Expansion plans put Santos in the box seat
CONNECTING the east coast to overseas energy markets, and pushing up domestic gas prices, has transformed Santos by increasing the value of its oil and gas assets, its chief executive, David Knox, says.
Santos reported a 31 per cent fall in its full-year net profit to $519 million on Friday. The 2011 result was boosted by $408 million in gains from the sale of assets, including the Evans Shoal offshore field in the Bonaparte Basin, and a stake in the Gladstone LNG project.
Almost everything else was up. Production rose 10 per cent last year to 52 million barrels of oil equivalent, and sales rose 18 per cent to $3.2 billion. Excluding one-offs, Santos's underlying profit rose 34 per cent to $606 million. The shares rose 15¢ to close at $12.05.
Mr Knox said Santos was three years into its transformation from an Australian to a regional energy player, underpinned by its investment in the $US18.5 billion GLNG project, fuelled from Queensland's coal seam gas fields.
Along with two other approved CSG-LNG projects in Queensland - Origin Energy's APLNG and BG's QCLNG - the effect would be to increase gas prices to between $6 and $9 per gigajoule or higher.
"Our strategy in getting involved [in Gladstone LNG] was to unlock the domestic gas market," Mr Knox said, and the resulting increase in east coast gas prices had "completely rebased Santos's gas portfolio".
Santos said the GLNG project was on budget and on schedule. Both Mr Knox and the chief financial officer, Andrew Seaton, stated unequivocally that the company would not need to raise equity - whether to fund the GLNG project, or to maintain the company's credit rating - under any currency or oil price scenario. While construction activity would peak this year at GLNG, cash flow would soon kick in from the Fletcher Finucane and PNG LNG projects.
Mr Knox talked up the prospects for Santos's exploration for shale gas in the Cooper Basin, saying "we are optimising our [drilling] program to maximise the potential for unlocking this basin" and reiterating that if recent successful flows at its Moomba and Gaschnitz wells were replicated, "the play could be multiple TCF [trillion cubic feet of gas]".
The Santos remuneration report noted Mr Knox received total pay of $5.9 million last year, up 18 per cent from $5 million in 2011.