Commentary - Santos

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Reserves and resources Santos’ growing reserve position, combined with existing infrastructure, leaves the company strategically well placed to supply the growing demand for natural gas in Australia and Asia. 2P RESERVES 1,406 mmboe 2P RESERVES RECONCILIATION mmboe 2P RESERVES REPLACEMENT RATIO % 1,440 1,445 1,364 1,406 1,364 71 23 (52) 1,406 305 1,013 180 2008 2009 2010 2011 2012 Reserves year-end 2011 Additions Acquisitions/ divestments Production Reserves year-end 2012 1-year RRR 5-year RRR In 2012, Santos continued its consistent track record of reserves growth. Proved and probable (2P) reserves have increased in nine of the past ten years, while producing over 480 mmboe in the same period. Proved and probable hydrocarbon reserves increased to 1,406 mmboe as at the end of 2012. Based on the 2012 production of 52 mmboe, Santos has a current 2P reserves life of 27 years. Approximately 88% of Santos’ 2P reserves are sales gas, 6% crude oil, 4% condensate and 2% LPG. On a proved (1P) reserves basis, year-end reserves were 663 mmboe, 14 mmboe higher than 2011. 2P additions of 71 mmboe in 2012 were driven by strong growth in Cooper Basin gas reserves, due to successful ongoing results from the infill drilling program combined with technical studies. Reserves growth was also recorded in Cooper Basin oil, Queensland CSG, the Carnarvon Basin and Vietnam, more than offsetting a reduction in Bonaparte reserves. Santos also booked Australia’s first 2P shale gas reserves, due to the success of the Moomba-191 shale gas well that was commissioned in September 2012. Net 2P acquisitions of 23 mmboe reflect Santos’ purchase of additional interests in the Combabula CSG field in Queensland, consolidation of interests in Fletcher Finucane, and the purchase of Woodside’s interest in Mutineer-Exeter. Santos has a strong track record of reserves replacement which is an important target to drive long-term shareholder value growth. A reserves replacement ratio (RRR) of more than 100% indicates that reserves grew by more than production during the period. In 2012, Santos’ 2P RRR was 180%, as reserves additions and net acquisitions and divestments of 94 mmboe exceeded production of 52 mmboe. Over the five years to 2012, Santos’ 2P RRR was a strong 305%. This was primarily driven by the sanction of the PNG LNG project, growth in CSG reserves in Queensland and NSW, Cooper gas and the Carnarvon. 10
RESERVES (SANTOS SHARE) mmboe Year-end 2011 Production Additions Acquisitions/ divestments Year-end 2012 1P reserves 649 -52 65 1 663 2P reserves 1,364 -52 71 23 1,406 2C contingent resources 2,162 - -108 -89 1,965 PROVEN PLUS PROBABLE RESERVES (SANTOS SHARE) BY ACTIVITY Sales gas PJ Crude oil mmbbl Condensate mmbbl LPG ’000 tonnes Total mmboe Reserves year-end 2011 6,959 71 72 3,449 1,364 Production -222 -10 -3 -194 -52 Additions 294 20 - 116 71 Acquisitions/divestments 130 1 - - 23 Estimated reserves year-end 2012 7,161 82 69 3,371 1,406 PROVEN PLUS PROBABLE RESERVES (SANTOS SHARE) YEAR-END 2012 BY AREA Sales gas PJ Crude oil mmbbl Condensate mmbbl LPG ’000 tonnes Total mmboe Eastern Australia Cooper Basin 1,213 30 21 2,522 280 Southern Australia 367 - 5 398 71 Queensland CSG 1,920 - - - 330 Queensland conventional 41 - - - 7 New South Wales CSG 1,141 - - - 196 Total Eastern Australia 4,682 30 26 2,920 884 Western Australia and Northern Territory Carnarvon 831 26 9 - 177 Bonaparte 179 - 7 451 41 Amadeus 123 8 2 - 31 Total Western Australia and Northern Territory 1,133 34 18 451 249 Asia Pacific Papua New Guinea 1,228 - 25 - 235 Indonesia 93 1 - - 17 Vietnam and Bangladesh 25 17 - - 21 Total Asia Pacific 1,346 18 25 - 273 Total 7,161 82 69 3,371 1,406 Unless otherwise stated, all references to reserves and resource quantities in this release are Santos’ net share. References to contingent resources are mid (2C) contingent resource estimates. Sales gas reserves and contingent resources are estimated after deducting the fuel, flare and vent necessary to produce and deliver sales gas. LNG project sales gas reserves are estimated after deducting the fuel, flare and vent necessary to produce and deliver sales gas to the LNG plant. The information in this reserves statement has been compiled by Greg Horton, a full-time employee of the company. Greg Horton is qualified in accordance with ASX Listing Rule 5.11 and has consented to the form and context in which this statement appears. Santos prepares its reserves and contingent resources estimates in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System (PRMS) prepared by the Society of Petroleum Engineers (SPE). Santos engages independent experts Gaffney, Cline & Associates, Netherland, Sewell & Associates, Inc. and DeGolyer and MacNaughton to audit and/or evaluate reserves and contingent resources. Each auditor found, based on the outcomes of its respective audit and evaluation, and its understanding of the estimation processes employed by Santos, that Santos’ 31 December 2012 reserves and contingent resources quantities in aggregate compare reasonably to those estimates prepared by each auditor. Thus, in the aggregate, the total volumes summarised in the Santos summary table represent a reasonable estimate of Santos’ reserves and contingent resources position as at 31 December 2012. Santos Annual Report 2012 11
Page 1 and 2: Annual Report 2012 The energy to de
Page 3 and 4: World of Santos Ref Location Site/A
Page 5 and 6: Contents Overview 2 Operating and f
Page 7 and 8: Operating cash flow $1,658 million
Page 9 and 10: Review by Peter Coates and David Kn
Page 11 and 12: Our vision and strategy Our vision
Page 13: Production and sales Santos continu
Page 17 and 18: NET PROFIT AFTER TAX $million AVAIL
Page 19 and 20: 2012 key statistics GREENHOUSE GAS
Page 21 and 22: Eastern Australia Positioned for gr
Page 23 and 24: On board the Mutineer-Exeter FPSO,
Page 25 and 26: GLNG Construction well underway on
Page 27 and 28: Pipelay underway at the Dua oil pro
Page 29 and 30: Jane Sharman Hemstritch BSc (Hons),
Page 31 and 32: DAVID KNOX Chief Executive Officer
Page 33 and 34: Principle 4 - Safeguard integrity i
Page 35 and 36: DEFINING REQUIRED SKILLS AND EXPERI
Page 37 and 38: Internal Board Review process Imple
Page 39 and 40: 2.2 Indemnity, access to informatio
Page 41 and 42: Regular meetings held with auditors
Page 43 and 44: 4.3 Examples of business risks Exam
Page 45 and 46: 4.4 Independence of auditors and no
Page 47 and 48: The Company remains committed to at
Page 49 and 50: Organisation chart BOARD COMMITTEES
Page 51 and 52: As at 31 December 2003 2004 2005 20
Page 53 and 54: Directors’ Report The Directors p
Page 55 and 56: Principal Activities The principal
Page 57 and 58: Asia Pacific Asia Pacific Business
Page 59 and 60: Dividends On 22 February 2013, the
Page 61 and 62: Shares Issued on the Exercise of Op
Page 63 and 64: The Company believes that the addit
Page 65 and 66:
Remuneration Governance People and
Page 67 and 68:
Long-term Incentives (“LTI”) Th
Page 69 and 70:
Long-term Incentives How much annua
Page 71 and 72:
Senior Executive Remuneration Overv
Page 73 and 74:
Table 7: Non-executive Directors’
Page 75 and 76:
Table 9 contains details of the num
Page 77 and 78:
Details of the fees and other benef
Page 79 and 80:
Long-term incentives How are long-t
Page 81 and 82:
Index A Announcements 173 Annual G
Page 83 and 84:
Major announcements made in 2012 13
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