Santos intends to almost double the natural gas production to more than 100 million barrels of oil by 2025.
Shedding light to the growth strategy of the company, Santos Managing Director and Chief Executive Officer Kevin Gallagher said the recent $2.15 billion acquisition of Quadrant Energy would help reduce the company’s breakeven oil price and would also support to deliver a leading position in the oil finding at Dorado. Mr Gallagher told since the beginning of 2016, Santos has shown significant progress in bringing down the costs, building robust balance sheet, selling non-core assets and reinstating the shareholder’s dividend.
Growth projects of the oil and gas producer include developing the Barossa gas field to supply Darwin LNG; Oil discovery at Dorado; expansion in Papua New Guinea along with proposed farm-in to P’nyang gas field and growth at Cooper Basin through a low-cost operating model. With the development to 4 rigs in Cooper Basin and exploration and growth opportunities in GNLG and Eastern Queensland, the company is expected to deliver additional supply to Eastern Australia market.
But Santos has been largely affected by the collapse of oil prices from mid-2014 until early 2016 which led to the sale of company’s assets and emergency capital raising to offset the price pressure. However, under the leadership of CEO Kevin Gallagher, company has successfully reduced the prices by cutting down costs since the start of Mr Gallagher joining in 2016. Moving the flag high Santos is now the Australia’s lowest cost onshore oil and gas operator, generating free cash flow to lower than a $40 per barrel oil price.
On East Coast Front, Santos expects to supply over 70 PJ of sales gas and ethane to the east coast domestic market in 2018 at the back of increasing direct sales to end-users. Whereas, in the Western Australia, well appraisal programs and joint ventures alignments are expected to deliver the higher production and lower unit cost. Moreover, to meet the oil and gas needs of the market, company positions to maintain a strong infrastructure and transportation facilities.
Santos targets to ramp-up GNLG’s sales to ~6 mtpa run-rate by 2019 year-end. At Cooper Basin drilling is expected to reach approximately 100 wells pa in 2019-20, whereas about 350-400 wells pa are expected to be drilled by GLNG activity in Queensland in the year 209-2020.
Further, the company expects its gearing ratio to decline to less than 30% by the end of 2019 ahead of privately held Quadrant Energy acquisition.
Santos’ share price slipped by 1.4% to $7.23 on 26 September 2018 (3:45 PM AEST). The stock has seen a tremendous performance change of +81.89 over the past one year. Currently, it is trading a PE of 44.940 x with market capitalization of $15.27 billion.
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