Commentary - Santos

Review by
Chief Financial Officer
Andrew Seaton
Santos delivered strong financial results
in 2012, with record sales revenue and
underlying profit up 34% to $606 million.
Santos produced strong operational and
financial results in 2012, which is testament
to our focus on delivery across all parts of
the business.
Sales revenue was up 18% to a record
$3.2 billion, driven by higher crude oil sales
volumes and higher gas prices. Gas prices
were up 9% on the previous year, reflecting
higher prices from our Indonesian and
Western Australian assets.
Net profit after tax (NPAT) was $519 million
for the year. The previous year comparable
profit of $753 million included gains on
asset sales of $408 million after tax. The
2012 result includes $77 million of after
tax impairments. The impairments primarily
relate to the Sangu assets in Bangladesh and
revisions to abandonment cost estimates for
the non-operated Thevenard Island asset,
located offshore Western Australia.
Underlying net profit after tax was up
34% to $606 million, continuing the
growth trend since 2009. Growth in
underlying profit was driven by higher
liquids volumes and gas prices, partially
offset by higher costs.
Production costs of $660 million were
$104 million higher than the previous year,
with over half of this increase due to the
commencement of production from new
assets, such as Chim Sáo, Reindeer and
Wortel. Other main drivers of the cost
increase were the planned shutdown of
Bayu-Undan/Darwin LNG and higher
maintenance activities.
Managing costs remains an absolute
priority for Santos, and we are targeting
2013 production costs of between
$630 and $660 million.
Operating cash flow of $1,658 million
was 32% higher than the previous year
due to the favourable impact of higher
sales volumes and lower taxes paid, partially
offset by higher operating costs. This is a
32% increase on 2011, and underpins our
robust funding position in support of our
major growth capital expenditure program.
The company’s capital expenditure increased
to $3.4 billion in 2012 as our investment
in growth projects continued. Capital
expenditure is forecast to peak in 2013
at approximately $4 billion, including
approximately $2.5 billion on the PNG
LNG and GLNG projects, ahead of their
start-up in 2014 and 2015 respectively.
12