LNG

Australian liquefied natural gas operator Santos said its share of LNG output from its stakes in Australian and Papua New Guinea would be increasing in the years ahead as it also gave key dates for final investment decisions and first gas while acknowledging obstructions to its offshore activities by Australian regulatory uncertainty.

One of Australia’s leading chief executives, Kevin Gallagher of liquefied natural gas and energy company Santos, has been given permission to undertake flexible working arrangements.

Santos Chief Executive Kevin Gallagher told the Australian Petroleum Production and Exploration Association conference in Adelaide that Australia would soon be taking emissions from natural gas production and heavy industries as a world leader in carbon management services.

Two Australian exploration and production companies, Talon Energy and Strike Energy, have signed an agreement to supply LNG exporter Santos with natural gas for the domestic market from their Walyering gas field in the Perth Basin of Western Australia.

Santos, the Asia-Pacific LNG shareholder and operator and Western Australia’s biggest domestic natural gas supplier, has overhauled the company into two divisions and said in an investor day briefing that activism and increased regulation had delayed timely investment in new fuel supplies.

Santos, the operator of two Australian LNG plants and the largest stakeholder in the Papua New Guinea export facility, has signed a new memorandum of understanding  aimed at securing stable energy in various projects with the Japan Bank for International Cooperation.

Sept 5 (LNGJ) - Australian energy company Santos, a major shareholder in the Darwin and Gladstone LNG plant in Australia and Papua New Guinea LNG, has been awarded permits to undertake evaluation and appraisal work for the potential storage of carbon dioxide in the offshore Carnarvon and Bonaparte basins, off the coast of Western Australia.

   The permits will enable Santos to pursue potential carbon capture and storage (CCS) opportunities with its joint venture partners. Santos Chief Executive Kevin Gallagher, said the permits allow the potential to yield additional CCS opportunities. The first Santos CCS project at Moomba in south Australia will be one of the biggest in the world and is currently 20 percent complete with 100 million tonnes of CO2 capacity and contingent resources already booked.

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.

JERA Co. Inc., the largest Japanese LNG buyer and power asset holder, said it would invest in the Barossa natural gas field offshore northwest Australia to underpin production at the Darwin LNG export plant.

Final shareholder and court approvals have been obtained for the US$6.25 billion merger of Papua New Guinea-based energy company Oil Search and Adelaide-based Santos to create a major Asia-Pacific energy player.