Santos today outlined its new strategy to drive sustainable shareholder value by becoming a low-cost, reliable and high performance business.
It includes simplifying the business to focus on five core, long-life natural gas assets: Cooper Basin; Gladstone LNG; PNG; Northern Australia, and Western Australia Gas.
The remaining assets will be packaged and run separately for value as a standalone business.
The firm will also progress growth opportunities across higher margin conventional assets and maximize production across operated assets.
In addition, Santos will develop focused exploration strategy and capability, and identify additional gas supply to drive long-term value from the five core, long-life natural gas assets.
The strategy will be underpinned by disciplined capital management. Santos will target a US$1.5 billion reduction in net debt to less than $3 billion by the end of 2019 through increased operating cash flow and releasing capital through non-core asset and infrastructure sales.
CEO Kevin Gallagher said substantial progress had been made in 2016 on the Santos turnaround.
“We have reduced the free cash flow breakeven oil price to US$39 per barrel, down from US$47 per barrel at the start of the year,” he said.
“Capital expenditure and upstream unit production costs have been reduced by 53% and 17% respectively, headcount has been reduced by more than 500 positions, and the business has been free cash flow positive for each of the last seven months.”
2016 sales volumes are expected to be at the top end of the 81-83 MMboe guidance range and upstream unit production costs below $9/boe. 2016 production is expected to be in the top half of the 60-62 MMboe guidance range.
“Our turnaround strategy also brings significant oil price leverage, with operating cash flow forecast to increase by $300 million in 2017 for a $10/bbl oil price move above $50/bbl,” Gallagher said.
Santos has appointed former AWE CEO Bruce Clement as vice president to run the new standalone low-cost business comprising all non-core assets.
Image: Santos GLNG
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