Interim Presentation 04
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Meeting the Challenge 2004 Interim Results 24 August 2004 1 Disclaimer & Important Notice This presentation 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 variety of variables which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, gas commercialisation, development progress, operating results, 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 Australian currency, unless otherwise stated. 2 1 Program • Overview - John Ellice-Flint • Harvesting value from existing assets - Jon Young • Financial performance - Peter Wasow • Creating value from new assets - John Ellice-Flint • Q&A 3 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A John Ellice-Flint Managing Director 4 2 Safety - Recordable Injuries Reduce • Major focus Total Recordable Case Frequency Rate (12 month rolling average) 10 • Embedding new culture 8 Full Year 6 2002 Full Year • Applying a range 2003 TRCFR of programs 4 (per million exposure hours) exposure (per million 2 0 Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun 02 02 02 02 03 03 03 03 03 03 04 04 04 Month / Year 5 Positioned for High Oil Prices Tapis (AU$) 80 70 Average $48.9/bbl 60 50 40 A $/bbl Average $26.5/bbl 30 1st half 2003 1st half 20 average 2004 $45.91 average 10 $46.76 0 1992 1994 1996 1998 2000 2002 2004 6 3 Results Reflect Moomba Half Year Half Year 2004 2003 Produced volume (mmboe) 21.2 26.8 Sales volume (mmboe) 22.0 26.5 Net profit after tax & write downs ($m) 86.5 135.6 Operating cash flow ($m) 192.6 421.7 Gearing (% net debt/net debt + equity) 28.7 25.3 Dividend (cents) 15 15 TSR (% annualised) 6.8 1.2 7 Reshaping the Organisation John Ellice-Flint Managing Director & Chief Executive Officer Jacques Bruce Rick Paul Jon Peter Gouadain Wood Wilkinson Moore Young Wasow VP VP VP VP Exec VP Chief Geoscience Strategic Gas Marketing Dev Projects Operations Financial Projects Officer Exploration Commercialisation Development Production Cash 8 4 Value From New Assets Developments start to contribute Gas commercialisation progress Exploration portfolio management Value from acquisitions and divestments 9 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A Jon Young Executive Vice President Operations 10 5 1H 2004 Production mmboe Natural Field New Moomba Decline Performance Projects Incident 30 28 26.8 (1.6) 26 (0.3) 0.3 25.2 (4.0) 24 21.2 22 20 18 16 14 12 10 1st Half 2003 1st Half 2004 11 Moomba Incident Moomba re-streaming is nearing completion • Liquids Recovery Plant (LRP) B recommissioning underway • Minimal production impact in 2nd half • Minimal impact on longer term costs • No reserves impact Stage 1 & 2 Stage 3 Stage 4 Stage 5 Stage 6 • Storage gas • Gas rate • Full gas • LRP A • Complete 3 Jan (100 500 TJ/d processing resumes recovery TJ/d) • Oil at 90% capacity May August • Storage + • LRP rebuild • Liquids at field gas 4 Jan 70% (200 TJ/d) January February March April May June July August 12 6 East Spar • Decline in deliverability due to water breakthrough • Recent drilling outcomes • Accelerated John Brookes development 13 Stag • Field decline increased • Mechanical reliability • Workovers commenced • Infill sidetracks imminent • Waterflood optimisation ongoing 14 7 Cost Management Santos Continuous Improvement Program is on track to deliver substantial cost savings through process redesign • Strategic sourcing Process Benchmarking 1st tier • Maintenance strategy Continuous process improvement • Drilling and completions 2nd tier Santos • Asset utilisation 2005 Santos • Engineering 3rd tier Now Santos • Headcount reduction Pre-2001 4th tier 10% 20% 30% 40% Improvement 15 Technology New technologies continue to be implemented… • Pinpoint fraccing • Coiled tubing underbalanced drilling • Improved real time production data capture • Moomba plant control systems upgrade • Wellhead telemetry … to increase reserves, productivity and reduce costs 16 8 Moomba Hub Leveraging Moomba’s commercial and infrastructure position… • Gas swaps Spot sales • Spot sales 3rd • Third party processing Peaking party services • Price review gas HUB 3rd Gas party oil swaps …is on track to deliver ~ $100 million NPV 10 17 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A Peter Wasow Chief Financial Officer 18 9 Sales Revenue $m Commodity Controllable Natural Decline Prices Items 750 716 (30) 693 (103)* (20) (5) 16 700 8 8 650 Gas 590 600 Volumes Liquids Liquids USA Aust Bayu- Volumes Prices Gas Gas Undan 550 Prices Prices start-up Moomba 500 Incident 450 400 350 300 250 200 1st Half 2003 1st Half 2004 * Reflects the 2004 volume variance based on 2003 prices 19 Production Costs $m 150 140 128 8 (8) 131 130 (3) 123 120 110 Cost Bayu- Moomba Incident 100 savings Undan start-up 90 80 70 60 50 1st Half 2003 1st Half 2004 1st Half 2004 Production Cost Production Cost Production Cost $4.78/boe $4.88/boe $6.18/boe 20 10 Netback ($/boe) Market Movements Controllable Items 21 2.03 (1.93) 20 0.37 19.13 (1.35) 18.66 0.36 19 18.76 (0.66) 0.30 Bayu- 17.78 18 US$ FX Cost Undan Commodity Volume Aust savings Start up Moomba 17 Prices /Mix Gas Prices Incident 16 15 1st Half 2003 1st Half 2004 21 Depreciation, Depletion & Amortisation $m 2003 Reserve Movements (24) 14 250 230 11229 20 225 209 Appraisal 200 Volume 2003 Success Moomba 175 Revisions Incident 150 125 100 75 50 25 0 1st Half 2003 1st Half 2004 $8.58/boe $9.86/boe 22 11 NPAT $m 2 149 (62) 150 136 (28) 31 Other 125 7 (14) 5 7 3 Write- 100 Field decline 87 Bayu- downs Aust gas Undan Restructure Cost prices start-up 75 Comm savings Moomba odity Incident prices 50 25 0 1st Half 2003 1st Half 2004 23 Capital Expenditure 1st Half 2004 - $390m 1st Half 2003 - $344m Exploration 41 61 Bayu-Undan Liquids 35 81 Bayu-Undan LNG 66 20 Mutineer-Exeter 53 3 Cooper Gas Devt 64 Cooper Oil D&D 26 13 99 Moomba LRP Rebuild 36 0 USA 25 21 Southern Aust 10 11 Corporate & Other 36 35 100 80 60 40 20 0 0 20406080100 24 12 Cash Flow & Net Debt Operating cash flow ($m) Net Debt ($m) 1,239 142 450 422 1,250 (49) (74) 1,097 1,125 79 350 Sales 120 Moomba volumes 299 (106) Incident 1,000 FX on Working 898 Debt 250 capital & tax 875 payments 193 Net Cash flow Moomba Incident 150 750 1st Half 2003 1st Half 2004 Year End 1st Half 2004 1st Half 2003 (exc. Moomba) 2004 Gearing Gearing 25.9% Gearing 22.5% 28.7% 25 Capital Management • Funding the growth program • Redeeming existing Resets of $350m • Offering FUELS $500m • FUELS more equity-like • Improves capital structure 26 13 International Accounting Standards (IFRS) Effective 1 January 2005 No extractive IFRS half year IFRS full year industry standard reports – including reports – including available comparatives comparatives parallel accounts required time elapsed1 Jan 04 30 Jun 0431 Dec 04 30 Jun 05 31 Dec 05 “Grandfathering” “Grandfathering” exposure draft issued issued as a ED6 standard? 27 Meeting the Challenge Overview Harvesting value from existing assets Financial performance Creating value from new assets Close Q&A John Ellice-Flint Managing Director 28 14 Developing New Assets Project Start-ups 2004–2006 2004 2005 2006 Bayu-Undan Liquids Mutineer-Exeter Bayu-Undan LNG 1Q 100% Mid 60% 1Q 50% Minerva John Brookes Casino 4Q 90% Mid 20% 1Q 20% Maleo Oyong 4Q-05/1Q-06 10% 1Q 10% 1Q Production commences Sanctioned Pre-sanctioned 29 Developing New Assets Potential Projects 2007–2010+ 2007 2008 - 2009 2010+ • Sole • Petrel-Tern • Hides • Golden Beach • Evans Shoal • Indonesia exploration • Kipper • Indonesia exploration • Otway exploration • US exploration • Egypt exploration • Onshore Aust oil • Otway exploration • Onshore Aust gas 30 15 Bayu-Undan • Liquids project complete ahead of schedule, on budget • LNG project over 50% complete on schedule on budget 31 Mutineer-Exeter • On track for mid 2005 start-up • FPSO topsides construction and installation in progress • Subsea equipment ready for delivery from September 32 16 John Brookes – Varanus Hub • Gas Sales John Brookes Wellhead Platform East Spar Gas Plant (water depth ~ 47m) Gas Processing Agreement signed & Compression • Major facilities contracts in place Varanus Island East Spar • Platform fabrication Pipeline to Mainland commenced 33 Casino • Project close to sanction • Low environmental impact • Facilitates further exploration 34 17 Indonesian Gas Maleo • MOPU bids under evaluation • Gas securitisation issues nearing completion • Planned project sanction 3Q-04 Oyong Bawean 1 PSC 00 50 • Reviewing recoverable oil kilometreskilometres Bawean Island reserves Legend Santos acreage Java Sea Novus acreage • Reviewing development plan Oyong Maleo Kangean IslandsIslands Madura Offshore PSC options Madura Island Sampang PSC Surabaya Oyong Maleo Area ll Area Area lV V Area l Porong • Gas securitisation issues under Area lll Brantas PSC Brantas PSC Bali Sea Grati North Bali l Central PSC negotiation Java