LNG

Santos Ltd, the Australian operator of two liquefied natural gas export plants and a main shareholder in Papua New Guinea LNG assets, has signed a long-term supply deal with Hokkaido Gas Co., the Japanese utility.

Santos, the Asia-Pacific LNG plant operator and Western Australia’s biggest domestic natural gas supplier, has renewed a gas supply agreements with Yara Pilbara Fertilisers to supply the Yara liquid ammonia plant on the Burrup Peninsula in Western Australia.

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.

Senex Energy, the Australian coal-seam gas company in Queensland with an stake in Gladstone LNG, has entered into a binding with agreement with South Korea’s POSCO International for a cash offer price of A$4.60 per share.

Australian coal-seam gas producer Senex Energy said it had received an A$815 million (US$605M) takeover proposal from POSCO International Corp., the South Korea industrial company, seeking to secure LNG imports.

Australian LNG plant operator Santos and Australian-listed energy company Oil Search have jointly announced the completion of the takeover of Oil Search by Santos in a deal worth A$8.40 billion (US$6.25 billion) to create a key Asia-Pacific LNG and energy player.

Australian LNG project operator Santos is on its way to making Chief Executive Keven Gallagher one of the highest paid executives in the country as he develops projects in five key natural gas basins in Australia.

Australian LNG operator Santos has taken a positive final investment decision to proceed with the offshore Barossa natural gas field joint venture to provide new feed gas for the Darwin LNG plant supplying Japan.

Jan 21 (LNGJ) - Australia’s Santos, which has stakes in Darwin LNG, the Gladstone plant in Queensland and at the Papua New Guinea plant operated by ExxonMobil, said in its fourth-quarter report that revenues rose 16 percent to US$922 million, primarily due to stronger LNG sales volumes. The average realised LNG price in the three months to the end of December was US$5.34 per million British thermal units versus US$4.27 per MMBtu in the previous three-month period and US$9.07 per MMBtu in the prior-year quarter.

   Santos reported that Gladstone LNG in Queensland shipped 101 cargoes in 2020 versus 87 in the previous year, while Darwin LNG dispatched 48 cargoes last year, two more than in 2019 and PNG LNG shipped 115 cargoes in 2020 compared with 111 in the previous year. “Santos LNG projects shipped 73 cargoes in the fourth quarter, of which six were spot cargoes, three from PNG, two from Darwin and one from GLNG,” said the Adelaide-based company.

Australian LNG plant operator Santos expects to recognise a non-cash impairment charge in the range of US$700-US$800 million before tax, most of it attached to LNG, due to the revised oil price and the effects of Covid-19 and energy market demand fundamentals.