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SANTOS LIMITED Interim / Quarterly Report 2021
65872_rns_2021-04-21_6588970b-20b9-49eb-bc19-4f7f09d86655.pdf
Interim / Quarterly Report
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ASX: STO | ADR: SSLZY
22 April 2021
Strong base business generated US$302 million free cash flow in first quarter
- First quarter production of 24.8 mmboe was 39 per cent above the corresponding quarter in 2020 primarily due to the ConocoPhillips acquisition which completed in May 2020
- Production was 2 per cent lower than the December quarter primarily due to lower domestic gas demand in Western Australia and unplanned maintenance in PNG, offset by strong production from Bayu-Undan
- Higher GLNG equity gas production from the Roma and Arcadia fields supported annualised LNG production of 6.4 mtpa in the quarter
- First quarter revenue of US$964 million was stronger despite the contractual 3-month lag in oil-linked LNG prices and lower overall sales volumes
- Santos generated US$302 million in free cash flow in the first quarter
Balance sheet supportive of disciplined and phased growth
- Net debt at the end of the first quarter (including leases) was US$3.6 billion after payment of the US$104 million 2020 final dividend and gearing was 33.6 per cent
- S&P Global Ratings reaffirmed Santos' investment grade credit rating with stable outlook and Fitch Ratings assigned Santos an inaugural BBB rating with stable outlook
- Final investment decision to proceed with the US$3.6 billion gross Barossa gas and condensate project to backfill Darwin LNG and the US$600 million gross Darwin LNG life extension and pipeline tie-in projects
- FEED entry planned in the coming months for the Dorado phase 1 oil project
Energy transition to clean fuels
- Moomba CCS project is FID-ready, subject to eligibility for Australian Carbon Credit Units, with the project having an estimated lifecycle breakeven cost of <US$24 per tonne of CO2
- Concept studies indicate that the production cost of zero-emissions hydrogen produced at Moomba utilising CCS would be below the Australian Government's target of A$2/kg
Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos had delivered another strong quarter of production and sales volumes, and strong free cash flow, as the business benefited from higher commodity prices and a low free cash flow breakeven oil price. This was despite the 3-month lag in oil-linked LNG prices, which should see stronger prices in the second quarter.
"Our consistent and successful strategy combined with the disciplined, low-cost operating model continue to drive strong performance across our diversified portfolio. Free cash flow generation of US$302 million in the first quarter demonstrates our diversification and leverage to oil price. We are currently forecasting more than US$1 billion in free cash flow for the year at current oil prices.
"The strategy to grow around our five core asset hubs has not changed since 2016. As we now enter a growth phase with FID on Barossa, we will remain disciplined in managing our major project costs, consistent with our operating model.
"It is a great achievement to have extended the life of Bayu-Undan following the approval of the infill drilling program and taken FID on the Barossa project less than a year after we completed the ConocoPhillips acquisition.
"Last December we announced an ambitious roadmap to net-zero emissions by 2040. Our Moomba carbon capture and storage project is FID-ready, subject to eligibility for Australian Carbon Credit Units. First injection is expected to commence in 2024 and importantly this project represents a step-change in emission reduction," Mr Gallagher said.
Comparative performance
| Santos share | Unit | Q1 2021 | Q4 2020 | Change | 2021 YTD | 2020 YTD | Change |
|---|---|---|---|---|---|---|---|
| Production | mmboe | 24.8 | 25.4 | -2% | 24.8 | 17.9 | 39% |
| Sales volume | mmboe | 27.4 | 31.1 | -12% | 27.4 | 22.3 | 23% |
| Sales revenue | $million | 964 | 922 | 5% | 964 | 883 | 9% |
| Capital expenditure1 | $million | 201 | 267 | -25% | 201 | 186 | 8% |
| 1 Capital expenditure including restoration expenditure but excluding capitalised interest. |
Media enquiries
James Murphy +61 (0) 478 333 974 [email protected]
Investor enquiries
Andrew Nairn +61 8 8116 5314 / +61 (0) 437 166 497 [email protected]
Santos Limited ABN 80 007 550 923 GPO Box 2455, Adelaide SA 5001 T +61 8 8116 5000 F +61 8 8116 5131 www.santos.com
| Product | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| LNG | 000 t | 1,327.6 | 1,382.2 | 851.6 | 1,327.6 | 851.6 |
| Domestic sales gas & ethane | PJ | 62.9 | 76.5 | 55.5 | 62.9 | 55.5 |
| Crude oil | 000 bbls | 1,713.5 | 2,818.2 | 2,958.5 | 1,713.5 | 2,958.5 |
| Condensate | 000 bbls | 1,781.3 | 1,451.3 | 1,414.1 | 1,781.3 | 1,414.1 |
| LPG | 000 t | 64.3 | 73.9 | 44.5 | 64.3 | 44.5 |
| Sales | ||||||
| Own product | mmboe | 22.8 | 25.6 | 17.2 | 22.8 | 17.2 |
| Third-party | mmboe | 4.6 | 5.5 | 5.1 | 4.6 | 5.1 |
| Total sales volume | mmboe | 27.4 | 31.1 | 22.3 | 27.4 | 22.3 |
Sales volumes (Santos share)
First quarter sales volumes were lower than the prior quarter primarily due to lower domestic gas sales in Western Australia, lower third-party crude volumes and the timing of crude liftings, partially offset by the timing of condensate liftings.
Sales revenues (Santos share)
| Product | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| LNG | $million | 427 | 388 | 397 | 427 | 397 |
| Domestic sales gas & ethane | $million | 285 | 303 | 209 | 285 | 209 |
| Crude oil | $million | 107 | 132 | 189 | 107 | 189 |
| Condensate | $million | 108 | 66 | 67 | 108 | 67 |
| LPG | $million | 37 | 33 | 21 | 37 | 21 |
| Sales | ||||||
| Own product | $million | 779 | 721 | 632 | 779 | 632 |
| Third-party | $million | 185 | 201 | 251 | 185 | 251 |
| Total sales revenue | $million | 964 | 922 | 883 | 964 | 883 |
| Third-party purchase costs | $million | 157 | 151 | 190 | 157 | 190 |
First quarter sales revenues were higher than the prior quarter reflecting significantly improved commodity prices partially offset by lower sales volumes.
Average realised prices
| Product | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| LNG price | US$/mmBtu | 6.12 | 5.34 | 8.88 | 6.12 | 8.88 |
| Domestic gas price | US$/GJ | 4.54 | 3.97 | 3.77 | 4.54 | 3.77 |
| East coast domestic | US$/GJ | 5.32 | 4.15 | 4.63 | 5.32 | 4.63 |
| West coast domestic | US$/GJ | 4.18 | 3.67 | 2.91 | 4.18 | 2.91 |
| Crude oil price | US$/bbl | 62.29 | 46.76 | 63.80 | 62.29 | 63.80 |
| Condensate price | US$/bbl | 60.41 | 45.82 | 47.05 | 60.41 | 47.05 |
| LPG price | US$/t | 581.26 | 443.37 | 465.79 | 581.26 | 465.79 |
The average realised LNG price was higher than the prior quarter reflecting the linkage of sales contracts to a lagged Japan Customs-cleared Crude (JCC) price. Three-month lagged JCC averaged US$44/bbl in the first quarter compared to US$41/bbl in the fourth quarter. Santos' LNG projects shipped 64 cargoes in the first quarter, of which eight were spot cargoes from Darwin LNG (6) and PNG LNG (2).
Production by asset (Santos share)
| Product | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Western Australia | mmboe | 8.1 | 8.9 | 6.2 | 8.1 | 6.2 |
| Cooper Basin | mmboe | 4.0 | 4.0 | 4.4 | 4.0 | 4.4 |
| Queensland & NSW | mmboe | 3.3 | 3.4 | 3.3 | 3.3 | 3.3 |
| PNG | mmboe | 3.1 | 3.3 | 3.3 | 3.1 | 3.3 |
| Northern Australia & Timor-Leste | mmboe | 6.3 | 5.8 | 0.9 | 6.3 | 0.9 |
| Total production | mmboe | 24.8 | 25.4 | 17.9 | 24.8 | 17.9 |
Production by product (Santos share)
| Product | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales gas to LNG plant | PJ | 68.8 | 62.1 | 34.8 | 68.8 | 34.8 |
| Domestic sales gas & ethane | PJ | 58.4 | 68.2 | 52.5 | 58.4 | 52.5 |
| Crude oil | 000 bbls | 1,063.8 | 1,136.2 | 1,561.1 | 1,063.8 | 1,561.1 |
| Condensate | 000 bbls | 1,494.6 | 1,505.6 | 1,073.7 | 1,494.6 | 1,073.7 |
| LPG | 000 t | 60.7 | 61.3 | 41.4 | 60.7 | 41.4 |
| Total production | mmboe | 24.8 | 25.4 | 17.9 | 24.8 | 17.9 |
First quarter production was lower than the prior quarter predominantly due to lower domestic gas production in Western Australia and unplanned maintenance at PNG LNG. This was partially offset by stronger gas production at Bayu-Undan to Darwin LNG, which was 9 per cent up on the fourth quarter of 2020.
A data worksheet containing unaudited quarterly sales, revenue, production and capital expenditure tables in Excel format is available on Santos' website.
2021 Guidance
All guidance for 2021 is maintained, as shown in the table below.
| 2021 guidance item | Guidance1 |
|---|---|
| Production | 84-91 mmboe |
| Sales volumes | 98-105 mmboe |
| Capital expenditure – base | ~$900 million |
| Capital expenditure – major growth | ~$700 million |
| Upstream production costs | $8.00-8.50/boe |
1 All guidance reflects the full-year and assume sell-down of 25% interest in Bayu-Undan to SK E&S in the first half of 2021, so first half volumes and costs are expected to be higher than second half.
Western Australia
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales volume | ||||||
| Sales gas | PJ | 42.4 | 48.3 | 27.7 | 42.4 | 27.7 |
| Condensate | 000 bbls | 319.6 | 368.0 | 324.3 | 319.6 | 324.3 |
| Crude oil | 000 bbls | - | 807.0 | 830.8 | - | 830.8 |
| Total sales volume | mmboe | 7.6 | 9.4 | 5.9 | 7.6 | 5.9 |
| Total sales revenue | $million | 196 | 233 | 149 | 196 | 149 |
| Production | ||||||
| Sales gas | PJ | 42.3 | 46.7 | 28.7 | 42.3 | 28.7 |
| Condensate | 000 bbls | 346.7 | 381.5 | 321.0 | 346.7 | 321.0 |
| Crude oil | 000 bbls | 473.4 | 497.5 | 913.6 | 473.4 | 913.6 |
| Total production | mmboe | 8.1 | 8.9 | 6.2 | 8.1 | 6.2 |
| Capital expenditure | $million | 44 | 82 | 29 | 44 | 29 |
Domestic gas production and sales decreased in the first quarter reflecting lower overall contract and spot market demand.
Oil production was lower due to a shutdown at the Pyrenees field in preparation for cyclone activity at the end of January. There were no crude liftings during the quarter. As previously announced, the Ningaloo Vision FPSO (Van Gogh and associated oil fields) returned from scheduled maintenance in Singapore at the end of the first quarter and is back on station producing around 11,000 barrels per day gross.
Preparations for the three-well infill drilling campaign on the Van Gogh field are progressing well with drilling expected to start in the coming weeks. First oil production from the infill wells is still expected in late 2021.
Work continues on the pre-FEED phase for the Dorado project, with FEED entry planned in the coming months and FID in the first half of 2022 for the Phase 1 oil project. A geophysical and geotechnical survey was completed in the field to support FPSO mooring design and wellhead platform design. The results of the survey are being integrated into the design by EPC contractors working across both the wellhead platform and FPSO. A detailed evaluation of a future phase of gas export to follow the initial phase of liquids development was also completed to utilise Santos' domestic gas infrastructure in Western Australia.
The Noble Tom Prosser rig was contracted to drill a number of near field exploration opportunities in the Carnarvon and Bedout basins commencing in late 2021 and extending into 2022. The Dancer prospect is located seven kilometres from the Reindeer field and would be developed via the Devil Creek facility in a success case. The Pavo and Apus opportunities in the Bedout Basin are located 35 to 40 kilometres from the Dorado field and would be developed as subsea tiebacks to the Dorado development in a success case.
Consistent with Santos' strategy to phase growth projects and review equity levels in-line with disciplined capital management, Santos has commenced a process to explore interest from the market in non-operated equity in Dorado and potentially other WA oil assets.
Cooper Basin
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales volume | ||||||
| Sales gas and ethane1 | PJ | 18.6 | 17.1 | 18.5 | 18.6 | 18.5 |
| Condensate1 | 000 bbls | 388.5 | 397.8 | 607.7 | 388.5 | 607.7 |
| LPG1 | 000 t | 38.0 | 45.8 | 39.9 | 38.0 | 39.9 |
| Crude oil | ||||||
| Own product | 000 bbls | 632.7 | 529.5 | 714.4 | 632.7 | 714.4 |
| Third-party | 000 bbls | 1,079.7 | 1,479.7 | 1,410.5 | 1,079.7 | 1,410.5 |
| Total | 000 bbls | 1,712.4 | 2,009.2 | 2,124.9 | 1,712.4 | 2,124.9 |
| Total sales volume | mmboe | 5.6 | 5.7 | 6.2 | 5.6 | 6.2 |
| Total sales revenue | $million | 222 | 199 | 255 | 222 | 255 |
| Production | ||||||
| Sales gas and ethane | PJ | 16.6 | 16.2 | 17.9 | 16.6 | 17.9 |
| Condensate | 000 bbls | 270.1 | 268.6 | 347.2 | 270.1 | 347.2 |
| LPG | 000 t | 35.6 | 36.7 | 37.2 | 35.6 | 37.2 |
| Crude oil | 000 bbls | 589.3 | 637.5 | 644.7 | 589.3 | 644.7 |
| Total production | mmboe | 4.0 | 4.0 | 4.4 | 4.0 | 4.4 |
1 Sales volumes include own product and third-party volumes.
Cooper Basin total production in the first quarter was 4 mmboe, consistent with the prior quarter. Higher gas production offset natural oil field decline.
Fifteen wells were drilled in the first quarter of 2021, including 5 development wells, 8 appraisal wells and 2 exploration wells. The horizontal well programme continues in the Cooper Basin with the last well drilled in 2020, Moomba-257, placed on production in the first quarter. The well is online and gas production is expected build over time in line with the lateral length. Five gas and seven horizontal oil wells are planned for the 2021 drilling program.
FEED and project assurance are complete for the 1.7 mtpa Moomba carbon capture and storage (CCS) project. Eligibility for Australia Carbon Credit Unit (ACCU) methodology for CCS is the key remaining milestone that would enable an FID decision on the project.
Concept studies have been completed on options to produce and distribute emissions-free hydrogen from Moomba utilising CCS. The studies indicate that the production cost of hydrogen produced at Moomba is lower than the Australian Government's target of A$2/kg.
Queensland & NSW
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales volume | ||||||
| GLNG Joint Venture | ||||||
| LNG | 000 t | 471.2 | 536.8 | 481.0 | 471.2 | 481.0 |
| Domestic contracts | PJ | 0.2 | 1.5 | 2.4 | 0.2 | 2.4 |
| Eastern Qld (non-GLNG)1 | PJ | 6.1 | 6.9 | 5.4 | 6.1 | 5.4 |
| Total sales volume2 | mmboe | 5.2 | 6.1 | 5.9 | 5.2 | 5.9 |
| Total sales revenue2 | $million | 167 | 181 | 266 | 167 | 266 |
| Production | ||||||
| GLNG Joint Venture | PJ | 15.1 | 14.9 | 13.8 | 15.1 | 13.8 |
| Eastern Qld (non-GLNG)1 | PJ | 4.0 | 5.1 | 5.0 | 4.0 | 5.0 |
| NSW | PJ | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| Total production2 | mmboe | 3.3 | 3.4 | 3.3 | 3.3 | 3.3 |
| Capital expenditure | $million | 38 | 39 | 42 | 38 | 42 |
1 Combabula, Scotia (Santos legacy domestic volumes), Spring Gully and Denison.
2 Total sales volume, sales revenue and production include sales gas from NSW assets.
| GLNG operational data (gross) | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales gas to domestic market1 | PJ | 11 | 8 | 14 | 11 | 14 |
| LNG produced2 | 000 t | 1,569 | 1,752 | 1,576 | 1,569 | 1,576 |
| Sales gas to LNG plant | ||||||
| GLNG equity gas | PJ | 51 | 50 | 44 | 51 | 44 |
| Santos portfolio gas | PJ | 13 | 15 | 15 | 13 | 15 |
| Third-party | PJ | 31 | 41 | 36 | 31 | 36 |
| Total sales gas to LNG plant | PJ | 95 | 106 | 95 | 95 | 95 |
| LNG cargoes shipped | 26 | 30 | 27 | 26 | 27 |
1Includes APLNG equity share of Fairview, Arcadia and Roma East.
2Includes LNG produced from GLNG equity gas, Santos portfolio gas and third-party quantities.
Gross GLNG-operated upstream sales gas production increased to a record 690 TJ/day at the end of the first quarter. This is a 5 per cent increase on the prior quarter, driven by better than expected production growth in the Arcadia field and reliable production from the Scotia, Roma and Fairview fields.
The Roma field reached production of over 190 TJ/day driven by growth in Roma East and strong legacy field performance. Arcadia also continues to perform well, exceeding 70 TJ/day and dewatering ahead of expectation. Scotia produced a steady 70 TJ/day and Fairview was delivering 358 TJ/day in line with expected reservoir decline.
The strong upstream gas production supported annualised LNG production of 6.4 mtpa in the quarter.
Fifty-eight wells were drilled and 40 connected across the GLNG acreage in the first quarter.
Santos' share of non-operated Eastern Queensland production was lower than the prior quarter due to planned maintenance during the quarter.
In late 2020, the Narrabri Gas Project received EIS approval by the NSW Independent Planning Commission (IPC) and Federal approval under the EPBC Act. Since that time, Santos has been progressing activities to address EIS and EPBC consent conditions to allow the commencement of the appraisal drilling program, which is required to inform the phased development at Narrabri. An appeal against the NSW IPC approval has been lodged with a hearing scheduled in August.
PNG
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales volume | ||||||
| PNG LNG | ||||||
| LNG1 | 000 t | 270.8 | 296.6 | 287.8 | 270.8 | 287.8 |
| Condensate | 000 bbls | 341.3 | 372.0 | 360.9 | 341.3 | 360.9 |
| Crude oil | 000 bbls | 1.2 | 1.9 | 2.8 | 1.2 | 2.8 |
| Total sales volume | mmboe | 2.9 | 3.2 | 3.1 | 2.9 | 3.1 |
| Total sales revenue | $million | 119 | 97 | 149 | 119 | 149 |
| Production | ||||||
| PNG LNG | ||||||
| Sales gas to LNG1 | PJ | 16.6 | 17.6 | 17.1 | 16.6 | 17.1 |
| Condensate | 000 bbls | 290.8 | 306.9 | 323.8 | 290.8 | 323.8 |
| Crude oil | 000 bbls | 1.1 | 1.2 | 2.7 | 1.1 | 2.7 |
| Total production | mmboe | 3.1 | 3.3 | 3.3 | 3.1 | 3.3 |
| Capital expenditure | $million | 3 | 5 | 14 | 3 | 14 |
1Includes SE Gobe
| PNG LNG operational data (gross) | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Production | ||||||
| LNG | 000 t | 2,090 | 2,194 | 2,163 | 2,090 | 2,163 |
| Sales gas to LNG plant | PJ | 124 | 130 | 128 | 124 | 128 |
| Condensate1 | 000 bbls | 2,149 | 2,275 | 2,394 | 2,149 | 2,394 |
| Sales gas (SE Gobe)2 | PJ | 2 | 2 | 2 | 2 | 2 |
| LNG cargoes shipped | 26 | 29 | 28 | 26 | 28 |
1Measured at the Kutubu entry point.
2 Purchased by PNG LNG.
During the quarter, PNG LNG operated at an annualised rate of approximately 8.5 mtpa. Sales gas, condensate and LNG production were lower than the prior quarter due to unplanned maintenance at the Hides Gas Conditioning Plant. LNG plant scheduled compressor maintenance is planned to commence in mid-April, which is expected to result in reduced LNG production rates for approximately six weeks. The operator continues to implement COVID-19 management plans to support stable production and shipping.
Northern Australia & Timor-Leste
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Sales volume | ||||||
| Darwin LNG | ||||||
| LNG | 000 t | 585.6 | 548.7 | 82.9 | 585.6 | 82.9 |
| Bayu-Undan | ||||||
| Condensate | 000 bbls | 732.2 | 311.2 | 121.8 | 732.2 | 121.8 |
| LPG | 000 t | 26.4 | 26.9 | 4.7 | 26.4 | 4.7 |
| Total sales volume | mmboe | 6.5 | 5.8 | 0.9 | 6.5 | 0.9 |
| Total sales revenue | $million | 237 | 173 | 43 | 237 | 43 |
| Production | ||||||
| Darwin LNG | ||||||
| Sales gas to LNG | PJ | 32.5 | 29.9 | 4.6 | 32.5 | 4.6 |
| Bayu-Undan | ||||||
| Condensate | 000 bbls | 587.0 | 548.7 | 81.7 | 587.0 | 81.7 |
| LPG | 000 t | 25.0 | 24.6 | 4.2 | 25.0 | 4.2 |
| Total production | mmboe | 6.3 | 5.8 | 0.9 | 6.3 | 0.9 |
| Capital expenditure | $million | 39 | 36 | 22 | 39 | 22 |
| DLNG operational data (gross) | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Production | ||||||
| LNG | 000 t | 902 | 875 | 856 | 902 | 856 |
| Sales gas to LNG plant | PJ | 52 | 53 | 52 | 52 | 52 |
| Condensate | 000 bbls | 1,019 | 1,079 | 980 | 1,019 | 980 |
| LPG | 000 t | 42 | 44 | 47 | 42 | 47 |
| LNG cargoes shipped | 12 | 14 | 14 | 12 | 14 |
First quarter LNG production at Darwin LNG was higher than the prior quarter due to continued strong supply from Bayu-Undan and high uptime at the LNG plant. Reflecting the transition away from the foundation LNG contracts as Bayu-Undan approaches end of field life, the March quarter saw a combination of spot sales (6), the last SPA cargoes based on oil-linked pricing (5) and the first SPA cargo based on JKM pricing (1). First quarter sales volume was 12 per cent higher than the previous quarter reflecting increased cargo size despite the lower number of cargoes shipped.
The US$235 million Phase 3C infill drilling program at the Bayu-Undan field will commence in the second quarter. The program comprises three production wells (two platform and one subsea) and will develop additional natural gas and liquids reserves, extending field life as well as production from the offshore facilities and the Darwin LNG plant.
On 30 March 2021, Santos announced a final investment decision to proceed with the US$3.6 billion Barossa gas and condensate project to backfill Darwin LNG. Barossa is one of the lowest cost, new LNG supply projects in the world and will give Santos and Darwin LNG a competitive advantage in a tightening global LNG market. First gas production is expected in 2025. Barossa FID also starts the US$600 million investment in the Darwin LNG life extension and pipeline tie-in projects, which will extend the facility life for around 20 years.
Barossa FID was the final condition required for completion of the 25 per cent equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S. Completion is expected at the end of April and result in net funds to Santos of approximately US$190 million. Santos and JERA continue to progress the sale and purchase agreement for JERA to acquire a 12.5 per cent interest in Barossa.
Well pad preparation is underway to support the drilling, fracture stimulation and flow testing of two horizontal wells later this year in the McArthur/Beetaloo. The wells will target the Velkerri shale gas play and follow on from the successful flow test acquired in the vertical Tanumbirni 1 well last year.
Santos completed a sale and purchase agreement with Armour Energy to acquire its remaining rights in five highly prospective exploration permits in the South Nicholson Basin (SNB), which will take Santos' interest in these blocks to 100 per cent. Santos farmed-in to these blocks in 2019 for a 70 per cent interest, with Armour retaining a 30 per cent interest. Santos now holds a 100 per cent interest in ATP 1087 and, upon formal award, the right to 100 per cent interest in five exploration application blocks (EP(A) 172, EP(A) 177, ATP 1107, ATP 1192 and ATP 1193) covering the most prospective parts of the SNB. ATP 1107, which was part of the original farm-in deal, will revert to Armour 100 per cent.
Corporate, exploration and eliminations
| Santos share | Unit | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|---|
| Total sales volume | mmboe | (0.4) | 0.9 | 0.3 | (0.4) | 0.3 |
| Total sales revenue | $million | 23 | 40 | 22 | 23 | 22 |
| Capital expenditure | $million | 7 | 18 | 8 | 7 | 8 |
Sales volumes and revenues in the corporate segment primarily represent gas trading activities. First quarter reported sales volumes include a prior period adjustment.
Capital expenditure
Total exploration, evaluation and development expenditure is summarised in the table below.
| $million | Q1 2021 | Q4 2020 | Q1 2020 | 2021 YTD | 2020 YTD |
|---|---|---|---|---|---|
| Capital expenditure | |||||
| Exploration | 13 | 26 | 10 | 13 | 10 |
| Evaluation | 57 | 41 | 25 | 57 | 25 |
| Development and other capex (inc restoration) | 131 | 200 | 151 | 131 | 151 |
| Capital expenditure excl capitalised interest | 201 | 267 | 186 | 201 | 186 |
| Capitalised interest | 9 | 10 | 3 | 9 | 3 |
| Total capital expenditure | 210 | 277 | 189 | 210 | 189 |
| Exploration and evaluation expensed | |||||
| Exploration | 8 | 19 | 7 | 8 | 7 |
| Evaluation | 1 | 4 | 3 | 1 | 3 |
| Total current year expenditure | 9 | 23 | 10 | 9 | 10 |
| Write-off of amounts capitalised in prior years | - | - | - | - | - |
| Total expensed | 9 | 23 | 10 | 9 | 10 |
Capital expenditure in the first quarter comprised US$150 million in the base business (including $7 million for restoration costs) and US$51 million for major growth projects.
Oil price hedging
3.4 million barrels of hedging matured during the first quarter resulting in a net outflow before tax of US$21 million.
11.6 million barrels of oil are currently hedged for the remainder of 2021 using zero cost collars, with an average floor price of US$42 per barrel and an average ceiling price of US$55 per barrel.
For 2022, 4 million barrels of oil are currently hedged using zero cost collars, with an average floor price of US$50 per barrel and an average ceiling price of US$66 per barrel.
Seismic activity
Acquisition of the Kanook East 3D seismic survey covering ~135 square kilometres across the southwestern Queensland section of the Cooper Basin commenced in the fourth quarter of 2020 and completed in the first quarter of 2021.
Drilling summary
Near-field exploration (NFE) / Appraisal wells
| Cooper Basin gas | |||||
|---|---|---|---|---|---|
| Well name | Area | Santos | Well status | ||
| Annabella 1 | QLD | 60.60% | P&A | ||
| Bolah 7 | QLD | 66.06% | C&S, successful | ||
| Ruby 3 | QLD | 60.60% | C&S, successful | ||
| Moomba 260 | SA | 100.00% | C&S, successful | ||
| Moomba 259 | SA | 100.00% | C&S, successful | ||
| Moomba 261 | SA | 100.00% | C&S, successful | ||
| Moomba 262 | SA | 100.00% | C&S, successful | ||
| Moomba 264 | SA | 100.00% | C&S, successful |
*Spud in Q4, completed in Q1
| Cooper Basin oil | |||||
|---|---|---|---|---|---|
| Well name | Area | Santos | Well status | ||
| N/A |
Development wells
| Cooper Basin gas | |||||
|---|---|---|---|---|---|
| Well name | Area | Santos | Well status | ||
| Anna North 2 | QLD | 60.06% | C&S, successful | ||
| Bolah 5 | QLD | 66.06% | C&S, successful | ||
| Dullingari 56 | SA | 66.60% | C&S, successful | ||
| Dullingari 62 | SA | 66.60% | C&S, successful | ||
| Dullingari 63 | SA | 66.60% | C&S, successful | ||
| Dullingari North 23* | SA | 66.60% | C&C, successful | ||
| Dullingari North 25 | SA | 66.60% | C&C, successful | ||
| Tarwonga 6 | SA | 66.60% | C&S, successful |
*Spud in Q4, completed in Q1
| Queensland - GLNG gas | |||||
|---|---|---|---|---|---|
| Well name | Area | Santos | Well status | ||
| Mount Kingsley 37 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 38 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 40 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 41 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 42 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 43 | Arcadia | 22.85% | C&S, successful | ||
| Mount Kingsley 44 | Arcadia | 22.85% | C&S, successful | ||
| FV11-108-1 | Fairview | 22.82% | C&S, successful | ||
| FV12-104-1 | Fairview | 22.82% | C&S, successful | ||
| FV12-22-5 | Fairview | 22.82% | C&S, successful | ||
| FV16-06-2 | Fairview | 22.82% | C&C, successful | ||
| FV17-54-1 | Fairview | 22.82% | C&S, successful | ||
| FV17-59-1 | Fairview | 22.82% | C&C, successful | ||
| FV17-61-1 | Fairview | 22.82% | C&C, successful | ||
| FV18-40-1 | Fairview | 22.82% | C&S, successful | ||
| FV18-69-1 | Fairview | 22.82% | C&S, successful | ||
| FV18-70-1 | Fairview | 22.82% | C&S, successful | ||
| FV18-71-1 | Fairview | 22.82% | C&S, successful | ||
| FV18-72-1 | Fairview | 22.82% | C&S, successful | ||
| RM09-70-2 | Roma | 30.00% | C&C, successful | ||
| RM09-72-2 | Roma | 30.00% | C&C, successful | ||
| RM13-53-1A | Roma | 30.00% | C&S, successful | ||
| RM14-27-1 | Roma | 30.00% | C&S, successful | ||
| RM15-16-2 | Roma | 30.00% | C&S, successful | ||
| RM15-18-1 | Roma | 30.00% | C&S, successful | ||
| RM15-18-2 | Roma | 30.00% | C&S, successful | ||
| RM15-19-1 | Roma | 30.00% | C&S, successful | ||
| RM15-20-1 | Roma | 30.00% | C&S, successful | ||
| RM15-22-1 | Roma | 30.00% | C&S, successful | ||
| RM15-25-2 | Roma | 30.00% | C&C, successful | ||
| RM15-30-1 | Roma | 30.00% | C&S, successful | ||
| RM15-31-1 | Roma | 30.00% | C&S, successful | ||
| RM15-32-1 | Roma | 30.00% | C&S, successful | ||
| RM15-33-1 | Roma | 30.00% | C&S, successful | ||
| RM15-38-1 | Roma | 30.00% | C&S, successful | ||
| RM15-39-1 | Roma | 30.00% | C&S, successful | ||
| RM15-40-1 | Roma | 30.00% | C&S, successful | ||
| RM15-41-1 | Roma | 30.00% | C&S, successful |
| Queensland - GLNG gas | ||||
|---|---|---|---|---|
| Well name | Area | Santos | Well status | |
| RM15-42-1 | Roma | 30.00% | C&S, successful | |
| RM15-46-1 | Roma | 30.00% | C&C, successful | |
| RM15-47-1 | Roma | 30.00% | C&C, successful | |
| RM15-48-1 | Roma | 30.00% | C&S, successful | |
| RM15-49-1 | Roma | 30.00% | C&S, successful | |
| RM15-55-1 | Roma | 30.00% | C&C, successful | |
| RM15-64-1 | Roma | 30.00% | C&C, successful | |
| RM15-74-1 | Roma | 30.00% | C&C, successful | |
| RM15-74-2 | Roma | 30.00% | C&C, successful | |
| RM15-81-1 | Roma | 30.00% | C&S, successful | |
| RM15-97-1 | Roma | 30.00% | C&S, successful | |
| RM15-99-1 | Roma | 30.00% | C&S, successful | |
| RM68-137-1 | Roma | 30.00% | C&C, successful | |
| RM68-144-1 | Roma | 30.00% | C&C, successful | |
| RM68-147-1 | Roma | 30.00% | C&S, successful | |
| RM68-148-1 | Roma | 30.00% | C&S, successful | |
| RM68-149-1 | Roma | 30.00% | C&S, successful | |
| Avalon 20 | Scotia | 30.00% | C&C, successful | |
| Avalon 21 | Scotia | 30.00% | C&C, successful | |
| Avalon 27 | Scotia | 30.00% | C&C, successful |
*Spud in Q3, completed in Q4
Abbreviations and conversion factors
| Abbreviations | Conversion factors | ||
|---|---|---|---|
| C&C | cased and completed | Sales gas and ethane, 1 PJ | 171.937 boe x 10³ |
| C&S | cased and suspended | Crude oil, 1 barrel | 1 boe |
| gas | natural gas | Condensate, 1 barrel | 0.935 boe |
| DES | delivered ex-ship | LPG, 1 tonne | 8.458 boe |
| FEED | front-end engineering and design | LNG, 1 PJ | 18,040 tonnes |
| FID | final investment decision | LNG, 1 tonne | 52.54 mmBtu |
| FPSO | floating production, storage and offloading | ||
| GJ | gigajoules | ||
| JCC | Japan Customs-cleared Crude | ||
| kbbls | thousand barrels | ||
| kt | thousand tonnes | ||
| LNG | liquefied natural gas | ||
| LPG | liquefied petroleum gas | ||
| m | million | ||
| mmbbl | million barrels | ||
| mmboe | million barrels of oil equivalent | ||
| mmBtu | million British thermal units | ||
| mmscf | million standard cubic feet | ||
| mt | million tonnes | ||
| mtpa | million tonnes per annum | ||
| NFE | near-field exploration | ||
| P&A | plugged and abandoned | ||
| pa | per annum | ||
| PJ | petajoules | ||
| PSC | production sharing contract | ||
| t | tonnes | ||
| TJ | terajoules |
Disclaimer
This report 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 range of variables which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, geotechnical factors, drilling and production results, gas commercialisation, development progress, operating results, engineering estimates, 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 United States currency, unless otherwise stated. Totals in the tables may not add due to rounding. The symbol "~" means approximately.
Free cash flow (operating cash flows less investing cash flows net of acquisitions and disposals and major growth capital expenditure, less lease liability payments) is a non-IFRS measure that is presented to provide an understanding of the performance of Santos' operations.
This ASX announcement was approved and authorised for release by Kevin Gallagher, Managing Director and Chief Executive Officer.