LNG

Australian LNG plant operator Santos, which has plant and project stakes in Queensland and in the Northern Territory as well as in Papua New Guinea, reported record free cash flow of US$1.5 billion and underlying profit of US$946 million after its merger with Oil Search.

The free cash flow was double the US$740 million posted in the previous year the underlying profits were 230 percent higher than the US$287M of profits reported in 2020.

The Adelaide-based company achieved net profits of US$658M versus losses of US$357M in the previous year.

“Net profit includes losses on commodity hedging and costs associated with acquisitions and one-off tax adjustments, and is significantly higher than the corresponding period mainly due to impairments included in the previous year,” explained Santos.

The Santos low-cost operating model delivered cash flow breakeven of US$21 per barrel of oil in 2021 and the Board resolved to pay a final dividend of US$0.85 cents per share, 70 percent higher than the previous final dividend.

Santos said the results reflected significantly higher oil and LNG prices compared with 2020 due to the recovery in global energy demand amid supply constraints from lower capital investment through the Covid-19 pandemic.

The earnings contained three weeks contribution from the Oil Search assets.

Highlight

“The highlight of the year was the completion of our merger with Oil Search,” said Santos Chief Executive Kevin Gallagher.

The CEO stated that the merger would drive “unrivalled growth opportunities” over the next decade.

“The financial results include only three weeks of the merged company. Had the merger been in place for all of 2021, the combined asset portfolio would have generated more than US$2.3Bln in free cash flow for the year,” explained Gallagher.

“We will now seek to further optimise the portfolio, reduce gearing and conduct a review of our capital management framework including returns to shareholders,” he added.

In the 2022 outlook, Santos said production was expected to increase to a range of 100 million to 110 million barrels of oil equivalent, primarily due to higher production from Papua New Guinea assets following the Oil Search merger.

This is expected to be offset by a lower share of Bayu-Undan production in the Timor Sea, which is expected to be about 10 million barrels of oil equivalent less than 2021, due to a lower average working interest following the 25 percent sell-down of a stake to South Korea’s SK E&S in 2021.

Santos noted that there would also be lower gross production from Bayu-Undan as the field approaches end of field life and lower net entitlement under the Production Sharing Contract due to higher forecast LNG prices.

Sales volumes in 2022 are expected to be in the range of 110 million boe and 120M boe.

Santos said major growth projects capital expenditure was expected to be in the range of US$1.15Bln to US$1.3Bln.

“A contingent amount of up to approximately US$400M could be added should the Dorado (Australia) and Pikka (Alaska) projects take final investment decisions. Guidance assumes current Santos interest in all projects,” said the company.

“At an average oil price of approximately US$65 per barrel in 2022, it is expected sufficient free cash flow would be generated to fund forecast major growth projects,” it added.

Santos said its AGM would be held on Tuesday, May 3 and the closing date for receipt of nominations from persons wishing to be considered for election as directors is Thursday, February 24.

Hilcorp Energy of the US, a major operator on Alaska's North Slope after the departure of UK major BP from the state, is now set to take over operations of the largest natural gas field run by ExxonMobil Corp. and which would underpin any future Alaska LNG export project.

Australian LNG plant operator Santos and Australian-listed energy company Oil Search, which has Papua New Guinea LNG and oil stakes and Alaskan oil assets, have extended their period of mutual due diligence regarding the proposed takeover of Oil Search by Santos in a deal worth A$8.40 billion (US$6.25 billion) to create a front-rank global energy company.

The Alaska Gasline Development Corp. (AGDC), the owner of the state’s LNG export project, is still filing regular updates to the Federal Energy Regulatory Commission at the same time as the State of Alaska has just decided to sue the Biden Administration over federal land restrictions.

March 4 (LNGJ) - Oil Search, the energy company with LNG and oil assets in Papua New Guinea and oil projects in the US state of Alaska, has named Peter Fredricson as its new Chief Financial Officer to replace Stephen Gardiner, who is stepping down after eight years. Gardiner will continue to assist Oil Search as an adviser to the Managing Director Keiran Wulff. The Australian-listed and PNG-based company said that CFO Fredricson had over 30 years of experience in the infrastructure and banking sectors in Australia, New Zealand and Asia.

   “We are fortunate to welcome Peter to Oil Search,” said Wulff. “His deep experience in finance, equity and debt capital markets and the financial services sector generally will be valuable to Oil Search as the company focuses on delivering its strategic objectives,” he added.

Oil Search, the company with LNG stakes in Papua New Guinea and oil assets in the North Slope of Alaska, posted a 37 percent increase in fourth-quarter revenues over the previous three months as prices recovered.

Oil Search, Papua New Guinea’s biggest company and a shareholder in the PNG LNG plant and its expansion, has successfully obtained an interim injunction from the National Court allowing the recommencement of trading of its shares on the PNG National Stock Exchange.

Oil Search, the Australian-listed company with a stake in the Papua New LNG export plant and its expansion project, said there had been no disruption of operations during the coronavirus crisis, while it has helped in the fight against the pandemic in PNG and Alaska.

Oil Search Managing Director Peter Botten, one of the leading figures in Papua New Guinea oil and gas development over the past 26 years and who had a key role in the nation’s emergence as an LNG exporter, has decided to hand over the company helm to a successor.