Santos : 2017 Half-year results

24 Aug 2017

Underlying profit increased to US$156 million. Net loss of US$506 million, including previously announced US$689 million after-tax net impairment

Strong delivery of the Santos turnaround. Costs reduced, sales volume guidance upgraded, stronger cash flows, free cash flow breakeven reduced to US$33 per barrel and net debt reduced to US$2.9 billion

Managing Director and Chief Executive Officer Kevin Gallagher said the company's half-year results delivered strong progress on the Santos turnaround strategy.

'We have removed substantial costs, generated significant free cash flow and reduced net debt.

'Our forecast free cash flow breakeven for 2017 sits at US$33 per barrel and we generated
US$302 million in free cash flow in the first half.This is pleasing progress towards our goal of transforming Santos into a low-cost, reliable and high performance business with a strong portfolio that can generate significant free cash flow in a low oil price environment,' Mr Gallagher said.

Excluding the previously announced net impairment and other significant items, the company recorded an underlying profit of US$156 million, a substantial improvement on the underlying loss of US$5 million in the corresponding period.

'Our focus on more efficient, lower cost operations has delivered significant improvements in earnings and cash flow. Santos' core asset portfolio of five long-life natural gas assets now provides stable base production for the next decade,' Mr Gallagher said.

'Material reductions in drilling costs in the Cooper Basin and GLNG are unlocking more gas supply. In the coming months, Santos expects to announce further domestic supply contracts to support the Federal Government's efforts to deliver affordable and reliable energy to households and industry.

'2017 sales volume guidance is upgraded to 77 to 82 million barrels of oil equivalent, following strong volumes from the core assets in the first half and higher forecast domestic sales volumes.

'We are also focused on future growth, with exploration and appraisal activity growing as part of our disciplined operating model and delivering successful outcomes in the Cooper Basin, as well as Muruk in PNG and Barossa offshore Northern Australia.

'Santos is now positioned to deliver future success and provide sustainable shareholder value.' Mr Gallagher said.

Consistent with the company's focus on debt reduction, the Board has determined not to pay an interim dividend. The Board will continue to review each dividend decision in light of the focus on debt reduction.

(1) Free cash flow breakeven is the average annual oil price in 2017 at which cash flows from operating activities (including hedging) equals cash flows from investing activities. Forecast methodology uses corporate assumptions. Excludes one-off restructuring and redundancy costs and asset divestitures.