Commentary - Santos

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3 3 3 3 2012 delivery Australia’s first commercial production of gas from a shale well. Highest Cooper oil production since 2009. First multi-well pad drilling project executed in Cooper Basin. Farm-in to 19 million acres across the Amadeus and Pedirka Basins. 1,000th cargo at Port Bonython, South Australia. 2012 key statistics PRODUCTION 22.3 mmboe 22.3 22.4 22.3 Turning the valve at Moomba-191 shale well, Cooper Basin. 2010 2011 2012 Production was in line with 2011, with higher Cooper Basin oil production offset by lower Queensland gas production. EBITDAX (excluding asset sales) $666 million 577 633 666 2010 2011 2012 16 EBITDAX increased by 5%, with higher crude oil sales driving higher sales revenue partially offset by higher third-party purchase costs. Drilling at the Tindilpie multi-well pad, Cooper Basin.
Eastern Australia Positioned for growth, with innovation and investment helping us meet rising demand locally and abroad. Santos is a leading producer of natural gas, gas liquids and crude oil in eastern Australia. Gas is sold primarily to domestic retailers and industry, while gas liquids and crude oil are sold in the domestic and export markets. The demand for natural gas in eastern Australia is expected to triple by 2016 which is driving gas prices significantly higher. Santos has substantial gas reserves and resources, conventional and unconventional, and is well positioned to supply the growing eastern Australian gas market. Our aim is to double current production by 2020 whilst delivering lower production costs per barrel through maximising utilisation of existing infrastructure. COOPER GAS TRANSITION UNDERWAY Gas production of 66.6 petajoules during 2012 was 1% higher than 2011, with improvements in field and plant downtime partially offset by lower upstream capacity due to the project backlog caused by the wet weather that affected the 2010–2011 drilling campaigns. During the year, 23 gas development wells were drilled, including the Tindilpie six-well pad that will produce 15 mmscf/day. Multi-well pad technology is used extensively in the United States for its greater efficiency, lower costs and a smaller environmental footprint. A 16-well pad is planned for the Cowralli field for 2013, with an expected reduction in each well cost of 16%. During the year, Santos also developed plans for a phased expansion of the Moomba processing plant, with phase one gross investment of up to $800 million over the next four years. This will be the most significant project in three decades affecting the Moomba plant and field satellites, and will include an additional carbon dioxide processing train and associated facilities, upgrades to existing satellite compression stations, and installation of gathering systems and trunklines covering hundreds of kilometres. DELIVERING COOPER OIL Santos produced 3.2 million barrels of oil from the Cooper Basin in 2012, its highest production since 2009. Driving the increase was the 2011 drilling campaigns in the Zeus and Cook fields, improved access to field infrastructure following the 2010–2011 floods, and strong performance from the Charo wells brought on line in the third quarter of 2012. In addition, Santos generated additional revenue through the ongoing processing of third-party crude oil at Moomba. This is expected to grow by 30% in 2013 as additional third-party volumes are processed. MOOMBA-191 SUCCESS Santos achieved a significant milestone in the second half of 2012 with the commencement of Australia’s first commercial production of gas from a shale well. The Moomba-191 well was commissioned in late September 2012 with an initial flow rate greater than 3 mmscf/day, exceeding expectations. As it was only 350 metres away from existing pipelines and only eight kilometres from Moomba, the well was able to be connected to the market within weeks. As at the end of the year, the well was flowing at 2.4 mmscf/day, a pleasing result. Following this success, Santos will expand its unconventional gas exploration campaign in 2013, with four exploration wells targeting Moomba shale and the Nappamerri Trough basin centred gas plays. NSW GAS OPPORTUNITY Santos has the largest natural gas acreage position in New South Wales, with uncontracted reserves close to existing market channels. Santos plans to commence a three-year drilling and seismic program in the Gunnedah Basin in 2013, including pilot and corehole wells to gather production data, working over existing wells and constructing state-of-the-art water treatment facilities. FARM-IN TO AMADEUS AND PEDIRKA BASINS In October, Santos announced a farm-in with Central Petroleum Ltd to earn a 70% interest in 13 permits in the Amadeus and Pedirka Basins, onshore Northern Territory. Under the agreement, Santos will be the operator of all the permits. A 2D seismic survey and an exploration well are planned, targeting a potentially large conventional and unconventional gas resource. The proposed program is a natural extension to Santos’ existing operations in the Mereenie field in the Amadeus Basin, which are managed by the Eastern Australia business and produce oil, condensate and gas. Santos Annual Report 2012 17
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 and 14: Production and sales Santos continu
Page 15 and 16: RESERVES (SANTOS SHARE) mmboe Year-
Page 17 and 18: NET PROFIT AFTER TAX $million AVAIL
Page 19: 2012 key statistics GREENHOUSE GAS
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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Commentary - Santos

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