly by a 17% increase in oil
production, with both August and September averaging over 10,000 bopd net to Santos, levels not seen since 2009.
With four rigs now in operation including one rig dedicated to the oil program, Santos expects to drill approximately 85-
90 wells in 2018. Cycle times continue to be reduced with some gas wells progressing from spud to sales in less than
50 days. This efficiency and early realisation of revenue from the capital investment supports the asset’s ability to
generate free cash flow at
