Second Quarter Report
For period ending 30 June 2022
ASX: STO | PNGX: STO | ADR: SSLZY
21 July 2022
only | Record first half sales revenue and free cash flow |
• Delivered record first half sales revenue of US$3.8 billion, up 85 per cent, and record free cash flow of | |
US$1.7 billion, up 199 per cent on the corresponding period | |
• Second quarter production of 25.5 million barrels of oil equivalent (mmboe) was slightly lower than the first | |
quarter, primarily due to expected natural field decline at Bayu-Undan and major planned maintenance | |
outages at PNG LNG, Darwin LNG and the Cooper Basin | |
• Generated US$843 million in free cash flow in the second quarter, bringing first half free cash flow to | |
US$1.7 billion | |
use | Strong balance sheet supportive of disciplined growth and higher returns |
• Strong free cash flows reduced gearing to 22.5 per cent at the end of June | |
• US$174 million of the initial US$250 million on-market share buyback completed by the end of the quarter | |
• Barossa project is 40 per cent complete and progressing on schedule and budget | |
• Pikka Phase 1 project in Alaska has received all major environmental and regulatory approvals and has | |
sufficiently advanced FEED work to achieve FID-ready status, as planned | |
Decarbonisation and clean fuels |
- Moomba CCS project is 18 per cent complete and progressing on schedule and budget
- Bayu-UndanCCS project is progressing with onshore and offshore FEED packages awarded during the quarter
- Trials of direct air capture technologies in the Cooper Basin planned for the second half 2023
- US$95 million in sustaining annual synergies achieved in the first six months of integration1
- Already exceeded the lower end of the merger integration synergies target range of US$90-115 million1
personalSantos Managing Director and Chief Executive Officer Kevin Gallagher said Santos delivered record production, sales revenue and free cash flow in the first half of 2022, demonstrating the strong performance of the base business and strategic benefits of our diverse portfolio, despite a number of major planned shutdowns in the second quarter.
Strong production combined with higher commodity prices delivered record first half free cash flow of US$1.7 billion, an increase of 199 per cent from the corresponding period last year.
"Santos is positioned as a leading and reliable LNG supplier into Asia and we are well placed to take advantage of growing Asian demand for LNG, which is forecast to double by 2050," Mr Gallagher said.
"At the same time, we supported the domestic gas market during a period of extreme demand by diverting gas from GLNG and committing to a fifth drilling rig in the Cooper Basin during the quarter.
For"Despite the period of price and demand volatility, Santos domestic gas customers paid significantly less than that paid
by international customers. These domestic prices are reflective of the long-term contracts that almost all of our Australian customers are on, rather than much publicised spot domestic market prices, which make up approximately
nly 10 per cent of the east coast gas market.
"Our new capital management framework announced in April combined with strong free cash flows position us well to provide returns to shareholders at the half-year results in August."
Comparative performance
Santos share | Unit | Q2 2022 | Q1 2022 | Change | 2022 YTD | 2021 YTD | Change | |||
Production | mmboe | 25.5 | 26.0 | -2% | 51.5 | 47.3 | 9% | |||
Sales volume | mmboe | 27.6 | 28.1 | -2% | 55.7 | 53.8 | 4% | |||
Sales revenue | $million | 1,879 | 1,887 | 0% | 3,766 | 2,040 | 85% | |||
Capital expenditure2 | $million | 453 | 436 | 4% | 889 | 535 | 66% |
- Excludes integration and other one-off costs.
- Capital expenditure including restoration expenditure but excluding capitalised interest.
Media enquiries | Investor enquiries | Santos Limited ABN 80 007 550 923 |
Claire Hammond | Andrew Nairn | GPO Box 2455, Adelaide SA 5001 |
+61 (0) 401 591 488 | +61 8 8116 5314 / +61 (0) 437 166 497 | T +61 8 8116 5000 F +61 8 8116 5131 |
claire.hammond@santos.com | andrew.nairn@santos.com | www.santos.com |
Sales volumes
Product | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | ||||||
LNG | 000 t | 1,393.9 | 1,541.8 | 1,064.9 | 2,935.7 | 2,392.5 | ||||||
Domestic sales gas & ethane | PJ | 56.5 | 50.8 | 67.2 | 107.3 | 130.1 | ||||||
Crude oil | 000 bbls | 2,658.4 | 2,730.9 | 2,770.9 | 5,389.3 | 4,484.4 | ||||||
Condensate | 000 bbls | 1,636.4 | 1,625.6 | 1,413.8 | 3,262.0 | 3,195.1 | ||||||
LPG | 000 t | 42.3 | 51.1 | 67.8 | 93.4 | 132.1 | ||||||
Sales | ||||||||||||
only | Own product | mmboe | 22.8 | 23.9 | 20.5 | 46.7 | 43.3 | |||||
use | ||||||||||||
Third-party | mmboe | 4.8 | 4.2 | 5.9 | 9.0 | 10.5 | ||||||
Total sales volume | mmboe | 27.6 | 28.1 | 26.4 | 55.7 | 53.8 | ||||||
Second quarter sales volumes were slightly lower than the prior quarter primarily due to lower LNG volumes due to expected natural field decline at Bayu-Undan, which is anticipated to cease production in late 2022, and planned maintenance outages during the quarter, partially offset by higher third-party crude volumes from the Cooper Basin.
Sales revenues
personal | Product | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | |
LNG | $million | 1,073 | 1,116 | 421 | 2,189 | 848 | ||
Domestic sales gas & ethane | $million | 287 | 252 | 319 | 539 | 604 | ||
Crude oil | $million | 318 | 309 | 205 | 627 | 312 | ||
Condensate | $million | 169 | 170 | 95 | 339 | 203 | ||
LPG | $million | 32 | 40 | 36 | 72 | 73 | ||
Sales | ||||||||
Own product | $million | 1,596 | 1,632 | 832 | 3,228 | 1,611 | ||
Third-party | $million | 283 | 255 | 244 | 538 | 429 | ||
Total sales revenue | $million | 1,879 | 1,887 | 1,076 | 3,766 | 2,040 | ||
Third-party purchase costs | $million | 223 | 208 | 167 | 431 | 324 | ||
Second quarter sales revenues were in line with the first quarter, with lower overall sales volumes offset by higher gas, LNG and oil prices. 2022 first quarter sales revenues have been restated to exclude US$29 million for WA domestic gas sales which has been reclassified as other income. Total revenue/income and cash flow remains unchanged.
Average realised prices | ||||||||||
For | ||||||||||
Product | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | ||||
LNG price | US$/mmBtu | 14.66 | 13.77 | 7.52 | 14.19 | 6.74 | ||||
Domestic gas price | US$/GJ | 5.08 | 4.96 | 4.74 | 5.02 | 4.65 | ||||
East coast domestic | US$/GJ | 6.60 | 6.37 | 5.35 | 6.49 | 5.33 | ||||
West coast domestic | US$/GJ | 4.09 | 4.10 | 4.43 | 4.09 | 4.31 | ||||
Crude oil price | US$/bbl | 119.55 | 113.09 | 74.06 | 116.28 | 69.57 | ||||
Condensate price | US$/bbl | 102.95 | 104.63 | 67.65 | 103.79 | 63.61 | ||||
LPG price | US$/t | 774.78 | 776.47 | 517.02 | 775.70 | 548.28 |
The average realised LNG price was higher than the prior quarter reflecting the linkage of sales contracts to an improving lagged Japan Customs-cleared Crude (JCC) price, partially offset by lower average JKM spot prices. Three-month lagged JCC averaged US$86/bbl in the second quarter compared to US$80/bbl in the first quarter of 2022. Santos' LNG projects shipped 58 cargoes in the second quarter, of which nine were spot cargoes (Darwin LNG 5, PNG LNG 4) sold on a JKM-linked basis.
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Production by asset
only | ||||||||||
Asset | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | ||||
Western Australia | mmboe | 7.0 | 6.5 | 8.5 | 13.5 | 16.6 | ||||
Cooper Basin | mmboe | 3.5 | 3.5 | 3.9 | 7.0 | 7.9 | ||||
Queensland & NSW | mmboe | 3.5 | 3.4 | 3.4 | 6.9 | 6.7 | ||||
PNG | mmboe | 10.4 | 10.6 | 3.0 | 21.0 | 6.1 | ||||
Northern Australia & Timor-Leste | mmboe | 1.1 | 2.0 | 3.7 | 3.1 | 10.0 | ||||
Total production | mmboe | 25.5 | 26.0 | 22.5 | 51.5 | 47.3 | ||||
use | ||||||||||
Production by product | ||||||||||
Product | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | ||||
Sales gas to LNG plant | PJ | 78.6 | 81.9 | 54.7 | 160.5 | 123.5 | ||||
Domestic sales gas & ethane | PJ | 49.1 | 46.8 | 59.0 | 95.9 | 117.4 | ||||
Crude oil | 000 bbls | 1,881.6 | 2,134.3 | 1,343.4 | 4,015.9 | 2,407.2 | ||||
personal | Condensate | 000 bbls | 1,414.9 | 1,513.8 | 1,249.4 | 2,928.7 | 2,744.0 | |||
LPG | 000 t | 35.6 | 40.5 | 48.6 | 76.1 | 109.3 | ||||
Total production | mmboe | 25.5 | 26.0 | 22.5 | 51.5 | 47.3 | ||||
Second quarter production was two per cent lower than the first quarter primarily due expected natural field decline at Bayu-Undan and planned maintenance outages during the quarter at PNG LNG, Darwin LNG and the Cooper Basin, partially offset by stronger domestic gas production in Western Australia.
A data worksheet containing unaudited quarterly sales, revenue, production and capital expenditure tables in Excel f rmat is available on Santos' website.
2022 Guidance
Production and sales volume guidance are narrowed to 102-107 mmboe and 110 to 116 mmboe, respectively. Major projects capital expenditure guidance is lowered slightly, reflecting timing of expenditures which are expected to be weighted to the second half. Production cost guidance is lowered to $7.90-8.30/boe. Depreciation, depletion and amortisation is expected to be approximately US$850 million in the first half and approximately US$1.7 billion for the full-year.
2022 Guidance item | Previous guidance | Updated guidance | |
Production | 100-110 mmboe | 102-107 mmboe | |
Sales volumes | 110-120 mmboe | 110-116 mmboe | |
For | ~$1,100 million | No change | |
Capital expenditure - base including restoration | |||
Capital expenditure - major projects | ~$1,150-$1,300 million | ~$1,100-$1,200 million | |
Capital expenditure - contingent major projects, | Up to ~$400 million | Up to ~$350 million | |
subject to FID1 | |||
Upstream production costs | $8.00-8.50/boe | $7.90-$8.30/boe | |
Depreciation, depletion and amortisation | na | ~$1.7 billion |
1 Unsanctioned projects contingent amount of up to ~$350 million for Dorado phase 1 and Pikka phase 1 (subject to FID).
2022 Half-year results
Santos will release its results for the half-year ended 30 June 2022 on Wednesday 17 August 2022. The first-half report (incorporating Appendix 4D) and associated investor presentation will be available on Santos' website at www.santos.com. A webcast briefing including investor/analyst questions will also be available on Santos' website from 11:00am AEST on 17 August 2022. Financial information included in this report is unaudited and subject to finalisation of the company's accounting and audit processes, and Board review. As such, actual results for the half-year ended 30 June 2022 may differ from the information given in this report.
Santos Ltd l Second Quarter Report l 21 July 2022 | Page 3 of 13 |
Western Australia
only | Santos share | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | |||||
Sales volume | ||||||||||||
Sales gas | PJ | 34.8 | 31.4 | 43.4 | 66.2 | 85.8 | ||||||
Condensate | 000 bbls | 277.6 | 194.3 | 310.0 | 471.9 | 629.6 | ||||||
Crude oil | 000 bbls | 808.7 | 1,424.1 | 1,165.0 | 2,232.8 | 1,165.0 | ||||||
Total sales volume | mmboe | 7.1 | 7.0 | 8.9 | 14.1 | 16.5 | ||||||
Total sales revenue | $million | 277 | 320 | 304 | 597 | 500 | ||||||
Production | ||||||||||||
Sales gas | PJ | 34.7 | 30.4 | 43.4 | 65.1 | 85.7 | ||||||
use | 000 bbls | 243.6 | 259.3 | 374.6 | 502.9 | 721.3 | ||||||
Condensate | ||||||||||||
Crude oil | 000 bbls | 837.4 | 1,009.8 | 766.3 | 1,847.2 | 1,239.7 | ||||||
Total production | mmboe | 7.0 | 6.5 | 8.5 | 13.5 | 16.6 | ||||||
Capital expenditure | $million | 94 | 89 | 90 | 183 | 134 |
Domestic gas production and sales were higher than the prior quarter due to higher customer demand. Oil production was lower than the prior quarter due to natural decline of production wells. A three-week planned shutdown of the Ningaloo Vision FPSO is scheduled for the third quarter.
personal2022 first quarter sales revenues have been restated to exclude US$29 million for WA domestic gas sales which has been reclassified as other income due to the value associated with an embedded derivative in an existing contract. Total revenue/income and cash flow remains unchanged.
As previously announced (refer to Santos' ASX release of 1 June 2022) a new contract was executed with Yara to supply over 120 petajoules of natural gas over five years, starting at the completion of Santos' current agreement with Yara in 2023.
The Spartan project continued to make good progress in support of developing additional reserves to be processed through Varanus Island. The project is on track to start-up in early 2023, with regulatory approvals and key equipment delivery progressing to plan.
The Dorado development FEED is nearing completion and working towards being FID-ready in the second half of the year. The initial phase of development will involve gas reinjection to maximise liquids recovery ahead of a second phase of gas export from the field, which offers backfill supply to Santos' existing domestic gas infrastructure in Western Australia.
For
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Cooper Basin
only | Santos share | Unit | Q2 2022 | Q1 2022 | Q2 2021 | 2022 YTD | 2021 YTD | |
Sales volume | ||||||||
Sales gas and ethane1 | PJ | 14.1 | 15.0 | 16.4 | 29.1 | 35.0 | ||
Condensate1 | 000 bbls | 207.0 | 397.6 | 603.1 | 604.6 | 991.6 | ||
LPG1 | 000 t | 42.3 | 38.6 | 44.2 | 80.9 | 82.2 | ||
Crude oil | ||||||||
Own product | 000 bbls | 591.0 | 471.0 | 488.5 | 1,062.0 | 1,121.2 | ||
Third-party | 000 bbls | 778.8 | 346.8 | 1,116.4 | 1,125.6 | 2,196.1 | ||
Total | 000 bbls | 1,369.8 | 817.8 | 1,604.9 | 2,187.6 | 3,317.3 | ||
Total sales volume | mmboe | 4.3 | 4.1 | 5.4 | 8.4 | 11.0 | ||
Total sales revenue | $million | 282 | 237 | 244 | 519 | 466 | ||
Production | ||||||||
Sales gas and ethane | PJ | 14.3 | 14.5 | 16.0 | 28.8 | 32.6 | ||
Condensate | 000 bbls | 226.4 | 215.0 | 270.2 | 441.4 | 540.3 | ||
useLPG | 000 t | 29.2 | 31.4 | 35.1 | 60.6 | 70.7 | ||
Crude oil | 000 bbls | 543.8 | 578.1 | 576.1 | 1,121.9 | 1,165.4 | ||
personal | Total production | mmboe | 3.5 | 3.5 | 3.9 | 7.0 | 7.9 | |
Capital expenditure | $million | 88 | 73 | 71 | 161 | 141 |
1 Sales volumes include own product and third-party volumes.
Cooper Basin production was slightly lower than the previous quarter due to a higher volume of planned maintenance work and impacts of wet weather events leading to flooding which caused delays to the development program. Oil production was lower due to maintenance at the Limestone Creek facility. A one-month planned maintenance outage was completed at the Port Bonython terminal during the quarter.
Twenty-one wells were drilled and fourteen gas wells were connected across the Cooper Basin in the second quarter. Drilling activities continued to be impacted during the second quarter by significant rainfall and subsequent flooding.
Santos and its joint venture partner committed to a fifth drilling rig in the Cooper Basin during the quarter, which is expected to deliver additional gas for the domestic market in the second half of the year.
The Moomba South Granite Wash horizontal well was successfully placed on long term test during the quarter.
The Moomba CCS project is progressing on budget and schedule. Forecast first CO2 injection remains on track for 2024 with 18 per cent of works complete at the end of the quarter. Pre-shutdown scopes have been completed for the CO2 train tie-in at Moomba along with testing of new gas turbines.
Santos is partnering with Australia's national science agency, CSIRO, to develop what is hoped could become the lowest cost direct air capture technology in the world. The collaboration will continue to develop CSIRO Carbon AssistTM technology which removes CO2 directly from the atmosphere and higher-concentrationpost-combustion scenarios. The ForCO2 can then be safely and permanently stored as part of a CCS project or utilised for beneficial uses. Trials of the
technology in the Cooper Basin are planned for the second half of 2023.
Santos Ltd l Second Quarter Report l 21 July 2022 | Page 5 of 13 |
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Santos Ltd. published this content on 20 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 July 2022 23:03:04 UTC.