Commentary - Santos

Directors’ Report
(continued)
Eastern Australia
Eastern Australia Business Unit EBITDAX was $668 million, 3% higher than 2011.
Santos’ share of Cooper Basin gas production of 66.6 petajoules (“PJ”) 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 wet weather impacting the
2010–11 drilling campaigns. Santos’ share of condensate production was 1 million barrels (“mmbbl”), in line with 2011. Santos’ share
of gas production from the Surat/Bowen/Denison areas in Queensland and the Otway Basin offshore Victoria was 30.6 PJ, 8% lower
than 2011 primarily due to the shut-in of the non-operated Northern Denison field.
Santos produced 3.2 mmbbl of oil from the Cooper Basin in 2012, its highest production since 2009. Driving the increase was the prior year
drilling campaigns in the Zeus and Cook fields, improved access to field infrastructure following the 2010–11 floods and strong performance
from the Charo wells brought on line in the second half of 2012.
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 and produced a first month average flow rate of 2.7 million
standard cubic feet per day (“mmscf/d”), exceeding expectations, with gas composition consistent with that historically produced in the
Moomba Big Lake area. As at the end of the year, the well was flowing at 2.5 mmscf/d. Following this success, Santos will expand its shale
development program in 2013, with four exploration wells targeting Moomba shale and the Nappamerri Trough basin centred gas plays.
WA and NT
Western Australia and Northern Territory Business Unit EBITDAX was $801 million, 17% lower than 2011 primarily due to the sale of the
Evans Shoal asset in 2011.
Santos’ Western Australia gas production increased by over 40% in 2012 to a record 65.0 PJ, driven by the Reindeer and Spar fields
brought on line in 2011. With partner Apache Energy, Santos processes gas through the Varanus Island and Devil Creek facilities in the
Carnarvon Basin, and supplies it to domestic resource and industrial customers. Santos’ share of Western Australia condensate production
of 635,600 barrels was 27% higher than 2011 due to higher production from the Reindeer and Spar fields.
Santos’ share of WA oil production of 2.8 mmbbl was 11% lower than 2011 primarily due to lower output from the Stag field. The Fletcher
Finucane oil project is on track for first oil by mid-year 2013 and will provide a boost to Santos’ production in the region.
Santos’ share of gas production from the Darwin LNG plant of 14.4 PJ was in line with 2011. The plant had a scheduled maintenance
shutdown in the first half of 2012 and has performed strongly since the shutdown.
In November 2012, Santos made a significant gas discovery at the Crown exploration well in WA-274-P, located between the Poseidon
and Ichthys fields in the Browse Basin offshore Western Australia. The well was drilled to a total depth of 5,301 metres and intersected
61 metres of net gas pay in the Jurassic-aged Montara, Plover and Malita reservoirs. Following on from the success at Crown, the Dufresne
and Bassett-West prospects are planned to be drilled in 2013, targeting gas and associated liquids in the neighbouring permit WA-408-P.
In June 2012, Santos and partner ConocoPhillips signed an agreement with South Korea’s SK E&S to progress the appraisal of the Caldita
Barossa gas fields offshore northern Australia. Under the agreement, SK E&S will fund up to US$520 million in carry obligations and
contingent payments with planning for a three-well appraisal program currently underway.
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