Meeting the Challenge 2004 Interim Results · Meeting the Challenge 2004 Interim Results 24 August...
Transcript of 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
Meeting the Challenge
Jon YoungExecutive Vice President
Operations
Overview
HarvestingHarvesting value from existing assetsvalue from existing assets
Financial performance
Creating value from new 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
Meeting the Challenge
Overview
Harvesting value from existing assets
Financial performanceFinancial performance
Creating value from new assets
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
1st Half 2004Production Cost
$6.18/boe
128 (8) 131
Moomba Incident
1238
Cost savings
Production Costs
(3)
Bayu-Undan
start-up
$m
1st Half 2004Production Cost
$4.88/boe
11
21
($/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
Meeting the Challenge
Overview
Harvesting value from existing assets
Financial performance
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
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
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
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
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
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
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
Meeting the Challenge
Overview
Harvesting value from existing assets
Financial performance
Creating value from new assetsCreating value from new assets
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
Meeting the Challenge
Harvesting value from existing assetsHarvesting value from existing assets
Price
Costs
Technology
Creating value from new assetsCreating value from new assets
Development projects
Exploration
50
Meeting the Challenge
Overview
Harvesting value from existing assets
Financial performance
Creating value from new assets
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
315 August, 2000Reference No.
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
415 August, 2000Reference No.
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
Half Year Half Year Change2004 2003 %
3
515 August, 2000Reference No.
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 $22 million
Half Year Half Year Change2004 2003 %
615 August, 2000Reference No.
2004 First Half Capital Expenditure
343.7390.1Total Exploration, Delineation& Development Expenditure
22.512.1Overseas
244.2292.7Australia
Development (1)
3.115.6Overseas
13.028.6Australia
Delineation40.525.4Overseas
20.415.7Australia
Exploration
(1) Includes construction & fixed assets expenditure
2004 2003(A$ million)
4
715 August, 2000Reference No.
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
815 August, 2000Reference No.
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