2024 Half-year Results Video Presentation
Summary
TLDRSantos's 2024 half-year results presentation highlighted strong financial performance with $27 billion in sales revenue and $1.8 billion in EBITDAX. The company is progressing on major projects like Barosa, Pika, and Mumba CCS, aiming for stable production and cash flows. Santos is committed to safety and operational efficiency, with a focus on decarbonization and low-carbon fuel development. A record interim dividend of $422 million was announced, reflecting the company's strategy to return at least 40% of free cash flow to shareholders.
Takeaways
- 📍 Santos's 2024 half-year results demonstrate a disciplined operating model and strategic success.
- 💹 The company reported sales revenue of $27 billion, EBITDAX of $1.8 billion, free cash flow from operations of $1.1 billion, and an underlying profit of $654 million.
- 📈 Santos plans to pay a record interim dividend of $422 million, reflecting a commitment to returning at least 40% of free cash flow to shareholders.
- 🔍 The company's free cash flow from operations in the first half of 2024 is consistent with the same period in 2023, allowing for a significant return to shareholders.
- 🏗️ Major projects like Barosa, Pika, and Mumba CCS are progressing well, with Barosa expected to start up in less than a year and Mumba CCS to begin operations this year.
- 🌿 Santos is committed to safety and has seen improvements in personal safety performance and a reduction in loss of containment incidents.
- ⚙️ Operational performance remained strong despite external challenges like extreme weather and inflation, with a focus on managing costs.
- 🌐 Santos is expanding its LNG production to meet regional demand, with a portfolio that will have a capacity of nearly 8 million tons per annum by 2028.
- 🌿 The company is progressing towards decarbonization with its CCS projects, aiming for net-zero scope one and two emissions by 2040.
- 🔋 Santos's balance sheet is strong, with gearing within the target range and a focus on cost management and operational efficiency.
Q & A
What are the key financial highlights for Santos in the first half of 2024?
-Santos reported sales revenue of $2.7 billion, EBITDA of $1.8 billion, free cash flow from operations of $1.1 billion, and an underlying profit of $654 million. The company also declared a record interim dividend of $422 million (13 US cents per share).
What are the major projects contributing to Santos's long-term production and cash flow?
-Santos is progressing on key projects such as Barosa, Pika, and Mumba Carbon Capture and Storage (CCS). Barosa is expected to start production within a year, and Pika is following closely behind. The Mumba CCS project is set to generate new revenue from carbon credits by the end of 2024.
How does Santos plan to return value to its shareholders?
-Santos aims to return at least 40% of free cash flow from operations to shareholders. In the first half of 2024, it returned $422 million through dividends. The company’s strong free cash flow enables it to maintain consistent and reliable shareholder returns.
How has Santos improved its safety performance in the first half of 2024?
-Santos saw improvements in personal safety and a significant reduction in loss-of-containment incidents. The company focuses on process safety and continuous learning from incidents to enhance safety across its operations.
What are the future growth prospects for Santos in terms of production?
-Santos expects to grow production with continued development in areas like the granite wash play at Mumba, with improvements in drilling technology and cost optimization. Additionally, record production rates were achieved from its CSG fields in GLNG.
How is Santos contributing to decarbonization and renewable energy efforts?
-Santos is developing projects like the Mumba CCS, which is one of the largest CCS projects globally and will start generating revenue through carbon credits. Additionally, solar and battery systems were installed at camps in the Cooper Basin, advancing electrification of operations.
What role does Santos see for LNG in the energy transition?
-Santos views LNG as crucial for energy security and the transition to low-carbon energy. It is expanding its LNG production to meet regional demand, with projects expected to produce nearly 8 million tons per annum by 2028.
What operational challenges did Santos face in the first half of 2024?
-Santos managed several external challenges, including extreme weather events and inflation. Despite these, the company focused on cost management, maintaining a strong operational performance.
What is the progress on the Barosa gas project?
-The Barosa project is 80% complete, with two wells drilled and completed. The gas export pipeline is finished, and the project is on track for first gas production within the next year.
How is Santos positioned to meet future energy demand in Asia?
-Santos is well positioned to meet Asia's growing demand for LNG, with a portfolio of world-class assets and a proximity advantage to Asian markets. It has strong contracted pricing and expects to benefit from the demand growth projected through 2050.
Outlines
📊 Santos 2024 Half-Year Results Overview
The speaker opens by acknowledging the traditional landowners and paying respect to Indigenous elders. They discuss Santos' financial performance, noting strong cash flows, significant progress on major projects like Barossa, Pikka, and Moomba CCS, which will generate long-term production and cash flow. Barossa is close to startup, and Moomba CCS will begin this year, generating revenue from carbon credits. Santos reported a sales revenue of $27 billion, free cash flow of $1.1 billion, and a record dividend of $422 million for shareholders, reinforcing the company’s focus on reliable shareholder returns.
💡 Record Operational Performance and LNG Expansion
Santos highlights record reliability across facilities and projects in Papua New Guinea (PNG), with Angore wells set for production in Q4 2024. PNG LNG projects continue to exceed expectations, delivering high-quality oil and gas while Santos' focus on decommissioning and improving cost management in Western Australia progresses. The company also advances its carbon capture and storage (CCS) strategy in Moomba, positioning itself as a leader in low-carbon fuel and CCS projects across its portfolio. With growing LNG demand in Asia, Santos emphasizes the strategic importance of LNG in the energy transition.
🌍 Progress on Global Projects and Carbon Capture
The Barossa project is nearing completion, with significant advancements in drilling and infrastructure installation. The Pikka Phase 1 project in Alaska made strong progress, and the Moomba CCS project, one of the largest of its kind, is set to become a new revenue source for Santos through carbon credits. Santos positions itself to benefit from long-term demand for LNG in Asia and continued investments in CCS and renewable energy projects, highlighting its vision to deliver decarbonized energy solutions.
💵 Financial Performance and Capital Management
The CFO presents Santos' strong financial results, including free cash flow of $1.1 billion and an EBITDA of $1.8 billion. The company expects a reduction in capital expenditure as major projects like Barossa and Pikka come online, improving cost efficiency. Santos maintains a strong balance sheet with gearing at 19.9%, focusing on delivering shareholder returns while managing operational costs. The company emphasizes its disciplined capital management and continued investment in strategic projects.
📈 Strong Cash Flow and Strategic Outlook
Santos delivers robust financial performance despite lower volumes and pricing, achieving $2.7 billion in sales revenue. The company outlines a strong liquidity position with $4 billion in cash and credit facilities, and emphasizes ongoing investments in its CCS projects. With a focus on optimizing its cost base and reducing capital expenditures, Santos positions itself for continued growth, strong shareholder returns, and resilience against market fluctuations. The company's diversified portfolio supports sustainable long-term growth and aligns with its low-carbon transition goals.
Mindmap
Keywords
💡Santos
💡Carbon Capture and Storage (CCS)
💡Barossa Project
💡Free Cash Flow
💡Dividend
💡Mumba CCS Project
💡Liquefied Natural Gas (LNG)
💡Energy Transition
💡Decarbonization
💡Pikka Project
Highlights
Santos's 2024 half-year results demonstrate success with a disciplined operating model and strategy.
Santos continues to generate strong cash flows from existing assets.
Significant progress on major projects Barosa, Pika, and Mumba carbon capture and storage.
Barosa project is less than a year away from startup.
Mimba CCS will start up this year, generating revenue from carbon credits.
Sales revenue of $27 billion for the half, EBITDAX of $1.8 billion.
Free cash flow from operations of $1.1 billion and underlying profit of $654 million.
Record interim dividend of $422 million or 13 US cents per share.
Free cash flow from operations consistent with the first half of 2023.
40% of free cash flow from operations returned to shareholders.
Safety performance improved with a significant reduction in loss of containment incidents.
Operational performance strong despite external challenges like extreme weather and inflation.
Mumba CCS in final stages of commissioning, on track for first injection by the end of the year.
Cooper Basin's potential to become an energy super Basin for the next 50 years.
Santos expanding Liquefied Natural Gas (LNG) production to meet regional demand.
Barosa gas project almost 80% complete, first gas expected within the next year.
Pika Phase 1 Project in Alaska has made strong progress with 40 miles of pipeline installed.
Mumba CCS expected to generate new revenue through Australian carbon credit units.
Santos's long-term contracted positions with high-quality LNG buyers in Asia provide stable cash flow.
Santos is well-positioned to benefit from ongoing demand for LNG in Asia.
Santos continues to view Australia, the US, and PNG as critical energy-producing nations.
Santos aims to reach Net Zero scope one and two emissions by 2040.
2024 has been an exciting year for Santos with a strong base business and clear line of sight to new production volumes.
Santos has delivered strong financial results for the first half of the year.
Transcripts
welcome to the presentation of Santos's
2024 halfe results I'm speaking today
from the traditional lands of the Garner
people of Adelaide
Plains I pay my respects to their Elders
past present and emerging I'd also like
to acknowledge and recognize the support
of traditional owners indigenous people
and Nationals everywhere Santos operated
operates including in Papa New Guinea
teor Lee and
Alaska I'm pleased to present yet
another set of financial results that
demonstrates the success of a
disciplined operating model and our
strategy Santos continues to generate
strong cash flows from existing assets
and has made significant progress on its
major projects Barosa Pika and mumba
carbon capture and storage these
projects will underpin long-term stable
production and cash flows for the
company with Barosa less than a year
away from startup and Pika falling close
behind mimba CCS will start up this year
generating a new Revenue Source from
carbon
credits I will provide an overview of
the halfe results for 2024 before
handing over to Chief Financial Officer
antha mckinnel who will discuss them in
more detail
detail before we start I draw your
attention to the usual
disclaimer sales revenue of $27 billion
for the half generated ebit Dax of $1.8
billion free cash flow from operations
of $ 1.1 billion and an underlying
profit of $654
million I am pleased to report that the
board has determined to pay a dividend
of $422 million or 13 us cents per share
on Frank this is a record interim
dividend for
Santos our free cash from operations in
the first half of 2024 is consistent
with the half of 2023 at almost $1.1
billion this has enabled a record $422
million to be returned to shareholders
achieving our goal of returning at least
40% free cash flow from operations to
our share shh
holders this reflects our commitment to
deliver consistent reliable shareholder
returns in accordance with a Capal
management
framework always safe is one of our core
values our expectation is that every day
every Santos employee and contractor is
focused on keeping themselves and their
workmates safe so that everyone goes
home healthy every single
day personal safety performance improved
in the first half and we've seen a
significant reduction in loss of
containment
incidents while Santos Compares Fab
favorably with in Industry benchmarks
process safety performance is critical
and continuous learning from all safety
incidents is vital to improve
performance and create safer
workplaces our operational performance
has been strong for the first half of
the year in the face of a number of
external challenges and uncertainties
from from extreme weather events to
inflation I remain focused on the things
within our control in particular
managing our cost
base my management team shares this
commitment and we have initiatives in
place across the business to continue to
drive cost
down at Mumba the granish granite wash
horizontal well encountered a 900 met
lateral section in the Target interval
and pleasingly the well has confirmed
the rate per stage we can expect in
future development Wells which should
deliver in the order of 10 to 15 times
the productivity of vertical
Wells we successfully installed and
commissioned solar and Battery Systems
at two of our camps in the Cooper Bas
advancing our plans for electrification
of
operations Santos plans to grow
production with continued development in
the Central Area focused on the granite
wash play followed by the patara Deep
we continue to improve operational and
cost performance with drilling
technology advances multi-well pads and
campaign drilling combined with
rationalization of surface facilities
and Midstream optimization through
electrification simpli simplification of
processing and other
projects at glng we delivered record
production rates from our CSG fields and
we remain on track to deliver 6 million
tons of LG from the project this year
glng also continued to support East
Coast domestic gas markets through
seasonal shaping of our l& cargos to
make more domestic gas available during
the East Coast winter demand
period across the operated facilities
and PNG we achieved record reliability
of
97.5% in the first half delivering
higher
production both angori Wells were
drilled and completed with angori on
track for production
in the fourth quarter of this year our
infill drilling program in PNG has also
been very successful with the discovery
of high quality producible oil zones in
deeper
reservoirs seven Equity P LNG cargos
were sold delivering incremental value
for shareholders and our marketing and
trading teams completed two price
reviews with long-term customers in
PNG and in teamour Ley in Northern
Australia p and continues to exceed
expectations and is still supplying gas
into the Northern Territory domestic
Market over in Western Australia
cyclical production from the reindeer
field is expected to continue throughout
the second half of
2024 and the wa team is also progressing
our decommissioning campaign safely
effectively and efficiently with a focus
on continuous Improvement and optimized
scheduling to manage costs
Santos Energy Solutions continues to
develop our three Hub ccs and low carbon
fuel strategy in Australia and teor
Ley Mumba CCs is in the final stages of
commissioning with the pipeline being
pressured up and CO2 being introduced to
the system imminently the project is on
track for first injection and ramp up to
fuel capacity by the end of this
year we're now planning phase two of
Mumba ccs and of completed a study on
CCS pipelines for the
project the Cooper Basin is a very
exciting long life asset to have in the
portfolio because of its key
infrastructure position its connection
to Gladstone l& and Export markets and
its gas production growth potential as
well as its carbon capture and storage
and Renewables resource
potential together these factors could
make the Cooper Basin an energy super
Basin for another 50 years or more
producing both traditional and low
carbon fuels and sequestering carbon at
scale with First cast from Barosa
expected next year I want to take a
moment to highlight the Strategic
importance of LG in the energy
transition and how Santos is expanding
its LG production to meet Regional
demand energy security and the energy
transition will continue to drive demand
for l in Asia out to 2050 and
Beyond Santos has a portfolio of
worldclass LG assets and development
projects that by 2028 will have a
capacity of nearly 8 million tons perom
of LG and increasing production for
delivery into
Asia the portfolio is advantaged by a
quality customer base and strong
contracted pricing with an average slope
to oil above 14
% Barosa will add around 1.8 million
tons perom to existing production of LG
from PNG LNG and Gladstone
LG the proximity of Santos's LG
portfolio to Asian markets is a real
advantage over other Supply sources with
lower shipping times and cost and lower
shipping emissions Santos's long-term
contracted positions with high quality
LG buyers in Asia provide stable cash
flow
generation the Barosa gas project is now
almost 80% complete and the progress we
have achieved following the successful
court case earli this year has been
impressive since Drilling recommenced in
January we have drilled and completed
two Wells with a third well drilled to
the top of the reservoir the most recent
well results were better than expected
with excellent Reservoir quality and
thickness encountered
the gas export pipeline is now complete
with pre-commissioning completed in July
the surf or subsurface facilities
installation is on track and 75%
complete with the fpso boy installed and
testing is is now underway on the six
infield subsea flow lines the fpso work
in Singapore is on track with all 16
topside modules now
installed the fpso has been moved to the
commissioning yard is on track to sail
away in the first quarter of
2025 I am very pleased with the good
progress that we are making on Barosa
with line of sight to First gas within
the next
year in Alaska the P Phase 1 Project has
progressed on all major work packages
and completed a strong first winter
season with 40 miles of pipeline
installed as well as all the vertical
supports required to complete the
pipeline we have drilled 11 Wells the
seawater treatment plant is progressing
and other infrastructure to support
production is on
track Mumba will be one of the largest
and lowest cost CCS projects in the
world and will be the proof point for
the role carbon capture and storage will
and must play for Santos for Australia
and for our Australian and Asian
customers as I've already mentioned the
plant is now in the final stages of
commissioning as we move towards first
injection and ramp up to full capacity
later this year importantly the Mumba
CCS Phase 1 Project is set to generate a
new source of revenue for Santos through
the issuance of Australian carbon credit
units Mumba will be the first project of
its kind to do so and we expect to see
Revenue flow within the next 9 to 12
months after the clean energy regulator
Assurance processes are completed
the market outlook for our products
remains strong while LG supply and
demand appears fairly balanced through
to the early 203s a significant number
of LG projects will need to be
sanctioned to fill the W widening and
balance between supply and demand
thereafter according to Wood McKenzie
gas demand in Asia is forecast to grow
by 67% to 2035 with no pklg this side of
2050
as a leading Global independent LG
supplier with advantaged LG
infrastructure close to Asian markets
Santos is well positioned to benefit
from this ongoing demand in oil
forecasts indicate there is a need for
new Supply investment even in the most
aggressive transition scenarios with
projects such as p in Alaska well
positioned to meet ongoing demand Santos
continues to view Australia the US and
PNG as critical energy producing Nations
for the world underlining the importance
of its investments in these
regions we continue to be unrelenting
and sticking to our strategy to deliver
long-term shareholder value through
backfilling and sustaining our
production decarbonizing our operations
and developing low carbon fuels as
customer demand
evolves in executing our strategy we
will remain disciplined and how we
allocate Capital operate our business
and manage our
costs Santos is in good shape the
business is performing well we have deep
expertise and a strong team and our
focus is on delivering what we say we
will
do you can see how our strategy has
performed by looking at the free cash
flow generation from our operations
since
2015 by 2027 our free cash flow from
operation Target is around $4 billion
and by 2029 we could deliver almost $5
billion in free cash flow from our
operations as we deliver our major major
growth projects our committed CAPIC
declines and our free cash flow yield
looks extremely attractive over the
coming coming years this will provide us
with optionality and flexibility to
manage and deploy our Capital we have
invested at the right time and we now
see opportunities to deliver significant
returns to shareholders in accordance
with our disciplined Capital Management
framework our Diversified and strong
cash generative portfolio will continue
to drive shareholder returns through the
cycle we are decarbonizing our own
operations with our targets to reach Net
Zero scope one and two emissions by 2040
and we are embracing the opportunity to
become a lowc carbon fuels company as
market demand
evolves 2024 has been an exciting year
for Santos so far the base business is
strong and we have clear line of sight
to new stable long-term production
volumes generating robust cash flows
from Barosa and Pica from 2025 and 2026
respectively we are excited by the prog
progress that is being made on
decarbonization and the development of
new earning streams from projects light
mber
CCS I'll now hand over to anthia to
provide a detailed review of our
financial
results thanks Kevin and thank you
everyone for joining us Santos has once
again delivered strong financial results
for the first half of the Year our
performance reflects our commitment to
maintaining a disciplined lowcost
operating model throughout the business
as well as the advantages of our divers
specified
portfolio we continue to actively manage
our cost base across all our assets and
pleasingly with line of sight to Startup
at baros and Pier we expect to see a
reduction in the level of our committed
capital expenditure from
2025 driven by strong operational
performance across the portfolio we
began delivered a set of strong results
including free cash flow from operations
of $1.1 billion and EA Dax of $1.8
billion we're maintaining a strong focus
on our cost base with unit production
costs within current guidance at $7.94 a
barrel and we continue to focus on unit
production costs over the second half of
2024 our balance sheet is strong and
gearing is within our target range at
19.9% excluding leases and
23.5% when
included continued generation of strong
cash flows has ensured we are well
positioned to fund shareholder returns
we've delivered a 49% increase in the
interim dividend to 13 cents per share
on front this is consistent with our
policy at approximately 40% of free cash
flow from operations for the first
half Santos's disciplined operating
model and Capital Management framework
are designed to support and drive our
strategy ensuring strong and sustainable
cash flows our disciplined approach
ensures we can continue to sustain
production levels and Carry Out
necessary maintenance activities
regardless of fluctuations in commodity
prices free cash flow generated above
sustaining Capital requirements is
strategically deployed to deliver
competitive returns to shareholders
maintain a robust balance sheet and
invest in major projects including
actical energy transition
initiatives the combination of
disciplined investment cash flow
management and a strong focus on
strategic priorities
position Santos to sustain long-term
growth and deliver on our policy of
Distributing at least 40% of free cash
flow from operations
annually as our major projects are
delivered our committed capex decreases
and production increases and we will
actively balance the need to invest in
the business and provide strong returns
to
shareholders we continue to maintain a
strong focus on cost management across
our operations
production costs have decreased slightly
to $376 million compared to the same
period last year assisted by lower costs
in Northern Australia as Bay andan
transition from l& to domestic gas late
last year unit production cost excluding
Bay andan of $7.94 per barrel reflect
higher production costs in the coopa
Basin due to increased maintenance costs
including following extreme events as
well as higher electricity costs in
Queensland due to the use of two
electric compressors which have released
additional gas for sale for the second
half of 2024 we expect to continue our
strong focus on our production cost base
our commitment to operational efficiency
and resilience is further demonstrated
by our four-year Target of a free cash
flow Break Even oil price of less than
$35 per barrel for 2024 we're guiding a
fre cash flow sensitivity of around $400
million in free cash flow for every $10
increase in Brent
pricing we continue to actively manage
and optimize the group's cost base and
resources both at the regional and the
corporate level for example in wa we
have recently announced a reduction in
headcount to better align our people
costs with our work activities and we
continue to look for other opportunities
to reduce costs across the
group our Diversified portfolio of
Upstream gas and liquids assets
supported by strong LG contracts and
inflation linked fixed price domestic
gas agreements underpinned an operating
cash flow of $1.4 billion this result is
12% lower than the first half of 2023
primarily due to lower volumes and lower
realized pricing partially offset by
higher liquids
prices the averaged realized oil price
increased by 4% compared to the previous
half while the average realized LNG
price decreased
9% investing cash flow was lower
compared to last year primarily due to
lower sustaining capital expenditure and
we delivered strong free cash flow from
operations of 1.1
billion product sales revenue though
slightly lower than 2023 first half
remains strong at $2.7
billion eax of $1.8 billion resulted in
underlying earnings of $654 million for
the
half this table provides a snapshot of
our halfe results showcasing the strong
performance of our Upstream gas of
liquids business and its contributions
to EA Dax and margins it underscores the
strength of our Diversified and balanced
portfolio which has delivered strong eax
margins of 66% for the half across the
portfolio and we've maintained strong
margins across all all our
regions we remain focused on maintaining
a strong balance sheet to ensure we are
well positioned to execute our strategy
we continue to Target a strong level of
liquidity with our total liquidity of
approximately $4 billion held in a
combination of cash and undrawn finance
facilities as previously noted our
gearing of
19.9% excluding operating leases 23.5%
including leases remain remains within
our target range of 15% to
25% we have secured transition Finance
for our share of the MBA carbon capture
and storage project the facilities with
a 5-year tener and totaling $150 million
will be used to cover project costs
incurred to date and to draw upon as the
project progresses to First injection
and ramp up by year
end we have a supportive banking group
with access to over $3 billion in cash
bilateral and syndicated loan facilities
most of which are under undrawn these
facilities have maturities extending
from 2024 to
2028 there is no substantial debt
maturing before
2027 P LNG Finance is repaid through
project cash flows with the final PNG
LNG financing payment due in
2026 our strong balance sheet and
liquidity metrics are demonstrated by
the stable investment grade ratings we
maintain
from all major rating agencies thank you
very much and I'll hand you back to
Kevin thanks anthia in summary we have
started the year with a focus on
disciplined operations in our base
business and steady execution of our
major projects the company continues to
perform well and has a strong pipeline
of Upstream production and new new
revenue streams from decarbonization
projects we remain focused on operating
our business efficiently and delivering
our major projects to generate
consistent reliable long-term value for
our shareholders
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