Shareholder Review 2018

Energy for To download the 2018 Annual Report please visit the Santos website:

the future www.santos.com

Record underlying profit Record free cash flow Record sales revenue Dividends reinstated up 129% up 63% up 18% (fully-franked) $727m $1,006m $3,660m US9.7¢

OUR PURPOSE Quadrant Energy Acquisition Our Purpose is to provide sustainable returns for our Varanus Island gas hub Ningaloo Vision FPSO shareholders by supplying reliable, affordable and cleaner energy to improve the lives of people in and Asia.

OUR VISION 2025

Our Vision is to be Australia’s leading natural gas company by 2025.

To deliver our Vision we will aspire to:

+ Reduce emissions & improve air quality across Asia & Australia by displacing coal with natural gas and supporting the economic development of combined gas & renewable energy solutions

Devil Creek gas hub + Be the leading national supplier of domestic gas in Australia + Be a leading regional LNG supplier by increasing LNG sales to our Asian customers to over 4.5 million tonnes per annum + Be recognised as the safest & lowest cost onshore gas developer in Australia + Become the market leader in running the safest and lowest cost facilities and infrastructure operations + Contribute positively to the communities in which we operate by providing jobs, energy supply and local partnerships On 22 August 2018, Santos The portfolio includes: Quadrant Energy’s portfolio of high-margin + Develop our people and culture to deliver conventional domestic natural gas assets our vision announced the acquisition + three gas hubs that feed into an extensive backed by medium to long-term CPI-linked domestic natural gas pipeline network offtake contracts provide strong and stable of Quadrant Energy in supporting some of WA’s largest and most cash flows and further balance to Santos’ respected industrial and resource companies existing oil-linked revenue streams. Western Australia. + two oil Floating Production Storage and Having enjoyed a long-established joint-venture Offloading Facilities (FPSO) Quadrant Energy’s gas and oil producing assets are partner relationship with Quadrant prior to the located in the resource rich Carnarvon Basin + a large inventory of discovered resources acquisition, Santos knows the assets well. offshore north Western Australia (WA). to backfill existing infrastructure, and Our focus now is to bring the businesses + a leading position in the highly prospective together and capture the benefits that scale, Bedout Basin, including the recent significant offshore operating expertise and growth Dorado oil-well discovery. optionality can provide.

INSIDE 2 3 4 5 6 7 8 Message from the Financial overview Strengthening our Asset performance Solar and battery powered Board of Directors Glossary Chairman and from the capabilities in 2018 oil wells in the Santos Executive Investor information Managing Director and Carbon capture, utilisation Committee Chief Executive Officer Shareholder calendar and storage 2 | Santos Shareholder Review 2018 Welcome to the Shareholder Review 2018

Message from the Chairman and Managing Director and Chief Executive Officer

Dear Shareholder, the oil price cycle, our new sustainable Dividend was sanctioned with 121 wells drilled by year-end In Australia, natural gas is the perfect clean energy Policy targets a payout of free cash flow1 generated and the Scotia CF1 field project delivered 85 wells partner for renewables, providing reliable power 24/7. Santos today is a safe, low-cost, reliable and high per annum in the range of 10% to 30% as well as one year ahead of schedule and 16% under budget. Santos remains focused on the delivery of natural performance business. The successful, ongoing additional returns to shareholders above the ordinary The 148-well Arcadia Phase 1 development was gas because we believe it has a critical role to play implementation of our Transform, Build, Grow strategy dividend when business conditions permit. also sanctioned during the year with the first wells in delivering clean and reliable energy for Australian has enabled our Company to generate strong, stable due to come on-line in the first quarter of 2019. We households and manufacturers alongside a thriving cash flows through the oil price cycle and pay a PNG EARTHQUAKE remain on track to meet our ~6 mtpa annualised sales gas export industry. sustainable dividend. Santos is now positioned to run-rate, including LNG volumes redirected to the deliver the significant growth across our five core In late February we were deeply saddened by the domestic market, by the end of 2019. Santos is actively participating in the wholesale long-life natural gas assets. loss of life and injuries suffered by communities commercial and industrial market, adding to in the Southern Highlands and Hela Provinces In New South Wales we are focused on securing competition in the domestic market and helping Consistent with our disciplined Operating Model, of as a result of the severe approval of the Narrabri Gas Project to unlock the to deliver more competitive natural gas prices and Santos’ diversified portfolio of five core assets earthquake in the region and numerous aftershocks. wealth of this resource for the people of NSW, terms for Australian industry. In 2018 two new gas each generate free cash flow at an oil price of Our PNG LNG expertise and resources were delivering natural gas to the state’s industries and sales contracts commenced in Western Australia and less than US$40 per barrel. Our focus on low- deployed to assist the humanitarian relief effort and providing jobs, small business opportunities and three significant new direct-sales agreements were cost, efficient operations ensures that in a lower Santos donated $200,000 to help provide urgently community investment for the people of the Narrabri signed with companies on the east coast, further oil price environment Santos can continue to fund needed food, water and medical supplies to more region. The Narrabri Gas Project is currently being demonstrating Santos’ commitment to secure the the Transform, Build, Grow strategy and in a rising than 30,000 people isolated in remote villages. assessed by the NSW Department of Planning ahead future of Australian resource and manufacturing jobs. oil price environment, benefit from higher margins. of a decision of the NSW Independent Planning We would like to thank and acknowledge the efforts of Commission. One hundred per cent of Narrabri LOOKING AHEAD Santos’ full-year results serve to highlight the our joint-venture partners, ExxonMobil and , gas would go into the domestic market, potentially benefits of a diversified portfolio of natural gas on a coordinated humanitarian relief and recovery supplying up to half of NSW natural gas demand, We are excited about the company’s future assets underpinned by a disciplined, cash generative program in conjunction with our community partners, helping to put downward pressure on energy prices. prospects and remain dedicated to providing an Operating Model. In 2018 we delivered: aid agencies and the PNG and Australian governments. inclusive workplace and organisational culture that In Northern Australia, Darwin LNG remains an embraces diversity. In 2019, we will continue to + A 129% increase in underlying net profit after tax The gas plant maintained integrity throughout the important and strategic infrastructure project for execute our clear and consistent Transform, Build, to a record $727 million earthquake period and there were no releases of the future development of onshore and offshore Grow strategy to deliver a safe, low-cost, reliable hydrocarbons and no significant injuries to personnel. + A 63% increase in free cash flow to a record resources. Plant performance in 2018 was again and high performance business. Production was safely resumed within two months of $1 billion strong with LNG production higher than 2017 despite the first earthquake and full rates were achieved by a one month planned maintenance shutdown. In In PNG we will seek to complete the farm-in to the + An 18% increase in sales revenue to a record the end of April. the upstream, the 3-well Bayu Undan infill program P’nyang acreage, further aligning Santos with our $3.7 billion, and joint-venture partners in the PNG LNG project, and OPERATING PERFORMANCE was delivered 40% under budget and the final + Dividends of US9.7 cents per share, fully-franked, well was brought on-line over three months ahead evaluate potential brownfield LNG plant expansion including a final dividend of US6.2 cents per share. schedule. The successful program resulted in higher opportunities. In Northern Australia we are working With a focus on operational excellence we are toward the Final Investment Decision in late 2019 / constantly looking at ways to eliminate waste and liquids production and increased offshore well A strong operating performance across our early 2020 on the Barossa project in the Bonaparte inefficiency and set new, higher standards and ways capacity. With the Bayu Undan field expected to portfolio of five core assets, including one month’s Basin to backfill Darwin LNG from around 2023. of working. cease production early next decade, the Barossa production and sales volumes from our Quadrant project is being progressed as the lead candidate to Onshore Australia we will continue to implement our Energy acquisition in Western Australia, resulted in development plans as we target ramping-up GLNG In Western Australia, production and sales volumes backfill Darwin LNG. In 2018 we entered Front End sales volumes of 78.3 million barrels of oil equivalent sales to ~6 mtpa by 2019 year-end. In the Cooper were higher in 2018 due to a strong operating Engineering and Design, with detailed engineering (mmboe) and production of 58.9 mmboe. Basin we will leverage our strong technical expertise performance and the commencement of two new design being advanced across a number fronts. and subsurface focus to drill ~100 wells. In Western sales contracts. The acquisition of Quadrant Energy The development of the Barossa project would more With the turnaround complete and the strategy Australia we will continue to realise significant further strengthens the Santos portfolio as the than double Santos’ production in Northern Australia. and Operating Model embedded, 2018 marked a synergies following the acquisition of Quadrant assets are backed by medium to long-term CPI-linked significant milestone for the company whereby we Energy and will appraise the exciting Dorado oil offtake agreements. As Santos enters a period of At PNG LNG, plant optimisation activities, including achieved our first full-year net profit after tax since discovery in the Bedout Basin. major growth project delivery, these agreements planned upgrades at both the Hides Gas Conditioning 2013 of $630 million. provide strong and stable cash flows and provide Plant and LNG plant, were undertaken during downtime as a result of the earthquake. These In addition, our renewed exploration focus will see the This successful turnaround was also recognised by balance and diversification to Santos’ predominantly upgrades resulted in a record daily production rates drilling of the Roc South-1 near field exploration well others in the market when in April we received a oil-linked revenues. equivalent to 9.2 mtpa being achieved in the second adjacent the Dorado well, offshore Western Australia, proposal from a private equity firm to acquire the the Dukas-1 wildcat well in the Amadeus Basin, central In the Cooper Basin our low-cost, efficient operations half of the year. business. The Santos Board, however, rejected this Australia, and a 2-well program in the McArthur Basin, have not only halted long-term production decline offer as it did not represent appropriate value for the onshore Northern Territory, to test the deliverability of but contributed to 8% production growth in 2018, In May 2018 we announced the sale of our Asian company. In rejecting the bid the Board unanimously the largest and most promising opportunity including our highest daily oil production rates since asset portfolio for $221 million. The sale was deemed the offer price to be too low, the control in Australia, subject to regulatory approval. 2009. Drilling activity increased 40% over the course consistent with Santos’ strategy to realise value premium inadequate and the highly-leveraged private of the year to 85 wells and a fourth rig was added from its late-life non-core assets. equity transaction structure complex, high risk Finally, we would like to thank you, our shareholders within the disciplined framework of our Operating and uncertain. RELIABLE, AFFORDABLE AND for your ongoing support. Santos is now positioned Model. A renewed focus on exploration and appraisal CLEANER ENERGY SUPPLY for disciplined growth across each of our five core We are of the firm view that Santos’ well-developed remains in place as we seek to commercialise the vast long-life natural gas assets as we target production strategy, strong management team, highly-skilled discovered resource that remains undeveloped. For more than 60 years, Santos has been working of more than 100 mmboe by 2025, almost double the workforce and outstanding growth opportunities in partnership with local communities to safely and levels in 2018. In-line with our plans to grow the Cooper Basin, will deliver superior shareholder value over time. sustainably develop Australia’s natural gas, now we successfully executed the ‘Moomba South’ more than ever, the fuel for the future. Between Yours sincerely, appraisal drilling campaign, the first of several CAPITAL MANAGEMENT now and 2040, the International Energy Agency large scale project appraisal programs focused on expects natural gas to grow to a market share of Since 2016 we have simplified the business, reduced delivering resource conversion to support future approximately a quarter of all global energy demand. costs, increased efficiencies and delivered on our clear production growth. In Asia, demand continues to grow as countries and consistent strategy to Transform, Build and Grow. KEITH SPENCE switch from coal to natural gas to reduce air pollution With improved capital efficiency, in 2019 we expect Chairman During this period we prioritised debt repayment to drill ~100 wells, targeting higher production and and greenhouse gas emissions. to restore balance sheet strength and position the reserves additions over time. Strong fundamentals Leading the way is China, where air pollution in company for growth. It was therefore very pleasing in the Cooper Basin continue to support our purpose 62 cities tracked by the World Health Organisation in 2018 that we reached our net debt reduction to supply reliable, affordable and cleaner energy to dropped by an average of 30% between 2013 and target of $2 billion more than a year ahead of plan. the east coast domestic market and benefit from KEVIN GALLAGHER 2016. Cleaner air (with lower particulates) is being This milestone gave us the flexibility to not only the strong demand for LNG in Asia. Managing Director and Chief Executive Officer driven by large-scale replacement of coal with gas acquire the low cost, high margin conventional assets in industry and household heating. When used for of Quadrant Energy in Western Australia but also, At GLNG our low-cost, efficient operations continue 1 Free cash flow is operating cash flow less investing cash flow power generation, natural gas is 50% less emissions (including all sustaining capital expenditure, exploration spend and very importantly, announce a return to dividends. to support an accelerated development plan to intensive than coal. China’s “Blue Sky Defence” policy interest payments). The Board will have the discretion to adjust unlock more gas over time. In 2018 we drilled a free cash flow for individually material items, including major In-line with Santos’ stated purpose to provide record 305 wells, 77% higher than 2017. During the will continue to support coal to gas replacement and growth spend (for example, capital expenditure associated with the drive natural gas demand through the 2020s. proposed Barossa development and PNG LNG expansion projects), sustainable returns to our shareholders through year the ~480-well Roma East field development and asset acquisitions and disposals. Santos Shareholder Review 2018 | 3 Financial overview

SALES VOLUME SALES REVENUE PRODUCTION mmboe US$million mmboe

3,641 3,660 84.1 83.4 78.3 3,100 61.6 57.7 59.5 58.9 64.3 2,594 54.1 63.7 2,442

20142015 2016 2017 2018 78.3 20142015 2016 2017 2018 3,660 2014 2015 2016 2017 2018 58.9

FREE CASH FLOW UNDERLYING NET NET PROFIT AFTER TAX US$million PROFIT AFTER TAX US$million US$million

1,006 727 630 618 564 -630 -1,953 -1,047 -360 206 -1,591 -739

318

54 75 20142015 2016 2017 2018 1,006 20142015 2016 2017 2018 727 20142015 2016 2017 2018 630

UNIT PRODUCTION CAPITAL EXPENDITURE NET DEBT COSTS US$million US$million US$ per boe

14.14 3,300

6,128 10.35 4,750 8.45 8.07 8.05 3,492 3,549 1,288 2,731

625 682 759 20142015 2016 2017 2018 8.05 20142015 2016 2017 2018 759 20142015 2016 2017 2018 3,549

2018 SALES VOLUMES 2018 PRODUCTION 2018 SALES REVENUE mmboe mmboe US$million

20.6 1.2 25.7 85 Third-party LPG Sales gas LPG product and ethane 3.0 Condensate 300 Condensate 2,518 57.7 5.9 23.1 Sales gas, Own product Oil LNG 757 ethane and LNG Oil

2018 RESULTS AVERAGE REALISED OIL PRICE 2014 2015 2016 2017 2018 US$ per barrel Sales volume mmboe 63.7 64.3 84.1 83.4 78.3 Production mmboe 54.1 57.7 61.6 59.5 58.9 Average realised oil price US$ per barrel 103.4 53.7 46.4 57.8 75.1 Net profit after tax US$million -630 -1,953 -1,047 -360 630 Underlying net profit after tax US$million 564 54 75 318 727 103.4 Sales revenue US$million 3,641 2,442 2,594 3,100 3,660 Operating cash flow US$million 1,633 811 840 1,248 1,578 75.1 Free cash flow US$million -1,591 -739 206 618 1,006 EBITDAX US$million 2,076 1,454 1,199 1,428 2,160 53.7 57.8 46.4 Total assets US$million 18,281 15,949 15,262 13,706 17,134 Earnings per share US cents -64.4 -169.5 -58.2 -17.3 30.2 Dividends declared A$0.35 A$0.20 - - US$0.097 Number of employees 3,636 2,946 2,366 2,080 2,190 20142015 2016 2017 2018 75.1 4 | Santos Shareholder Review 2018 Strengthening our capabilities in 2018

15 Feb 21 Feb 27 Feb 27 Feb 4 Mar Santos strikes ~A$100 million, Santos releases its inaugural PNG LNG facilities safely GLNG Roma East development Santos donates US$200,000 to four year, domestic gas deal Climate Change Report setting shut-down following a major sanctioned incorporating the aid agencies in PNG to help get to provide gas for electricity an aspirational target to achieve earthquake and a series of drilling of ~440 new wells and the urgently-needed food, water and generation at New Century net-zero emissions from our aftershocks in the Papua New connection of ~40 existing medical supplies to more than Resources’ zinc mine near Mt Isa. operations by 2050. The report Guinea highlands. appraisal wells. This important 30,000 people isolated in small Santos is proud to support jobs, aligns with the G20’s Taskforce project will create up to 400 villages in the PNG Southern investment and regional on Climate-Related Financial construction jobs and help to Highlands and Hela Provinces. 2018 Climate communities in northwest Disclosure (TCFD) guidelines. sustain and boost local business Change Report Queensland. opportunities in the Roma area.

3 Apr 13 Apr 17 Apr 22 Apr 23 Apr

Unsolicited, non-binding, Production of liquefied natural The Scientific Inquiry into Hydraulic Longest ever well drilled in the Agreement reached with Santos’ indicative and conditional gas (LNG) at PNG LNG safely Fracturing in the Northern Territory Cooper Basin – 14,029’ MD. joint-venture partners to enter proposal received from private- resumes following a temporary (NT) concludes that the onshore Low-cost, efficient operations the Front-End Engineering and equity backed suitor to acquire shutdown of operations following shale gas industry can be set the stage for continued Design (FEED) phase for the appropriately managed. With 100% of Santos Ltd. the severe earthquake in future growth. development of the Barossa exploration and appraisal success, February 2018. the McArthur Basin has the potential project to backfill Darwin LNG. A to provide the NT the competitive successful Barossa development advantage required to support Roma East would more than double Santos’ energy-intensive industries and Compressor Station current production out of generate wealth for the nation. under construction Northern Australia. 24 Apr 26 Apr 3 May 22 May 31 May

Fastest ever gas well drilled in The 85-well Scotia Project to Sale of non-core Asian assets Private-equity backed proposal Final Investment Decision (FID) the Cooper Basin: 3.1 days from boost gas supply to GLNG announced for $221 million to acquire 100% of Santos Ltd taken on the 137-well Arcadia spud to rig release. delivered ahead of schedule and consistent with Santos’ strategy rejected by the Board and project to boost gas supply to 16% under budget reflecting our to realise value from its late-life discussions terminated. The bid GLNG. The project will create up focus on cost of supply, non-core assets. was deemed not to represent full to 300 construction jobs and innovation and efficiency as value for the company and when local business opportunities in Australia’s lowest cost onshore combined with the associated the Central Highlands region developer. risks, was not considered in the of Queensland. best interests of Santos Cooper Basin drilling rig shareholders. 7 Jun13 Jun 28 Jun 8 Aug 10 Aug

200th cargo of LNG shipped Santos commits to the Aboriginal New dividend policy announced in-line with Barikewa-3 appraisal well Santos donates ~A$200,000 from GLNG. Power Cup for another 3 years. Santos’ stated purpose to provide sustainable success in PNG. Located to help drought-affected With a competitive football returns to our shareholders. Santos will look to pay approximately 10 kilometres from farmers and local communities carnival as its centrepiece, the ordinary dividends that are sustainable through the PNG LNG gas pipeline, it is in Queensland and Aboriginal Power Cup focuses the oil price cycle and will target a range of 10% to well placed to play a part in New South Wales. on engaging young people in 30% payout of free cash flow generated per future LNG expansion projects. Aboriginal culture, education, annum. Furthermore, given the cyclical nature of healthy lifestyle choices, the industry, the Board will also consider additional teamwork, leadership and returns to shareholders above the ordinary life skills. dividend when business conditions permit. 13 Aug 22 Aug 23 Aug 10 Sep 12 Sep

Santos accelerates Cooper Basin $2.15 billion acquisition of Half-year results released. US3.5c New domestic wholesale gas New long-term domestic natural gas development with a Quadrant Energy in Western dividend announced and a agreement signed with Visy wholesale supply agreement for fourth rig commencing Australia announced. The doubling of underlying net profit. Industries to supply its New up to 15PJ of gas signed with operations. Drilling more wells transaction is materially value South Wales operations. for its east and lowering production costs accretive for Santos shareholders coast operations through to the – extracting more gas for less and advances our aim to be end of 2024. money – is the best way to keep Australia’s leading domestic downward pressure on gas natural gas supplier. prices. Aboriginal Power Cup 26 Sep 15 Nov 27 Nov 3 Dec 18 Dec Devil Creek gas hub, WA

Santos outlines plans targeting Santos appointed as preferred Quadrant Energy acquisition In Northern Australia, the Bayu A project to convert all Cooper production of more than 100 tenderer to explore new acreage completes increasing Santos’ Undan gas/condensate infill well Basin oil well pumps to run on mmboe by 2025, almost doubling in Queensland’s key gas- ownership and operatorship of program was completed 40% solar power and batteries current levels of production. producing Surat and Bowen a high quality portfolio of low below budget and 3 months announced. The solar pumps will Basins, in a 50-50 joint venture production cost, long-life ahead of schedule. reduce emissions and waste from $2 billion net debt reduction with Shell. Positive exploration conventional Western Australian oil production, saving 140 barrels target achieved, more than a results may potentially unlock a natural gas assets with stable of oil per day. year ahead of plan. material new gas supply source cash flows. for the Australian east coast domestic gas market. Santos Shareholder Review 2018 | 5

PAPUA Santos acreage NEW GUINEA Gas pipeline Oil pipeline NORTHERN Port Moresby Our asset AUSTRALIA Darwin

WESTERN performance AUSTRALIA QUEENSLAND AND NSW

COOPER BASIN

Perth Sydney Canberra Five core long-life natural gas assets Melbourne

Western Australia Hobart Santos is one of the largest producers of natural gas for capture value from backfill and third party gas Asset KPIs 2018 2017 the domestic market in Western Australia and is also a opportunities significant producer of oil and natural gas liquids. Production (mmboe) 12.5 10.5 + offshore operating expertise and capabilities to drive In August 2018, Santos announced the acquisition of future growth opportunities across offshore Western Sales volume (mmboe) 13.0 10.8 Quadrant Energy for US$2.15 billion. The acquisition Australia and Northern Australia, Revenue ($m) 422 332 completed on 27 November 2018 and is fully aligned + high-margin conventional domestic natural gas assets Production cost ($/boe) 8.68 10.14 with Santos’ growth strategy to build on existing backed by medium to long-term CPI-linked offtake infrastructure positions around the company’s core EBITDAX ($m) 283 224 contracts providing strong and stable cash flows, and assets + a significant position in the highly prospective Bedout Capex ($m) 93 79 The Quadrant Energy acquisition delivers Santos: Basin, including the Dorado oil discovery which + operatorship of existing Western Australia gas hubs, provides near-term development opportunity, subject providing the flexibility to optimise operations and to an appraisal program in 2019. Cooper Basin

The Cooper Basin produces natural gas, gas liquids and are now down 50% to $2.4 million from 2015. By drilling Asset KPIs 2018 2017 crude oil. Gas is sold primarily to domestic retailers, more wells and lowering production costs we can Production (mmboe) 15.5 14.4 industry and for the production of , extract more gas for less money and meet our purpose while gas liquids and crude oil are sold in domestic and to supply reliable, affordable and cleaner energy to the Sales volume (mmboe) 21.6 21.0 export markets. east coast domestic market and meet the strong and Revenue ($m) 1,146 851 growing demand for LNG in Asia. In 2018 the Cooper Basin production decline was Production cost ($/boe) 8.17 9.32 arrested, the asset returned to growth and our EBITDAX ($m) 518 329 low-cost, disciplined Operating Model continued to encourage innovation. In 2018 we drilled 85 wells, a Capex ($m) 245 199 40% increase on 2017, including 19 exploration wells. We drilled our fastest ever gas development well, 1 1 Vertical and deviated wells gas development wells: drill, 3.1 days from spud to rig release and our well costs stimulate, complete Queensland and NSW

GLNG produces liquefied natural gas (LNG) for export Our low-cost, efficient operations are supporting an Asset KPIs 2018 2017 to global markets from the LNG plant at Gladstone. Gas accelerated development plan. In 2018 we drilled a Production (mmboe) 12.2 11.7 is also sold into the domestic market. Santos has a 30% record 305 wells, a 70% increase on 2017. Average interest in GLNG. Production from Train 1 commenced drilling times have reduced substantially, from 6.3 days Sales volume (mmboe) 22.0 22.6 in September 2015 and Train 2 in May 2016. Feed gas is in 2015 to 2.6 days, rig release to rig release, and Roma Revenue ($m) 1,016 769 sourced from GLNG’s upstream fields, Santos portfolio well costs1 are down 72% to $0.85 million per well over Production cost ($/boe) 5.77 5.83 gas and third-party suppliers. the same period. EBITDAX ($m) 570 322 GLNG equity gas production continued to build during the year with project producing ~5.5 million tonnes of Capex ($m) 244 190 LNG equivalent, including volumes redirected to the domestic market. 80 cargoes were shipped during the

year including our 200th cargo since start-up in June. 1 Drill, complete, connect Northern Australia

Santos’ business in Northern Australia is focused on the In April 2018, Santos announced that agreement had Asset KPIs 2018 2017 Bayu-Undan/Darwin LNG (DLNG) project. In operation been reached with its joint venture partners to enter Production (mmboe) 3.7 4.0 since 2006, DLNG produces LNG and gas liquids for the front-end engineering and design (FEED) phase for export to global markets. Santos has an 11.5% interest the development of the Barossa project to backfill Sales volume (mmboe) 3.6 4.0 in DLNG. Darwin LNG. A final investment decision (FID) is Revenue ($m) 184 153 targeted for late 2019 / early 2020. Santos has a 25% Production cost ($/boe) 20.17 18.95 In Northern Australia, excellent Darwin LNG interest in Barossa and the successful development of performance resulted in production of 3.3 million tonnes the project would extend the operating life of Darwin EBITDAX ($m) 116 87 of LNG despite a scheduled one-month shutdown for LNG by more than 20 years and more than double Capex ($m) 66 63 plant maintenance activities in May. In the upstream, a Santos’ current production in Northern Australia. three-well infill project was delivered 40% under budget and ahead of schedule which resulted in higher condensate production and increased well capacity Papua New Guinea

Santos’ business in PNG is centred on the PNG LNG The LNG plant produced 7.4 million tonnes of LNG Asset KPIs 2018 2017 project. Completed in 2014, PNG LNG produces LNG in 2018 and shipped 98 cargoes. Production (mmboe) 11.3 12.6 for export to global markets, as well as sales gas and gas liquids. Santos has a 13.5% interest in PNG LNG. Santos’ strategy in PNG is to work with its partners to Sales volume (mmboe) 10.8 12.0 align interests, and support and participate in backfill Revenue ($m) 630 534 PNG LNG production and sales were significantly and expansion opportunities at PNG LNG. Santos along impacted by a severe earthquake that struck the with the other PNG LNG parties are in discussions to Production cost ($/boe) 6.23 4.37 PNG Highlands region in February 2018. PNG LNG build alignment for the proposed construction of three EBITDAX ($m) 506 432 was safely shut-in and there were no releases of additional LNG trains at the PNG LNG site. Santos is hydrocarbons or significant injuries to personnel. also in discussions regarding a proposal received for Capex ($m) 39 32 Production recommenced in April and resumed full Santos to farm-in to PRL 3 which contains the multi-tcf rates in May. P’nyang field. 6 | Santos Shareholder Review 2018

Resilience and The Santos Energy opportunity in a Solutions team has started lower-carbon future Solar and battery work on a program to convert oil well pumps powered oil wells to run on solar power and batteries.

in the Cooper basin A pilot pump a the Hobbes-1 oil well has been operating on solar power and batteries since Santos is committed August 2018, proving that solar power and batteries can maintain reliability and availability in the harsh to supporting the twin environment of the Cooper Basin. objectives of limiting Santos now plans to convert over 200 existing pumps to use solar power and ultimately, use solar greenhouse gas emissions power as the standard energy source for new while providing access oil wells. to reliable and affordable At present, the pumps are powered by generators burning crude oil. energy to domestic and In December 2018, Santos received a grant under global markets. the Advancing Renewables Program to convert 56 wells in 2019 and 2020. We have set medium-term targets that align with these objectives and have a long term Using solar power will deliver environmental and aspiration target of net-zero emissions from commercial benefits by reducing crude oil our operations by 2050. consumption, long distance fuel haulage and emissions associated with burning crude oil. Our Energy Solutions team is actively pursuing projects to reduce fuel use and emissions across our business, as well as identifying step-change technology that will help achieve our long- term aspiration. Number of wells converting to solar Our natural gas portfolio is economically resilient power in 2019 and 2020 56 under different scenarios consistent with global efforts to reduce greenhouse gas emissions.

Santos recognises the risks that climate change poses for our business, from policy changes to the physical risks associated with more extreme weather events. These risks are managed Carbon capture, through our enterprise-wide risk management process, and are overseen and monitored by Executive Management and the Board. utilisation and storage Transition to a lower-carbon future also creates opportunities. Natural gas has a critical role to play in providing energy in a lower-carbon future. This is because natural gas is a reliable and affordable source of energy that produces 50% less greenhouse gas emissions than coal when used to generate electricity and is much cleaner Reducing emissions Santos is actively pursuing The project involves centralised capture and with regards to local air pollutants. compression of CO2 at the Moomba Gas Plant, with carbon capture, a project to capture CO enabling the development of multiple target Through its disciplined, low-cost operating 2 reservoirs and development phases. The initial phase model, proximity to Asian markets and the scale utilisation and storage emissions from the is estimated to capture approximately 0.3 MtCO2e of its Australian natural gas business, Santos from the Moomba Gas Plant through injection is in a strong position to supply Australia and (CCUS) Moomba processing plant and recycling. Asia’s growing energy demands in a lower- carbon future. and inject it into Cooper This project has the potential to be scaled up in

future phases to capture all the CO2 generated in Basin oil reservoirs to the Cooper Basin. In the longer term, the Cooper enhance oil production Basin could become a storage hub for Eastern Australia. from these reservoirs. Globally there are currently 18 large-scale CCUS In September 2018, Santos announced a facilities in operation, including 14 that are used dedicated appraisal program to test the potential for enhanced oil recovery1. for CO injection. 2 In the United States, where the majority of these

The work we are doing on this project could result projects currently operate, CO2 captured through in the development of Australia’s first commercial- enhanced oil recovery methods are now being scale use of carbon capture, utilisation and storage recognised for their contribution to the reduction in for enhanced oil recovery and contribute to a carbon emissions, with a new law passed in 2018 to grant credits for every tonne of CO permanently significant reduction in Santos’ CO2 emissions 2 stored through the process1. Moomba Gas Plant in the Cooper Basin. In the longer term, technology developments such When CO2 is injected into oil reservoirs to enhance Santos Climate Change Report 2019 1 as CCUS will be required to meet both emissions oil recovery, some of the CO2 remains held within the reservoir whilst some returns to surface with reduction targets and growing energy demand. Climate the produced oil and is captured for re-injection. → Change

Report 2019 During 2018, Santos completed studies indicating positive potential for carbon capture, utilisation and storage. These included miscibility testing, static reservoir modelling and concept studies.

Throughout 2019, we will spend approximately $10 million to execute a defined appraisal program 1 Global CCS Institute. The Global Status of CCUS 2018. to assess incremental improvements in oil recovery from oil reservoirs in the Cooper Basin using

captured CO2. To view Santos’ 2019 Climate Change Report, As part of the ongoing appraisal program, Santos is Large-scale please visit our website at partnering with experts in the field, such as the CCUS facilities www.santos.com/sustainability CSIRO, who have substantial scientific and practical in operation globally expertise in CO injection. 18 2 Santos Shareholder Review 2018 | 7

1. KEITH SPENCE In 2011 Kevin joined Clough 5. HOCK GOH Chair of the Environment, Health, Chairman Limited as CEO and Managing Safety and Sustainability Board of Director where, over four years, Hock is an independent Committee, a member of Keith is an independent he transformed the business and non-executive Director. He the People and Remuneration non-executive Director. He delivered record financial results. joined the Board on 22 October Committee and the Nomination joined the Board on 1 January 2012 and is a member of the Committee; having earlier served Directors 2018 and became Chairman 3. YASMIN ALLEN Environment, Health, Safety on the Company’s Audit and Risk on 19 February 2018. and Sustainability Committee, Committee. Yasmin is an independent Audit and Risk Committee and He is Chairman of Santos non-executive Director. She Nomination Committee. Other Current Directorships: Finance Limited and Chair of joined the Board on 22 October Director of Limited the Nomination Committee. 2014 and is the Chair of the Other Current Directorships: (since 2014) and Member of People and Remuneration Non-executive Director of Stora Investment Committee of the Other Current Directorships: Committee and a member of Enso Oyj (Finland) (since 2012), Chairman of Base Resources Stepping Stone Foundation, a the Audit and Risk Committee AB SKF (Sweden) (since 2014) Sydney based NFP (since 2018). Limited (since 2015); Non- and Nomination Committee. and Vesuvius PLC (UK) executive Director of (since 2015). Former Directorships in the last Independence Group NL (since Other Current Directorships: 3 years: Director of Treasury 2014) and Murray and Roberts Director of Former Directorships in the last Wine Estates (2012 to 2017) Holdings Limited (since 2015). (since 2010), National Portrait 3 years: Chairman of MEC Gallery (since 2013), The George Resources (2005 to 2018) 8. EUGENE SHI Former Directorships in the last Institute for Global Health (since and Director of Harbour 3 years: Oil Search Limited 2014), ASX Limited and ASX Energy (2015 to 2018). Eugene is a non-executive (2012–2017) Clearing and Settlement boards Director. He joined the Board on 6. DR VANESSA GUTHRIE 26 June 2017 as a nominee of a 2. KEVIN GALLAGHER (since 2015) and Chair of Advance (since 2018). substantial shareholder. Eugene Managing Director & Vanessa is an independent is a member of the People and Chief Executive Officer Former Directorships in the last non-executive Director. She Remuneration Committee and joined the Board on 1 July 2017 Kevin joined Santos as Managing 3 years: National Director (2010 the Audit and Risk Committee. and is a member of the People Director and Chief Executive to 2016) and acting Chair (2015 and Remuneration Committee Eugene has more than 20 years Officer on 1 February 2016, to 2016) of the Australian 1 5 and Environment, Health, Safety of professional experience, bringing more than 25 years’ Institute of Company Directors. and Sustainability Committee. including five years in international experience in 4. GUY COWAN management consultancy managing oil and gas operations. Other Current Directorships: and 15 years in senior Kevin is also a Director of Santos Guy is an independent non- Director of Australian management roles. Finance Limited and a member of executive Director. He joined the Broadcasting Corporation (since the Environment, Health, Safety Board on 10 May 2016 and is the 2017) and Adelaide Brighton His industry experience covers and Sustainability Committee. Chair of the Audit and Risk Limited (since 2018), Chair of energy, health care, retail and 2 6 Committee and a Director Minerals Council of Australia, finance in Europe and Asia- Kevin commenced his career as a of Santos Finance Limited. Deputy Chair of Western Pacific. His specialties include drilling engineer with Mobil North Australian Cricket Association, M&A and restructuring, strategy, Sea, before joining Woodside in Other Current Directorships: Council member of Curtin value management, and cost Australia in 1998. At Woodside, Chairman of Queensland Sugar University. optimisation. Kevin led the drilling organisation Limited (since 2015) and Buderim through rapid growth, delivering Ginger Limited (since 2018) and Former Directorships in the last Eugene has held the role of Vice 3 7 several Australian and Director of Winson Group Pty Ltd 3 years: Managing Director and President, ENN Ecological since international development (since 2014). CEO of Toro Energy Limited February 2017. His previous roles projects and exploration (2013 to 2016). include Department Head of campaigns, before leading the Former Directorships in the last Business Performance Service Australian oil business. Then, as 3 years: Director of UGL Limited 7. PETER HEARL with KPMG China and CEO of the North West Shelf (2008 to 2017) and Coffey Transformation Service Peter is an independent Venture, he was responsible for International (2012 to 2016). with KPMG Europe. non-executive Director. He joined production from Australia’s first 4 8 the Board on 10 May 2016 and is ever LNG project. Santos Executive Committee

1. KEVIN GALLAGHER 5. ANGUS JAFFRAY 8. BILL OVENDEN Managing Director & CEO Executive Vice President Executive Vice President People and Sustainability Exploration & New Ventures Please see Board of Directors. Angus joined Santos in 2016 and Bill joined Santos in 2002 and is 1 6 2. DAVID BANKS is accountable for Human accountable for developing and Executive Vice President Resources, Remuneration and executing a targeted exploration Onshore Upstream Performance, Organisational and appraisal strategy across and Learning Development, Santos’ core asset hubs, while David joined Santos in 2018 and Sustainability and Organisational identifying new high value is accountable for Santos’ Integration. exploration targets. onshore upstream assets including the Cooper Basin, 6. NAOMI JAMES 9. VINCE SANTOSTEFANO 2 7 GLNG and Narrabri. Executive Vice President Chief Operations Officer Midstream Infrastructure Operations Services 3. PHILIP BYRNE Executive Vice President Naomi joined Santos in 2016 and Vince joined Santos in 2016 and Marketing, Trading & Commercial is accountable for maximising the is accountable for the provision utilisation and value of Santos’ of technical and operational Philip joined Santos in 2017 and is midstream infrastructure, services to increase the scale and accountable for the marketing 3 8 including oil and gas processing strategic value of Santos’ assets. and trading of all Santos gas, facilities at Moomba and Port LNG and liquid hydrocarbon Bonython and LNG facilities in 10. BRETT WOODS products as well as the the GLNG and Darwin LNG Executive Vice President commercial function. projects. Developments 4. BRETT DARLEY 7. ANTHONY NEILSON Brett joined Santos in 2013 and Executive Vice President Chief Financial Officer is accountable for development 4 9 Offshore across Santos’ onshore and Anthony joined Santos in 2016 offshore assets, including major Brett joined Santos in 2018 and is and is accountable for the capital projects, drilling & accountable for the development finance, tax, treasury, planning, completions, and reservoir and growth of our conventional business development, investor development, as well as energy assets across Western Australia relations and IT functions. solutions and technology and and Northern Australia. overseeing Santos’ Joint Venture 5 10 in PNG LNG. 8 | Santos Shareholder Review 2018 Glossary

barrel/bbl crude oil FPSO Proven plus probable reserves The standard unit of A general term for unrefined Floating production, storage and (2P) Units of measure measurement for all oil and liquid or hydrocarbons. offloading vessel Reserves that analysis of bbl – barrel condensate production. One geological and engineering data barrel = 159 litres or 35 imperial EBITDAX joules suggests are more likely than not boe – barrel of oil equivalent gallons. Earnings before interest, tax, Joules are the metric to be recoverable. There is at depreciation, depletion, measurement unit for energy. least a 50% probability that mmboe – million barrels of oil equivalent barrel of oil equivalent/boe exploration and impairment. A petajoule (PJ) is equal to reserves recovered will exceed A unit of energy approximately 1 joule × 1015. proven plus probable reserves. mmBtu – million British thermal units equal to the energy released by free cash flow burning one barrel (159 litres) of Cash flow from operating LNG Sales gas mtpa – million tonnes per annum crude oil. activities less cash flow from Liquefied natural gas. Natural gas Natural gas (methane) that has investing activities. that has been liquefied by been processed by gas plant Conversion factors condensate refrigeration to store or transport facilities and meets the required free cash flow breakeven A natural gas liquid that occurs in it. Generally, LNG comprises specifications under gas sales Sales gas and ethane – 1 PJ = 171.937 boe x 103 association with natural gas and The average annual oil price at mainly methane. agreements. is mainly composed of pentane which cash flow from operating Crude oil – 1 barrel = 1 boe and heavier hydrocarbon activities (including hedging) LPG Train (LNG) fractions. equals cash flows from investing . A The infrastructure that purifies Condensate – 1 barrel = 0.935 boe activities. Excludes one-off mixture of light hydrocarbons and cools natural gas to a liquid contingent resources (2C) restructuring and redundancy derived from oil-bearing strata state ready for transport. LPG – 1 tonne = 8.458 boe Those quantities of hydrocarbons costs, and asset divestitures and which is gaseous at normal which are estimated, on a given acquisitions. temperatures but which has LNG – 1 PJ = 18,040 tonnes date, to be potentially recoverable been liquefied by refrigeration or from known accumulations, but FEED pressure to store or transport it. LNG – 1 tonne = 52.54 mmBtu which are not currently Front end engineering and design Generally, LPG comprises mainly considered to be commercially propane and butane. recoverable. Contingent FID resources may be of a significant Final investment decision PRL size, but still have constraints to Petroleum Retention License For a comprehensive development. These constraints, online conversion preventing the booking of calculator tool, please reserves, may relate to lack of visit our homepage at gas marketing arrangements or to technical, environmental or political barriers. www.santos.com

Investor information Shareholder Calendar

Santos Limited SHAREHOLDING ENQUIRIES 2018 Fourth Quarter Activities Report 24 Jan 2019 ABN 80 007 550 923 Boardroom Pty Limited 2018 Full-year results 21 Feb 2019 REGISTERED AND HEAD OFFICE Grosvenor Place Ex-dividend date for 2018 full-year dividend 26 Feb 2019 Level 12, 225 George Street Ground Floor Santos Centre Sydney NSW 2000 Record date for 2018 full-year dividend 27 Feb 2019 60 Flinders Street Payment date for 2018 full-year dividend 28 Mar 2019 Adelaide SA 5000 GPO Box 3993 Australia Sydney NSW 2001 2019 First Quarter Activities Report 17 Apr 2019

GPO Box 2455 Website: www.boardroomlimited.com.au Annual General Meeting 2 May 2019 Adelaide SA 5001 Shareholder Access: www.investorserve.com.au 2019 Second Quarter Activities Report 18 Jul 2019 Telephone: 1300 096 259 (within Australia) 2019 Half-year results 22 Aug 2019 Telephone: +61 8 8116 5000 + 61 2 8016 2832 (International) Facsimile: +61 8 8116 5050 Ex-dividend date for 2019 interim dividend 27 Aug 2019 Website: www.santos.com INVESTOR ENQUIRIES Record date for 2019 interim dividend 28 Aug 2019 SECURITIES EXCHANGE LISTING Investor Relations, Santos Ltd Payment date for 2019 interim dividend 26 Sep 2019 GPO Box 2455 STO Adelaide SA 5001 2019 Third Quarter Activities Report 17 Oct 2019

SANTOS WEBSITE Telephone: 08 8116 5000 *Dates are subject to change Email: [email protected] To view news announcements, company Website: www.santos.com reporting and presentations please visit the Investors page at www.santos.com/investors UPDATE YOUR DETAILS ONLINE

2018 ANNUAL REPORT To update your address, payment instructions, dividend reinvestment plan options, tax file To view a copy of our 2018 Annual Report number, e-communication preferences, please visit our website at www.santos.com or email address and more, please visit alternatively, printed copies can be requested www.investorserve.com.au or telephone from the Share Registrar either by email at on 1300 096 259 (within Australia) [email protected] or by or + 61 2 8016 2832 (International) telephone on 1300 096 259 (within Australia) or + 61 2 8016 2832 (International) Designed and produced by www.twelvecreative.com.au by Designed and produced