Our natural gas resources offer clean, reliable and abundant energy for Australia and Asia.

154 Pages·2009·4.61 MB·English

Paper and printing of the Help save paper by reading this
S
Annual Report report online a
n
t
o
This report is printed on Monza Recycled An electronic version of this report is s
a Annual Report 2008
and ecoStar paper, which contains chlorine- available on Santos’ website www.santos.com. n
n
free recycled fibre and fibre from sustainable Shareholders who do not require a printed ua
plantation forests. Annual Report, or who receive more than l r
e
one copy due to multiple shareholdings, can p
TStheew paardpsehri pis Cceorutnifcieild ( FbSyC th), ew Fhoicrhe st help reduce the number of copies printed ort 2
by advising the Share Register in writing of 0
promotes environmentally appropriate, changes to their report mailing preferences. 08
socially beneficial and economically viable
management of the world’s forests. Shareholders who choose not to receive
a printed report will continue to receive
The report was printed by Southern
all other shareholder information, including
Colour, one of a small number of printers
notices of shareholders’ meetings.
in Australia certified by the FSC to continue Inside
the chain of custody when printing on
FSC-certified paper.
Fold-out 10
Southern Colour is certified for IntrOduCIng SantOS thE wOrld OF SantOS 26 bOard OF dIrECtOrS
ISO 14001:2004 (Environmental
28 SantOS lEadErShIp tEam
Management Systems). Company profile and history, and an Locations of Santos’ exploration,
overview of Santos’ vision, strategy development and production activities. 30 COrpOratE gOvErnanCE
The printing process uses digital printing
and values.
plates which eliminate film and associated 40 SantOS grOup IntErEStS
12
chemicals. The vegetable-based inks use
2 prOduCtIOn StatIStICS 2008 42 10-yEar Summary 1999–2008
renewable sources such as flax, rather
than the traditional mineral oils which 2008 OpEratIng and Summary of production results for 2008. 45 dIrECtOrS’ StatutOry rEpOrt
emit higher volumes of greenhouse gases. FInanCIal hIghlIghtS 50 rEmunEratIOn rEpOrt
Corporate directory Key results for 2008 and five-year 13 68 FInanCIal rEpOrt
performance. rESErvES StatIStICS 2008
144 SECurItIES ExChangE and
‘O ur natural gas
Summary of reserves movements in 2008. SharEhOldEr InFOrmatIOn
3
Santos ltd
abn 80 007 550 923 OFFICES prOgrESS madE On thE 14 146 glOSSary
Registered and Head Office Brisbane Jakarta New Delhi grOwth StratEgy In 2008 lng prOjECtS 147 IndEx
resources offer
Ground Floor Santos Centre Level 14 Santos House Santos Asia Pacific Pty Ltd Santos International Milestones that delivered on the growth Santos’ transformational GLNG project and 148 InFOrmatIOn FOr SharEhOldErS
60 Flinders Street 60 Edward Street Level 4 Ratu Plaza Office Tower Operations Pty Ltd strategy during 2008. progress on Darwin LNG and PNG LNG. 149 majOr annOunCEmEntS madE
Adelaide South Australia 5000 Brisbane Queensland 4000 Jalan Jendral Sudirman Kav 9 1401 & 1402 Level 14
by SantOS durIng 2008
GPO Box 2455 Telephone: [phone] Jakarta 10270 Indonesia Narain Manzil clean, reliable and 4 16
Adelaide South Australia 5001 Facsimile: 61 7 3838 3700 PO Box 6221 JKS GN 23 Barakhamba Road COrpOratE dIrECtOry
tranSFOrmatIOnal auStralIa
Telephone: [phone] Jakarta 12060 Indonesia Connaught Place
Facsimile: 61 8 8116 5050 Perth Telephone: [phone] New Delhi 110 001 India prOgrESS Growth in the Cooper Basin, New South
Level 28 Forrest Centre Facsimile: 62 21 720 4503 Telephone: [phone] Chairman Stephen Gerlach comments on Wales coal seam gas exploration and
Share Register 221 St Georges Terrace Fascimile: 91 11 4351 2070 abundant energy for Santos’ performance in 2008. Reindeer gas project go-ahead.
Ground Floor Santos Centre Perth Western Australia 6000 Port Moresby
60 Flinders Street Telephone: [phone] Barracuda Ltd Bishkek 5 18
Adelaide South Australia 5000 Facsimile: 61 8 9333 9571 Level 8 Pacific Place CJSC South Petroleum Company
GPO Box 2455 Cnr Champion Parade and Str. Isanova, 128. Bishkek Australia and Asia.’ a yEar OF StratEgy aSIa
Adelaide South Australia 5001 Gladstone Musgrave Street Kyrgyzstan 720033 dElIvEry Solid progress in Indonesia, Vietnam
Telephone: [phone] Goondoon Street Port Moresby Telephone: [phone] Chief Executive Officer David Knox reviews drilling success and seismic surveys
Facsimile: 61 8 8116 5950 Gladstone Queensland 4680 Papua New Guinea Facsimile: 996 312 90 1005 a year which marked a significant chapter offshore India.
Telephone: [phone] Telephone: [phone]
in the ongoing transformation of Santos.
Facsimile: 61 7 4970 8444 Facsimile: 675 321 2847 20
David Knox Chief Executive Officer 8 SuStaInabIlIty
uSEFul EmaIl COntaCtS Roma
Hanoi
Share register enquiries: 39 Currey Street Santos Vietnam Pty Ltd wEll pOSItIOnEd wIth Sustainability policies, systems
[email protected] Roma Queensland 4455 Suite 701 Level 7 a StrOng FInanCIal and activities, including safety and
Telephone: [phone] A Ngo Quyen pErFOrmanCE environmental performance, employees
Investor enquiries: Facsimile: 61 7 4622 3476 Hanoi Vietnam and communities.
Chief Financial Officer Peter Wasow puts
[email protected] Telephone: [phone]
Port Bonython the numbers in perspective and explains
Facsimile: 84 4 2220 6002
Employment enquiries: PO Box 344 the 2008 financial results.
[email protected] Whyalla South Australia 5600
Telephone: [phone]
Website Facsimile: 61 8 8649 0200
www.santos.com
Designed and produced by WellmarkPerspexa.com,
FSC publisher/paper user of the year 2008.
Paper and printing of the Help save paper by reading this
S
Annual Report report online a
n
t
o
This report is printed on Monza Recycled An electronic version of this report is s
a Annual Report 2008
and ecoStar paper, which contains chlorine- available on Santos’ website www.santos.com. n
n
free recycled fibre and fibre from sustainable Shareholders who do not require a printed ua
plantation forests. Annual Report, or who receive more than l r
e
one copy due to multiple shareholdings, can p
TStheew paardpsehri pis Cceorutnifcieild ( FbSyC th), ew Fhoicrhe st help reduce the number of copies printed ort 2
by advising the Share Register in writing of 0
promotes environmentally appropriate, changes to their report mailing preferences. 08
socially beneficial and economically viable
management of the world’s forests. Shareholders who choose not to receive
a printed report will continue to receive
The report was printed by Southern
all other shareholder information, including
Colour, one of a small number of printers
notices of shareholders’ meetings.
in Australia certified by the FSC to continue Inside
the chain of custody when printing on
FSC-certified paper.
Fold-out 10
Southern Colour is certified for IntrOduCIng SantOS thE wOrld OF SantOS 26 bOard OF dIrECtOrS
ISO 14001:2004 (Environmental
28 SantOS lEadErShIp tEam
Management Systems). Company profile and history, and an Locations of Santos’ exploration,
overview of Santos’ vision, strategy development and production activities. 30 COrpOratE gOvErnanCE
The printing process uses digital printing
and values.
plates which eliminate film and associated 40 SantOS grOup IntErEStS
12
chemicals. The vegetable-based inks use
2 prOduCtIOn StatIStICS 2008 42 10-yEar Summary 1999–2008
renewable sources such as flax, rather
than the traditional mineral oils which 2008 OpEratIng and Summary of production results for 2008. 45 dIrECtOrS’ StatutOry rEpOrt
emit higher volumes of greenhouse gases. FInanCIal hIghlIghtS 50 rEmunEratIOn rEpOrt
Corporate directory Key results for 2008 and five-year 13 68 FInanCIal rEpOrt
performance. rESErvES StatIStICS 2008
144 SECurItIES ExChangE and
‘O ur natural gas
Summary of reserves movements in 2008. SharEhOldEr InFOrmatIOn
3
Santos ltd
abn 80 007 550 923 OFFICES prOgrESS madE On thE 14 146 glOSSary
Registered and Head Office Brisbane Jakarta New Delhi grOwth StratEgy In 2008 lng prOjECtS 147 IndEx
resources offer
Ground Floor Santos Centre Level 14 Santos House Santos Asia Pacific Pty Ltd Santos International Milestones that delivered on the growth Santos’ transformational GLNG project and 148 InFOrmatIOn FOr SharEhOldErS
60 Flinders Street 60 Edward Street Level 4 Ratu Plaza Office Tower Operations Pty Ltd strategy during 2008. progress on Darwin LNG and PNG LNG. 149 majOr annOunCEmEntS madE
Adelaide South Australia 5000 Brisbane Queensland 4000 Jalan Jendral Sudirman Kav 9 1401 & 1402 Level 14
by SantOS durIng 2008
GPO Box 2455 Telephone: [phone] Jakarta 10270 Indonesia Narain Manzil clean, reliable and 4 16
Adelaide South Australia 5001 Facsimile: 61 7 3838 3700 PO Box 6221 JKS GN 23 Barakhamba Road COrpOratE dIrECtOry
tranSFOrmatIOnal auStralIa
Telephone: [phone] Jakarta 12060 Indonesia Connaught Place
Facsimile: 61 8 8116 5050 Perth Telephone: [phone] New Delhi 110 001 India prOgrESS Growth in the Cooper Basin, New South
Level 28 Forrest Centre Facsimile: 62 21 720 4503 Telephone: [phone] Chairman Stephen Gerlach comments on Wales coal seam gas exploration and
Share Register 221 St Georges Terrace Fascimile: 91 11 4351 2070 abundant energy for Santos’ performance in 2008. Reindeer gas project go-ahead.
Ground Floor Santos Centre Perth Western Australia 6000 Port Moresby
60 Flinders Street Telephone: [phone] Barracuda Ltd Bishkek 5 18
Adelaide South Australia 5000 Facsimile: 61 8 9333 9571 Level 8 Pacific Place CJSC South Petroleum Company
GPO Box 2455 Cnr Champion Parade and Str. Isanova, 128. Bishkek Australia and Asia.’ a yEar OF StratEgy aSIa
Adelaide South Australia 5001 Gladstone Musgrave Street Kyrgyzstan 720033 dElIvEry Solid progress in Indonesia, Vietnam
Telephone: [phone] Goondoon Street Port Moresby Telephone: [phone] Chief Executive Officer David Knox reviews drilling success and seismic surveys
Facsimile: 61 8 8116 5950 Gladstone Queensland 4680 Papua New Guinea Facsimile: 996 312 90 1005 a year which marked a significant chapter offshore India.
Telephone: [phone] Telephone: [phone]
in the ongoing transformation of Santos.
Facsimile: 61 7 4970 8444 Facsimile: 675 321 2847 20
David Knox Chief Executive Officer 8 SuStaInabIlIty
uSEFul EmaIl COntaCtS Roma
Hanoi
Share register enquiries: 39 Currey Street Santos Vietnam Pty Ltd wEll pOSItIOnEd wIth Sustainability policies, systems
[email protected] Roma Queensland 4455 Suite 701 Level 7 a StrOng FInanCIal and activities, including safety and
Telephone: [phone] A Ngo Quyen pErFOrmanCE environmental performance, employees
Investor enquiries: Facsimile: 61 7 4622 3476 Hanoi Vietnam and communities.
Chief Financial Officer Peter Wasow puts
[email protected] Telephone: [phone]
Port Bonython the numbers in perspective and explains
Facsimile: 84 4 2220 6002
Employment enquiries: PO Box 344 the 2008 financial results.
[email protected] Whyalla South Australia 5600
Telephone: [phone]
Website Facsimile: 61 8 8649 0200
www.santos.com
Designed and produced by WellmarkPerspexa.com,
FSC publisher/paper user of the year 2008.
David Lobb, Landholder Adviser, discussing Major announcements
development plans with Ross West and ‘Louie’
from the ‘Roleen’ property, Wallumbilla,
eastern Queensland. made by Santos during 2008
is an Australian company providing
energy for Australia and Asia.
Dates shown are when announcements
24 Jan 2007 Fourth Quarter Activities Report
were made to the exchanges where Santos’
19 Feb New investor relations executive appointed shares are listed: the Australian Securities
21 Feb 2007 Full Year Results: net profit $441 million Exchange (ASX) and NASDAQ.
14 Mar Further progress in PNG LNG As part of Santos’ continuous disclosure,
18 Mar Peter Coates appointed to Board the company informs the market of
information that may affect the company’s
20 Mar Mutineer-Exeter production recommences
share price. All material announcements
25 Mar Managing Director John Ellice-Flint retires disclosed to the ASX are published on
28 Mar 2007 Annual Report, Sustainability Report and Notice of Meeting released Santos’ website, www.santos.com.
7 Apr Reindeer project sanctioned The Santos website provides an email
8 Apr Pre-FEED contractors for GLNG appointed alert facility where people can register to
be notified, free of charge, of Santos’ news
23 Apr 2008 First Quarter Activities Report
announcements via email. It also provides
24 Apr Closure of the Moonie to Brisbane oil pipeline an RSS feed which allows people to view these
announcements using RSS reader software.
2 May 2008 Annual General Meeting
14 May John Ellice-Flint retirement benefits and entitlements
21 May Successful testing of Chim Sao North appraisal well
22 May PNG LNG gas agreement and FEED entry
29 May Santos and PETRONAS sign historic partnership for GLNG
3 Jun Santos investor seminar
4 Jun John Brookes production interruption
24 Jun John Brookes production interruption update
COmpany prOFIlE hIStOry vISIOn and StratEgy valuES 18 Jul GLNG partnership transaction with PETRONAS receives regulatory approvals
24 Jul 2008 Second Quarter Activities Report
Santos is an Australian oil and gas exploration Founded in 1954, our name was an acronym Santos’ vision is to be a leading energy company for Australia and Asia through We are a team that:
29 Jul David Knox appointed CEO and Managing Director
and production company with high quality for South Australia Northern Territory Oil delivering the base business, tapping our resource riches, being a great place to
assets and projects throughout Australia Search. Santos made its first significant work and doing it safely and sustainably to deliver a superior shareholder return. • Discovers – by opening our minds to 21 Aug 2008 Interim Results: record $304 million half-year net profit
and the Asia-Pacific region. discovery of natural gas in the Cooper Basin new possibilities, thinking creatively
21 Aug Gas-fired power station proposed for western Victoria
in 1963. The Moomba discovery in 1966 The company has a robust strategy to achieve this through: and having the courage to learn from
We supply over 20% of eastern Australia’s confirmed this region as a major petroleum successes and failures, to take on new 21 Aug $300 million off-market share buy-back announced
domestic gas and produced 54.4 million province and enabled gas supplies to Reliable base business Focused growth in Asia challenges, to capture opportunities 8 Sep Share buy-back booklet released
barrels of oil equivalent in 2008. We have the Adelaide to commence 40 years ago in 1969. and to resolve problems.
largest Australian exploration portfolio by area • Eastern Australia: safe, reliable • Vietnam: develop Chim Sao field 15 Sep Sidoarjo mudflow incident
of any company – 192,000 square kilometres. The 1980s saw Santos develop a major operations and market growth. and exploration-led growth. • Delivers – by taking personal 19 Sep Santos purchases 100% of WA-4-R (Spar gas field)
liquids business with the construction responsibility and pride in our work
• Western Australia: exploit asset position. • India/Bangladesh: Bay of Bengal 6 Oct $300 million off-market buy-back successfully completed
Santos is developing a multi-billion-dollar of a liquids recovery plant at Moomba to deliver timely, quality results that
exploration-led growth.
project to build a liquefied natural gas (LNG) and a fractionation and load-out facility • Indonesia: steady business with benefit Santos and help achieve our 8 Oct Santos secures Moly Metals gas supply contract
facility at Gladstone, Queensland – the at Port Bonython. During the 1990s Santos incremental growth. Delivering to our employees vision and strategy. 23 Oct 2008 Third Quarter Report
world’s first project to convert coal seam further expanded its interests in Australia
gas to LNG on a large scale. We are already and overseas. Significant growth in LNG • Technical excellence. • Collaborates – by recognising the value 27 Nov Executive Vice President Technical appointed
a producer of LNG through the Darwin LNG and power in diversity of thought and 8 Dec Deferral of Reindeer project
project, which has been exporting to Japan Since 2000, the company has continued to • Gladstone LNG (GLNG®): transformational • A collaborative workplace of capable communicating openly to understand the
since 2006. build its business in South East Asia while growth fuelled by Queensland coal and committed people. perspectives of others; demonstrating 11 Dec Santos interest in Brantas PSC
developing an Asian-focused business seam gas. leadership by sharing what we know and 17 Dec Peter Coates appointed Deputy Chairman
• Opportunities to grow and innovate.
Santos has more than 1,700 Australian- through exploration investment. respectfully challenging each other to
• Papua New Guinea LNG: project 22 Dec Bechtel appointed downstream FEED contractor for GLNG
based employees working across its achieve the best results for all.
underpinned by high quality gas reserves.
operations, and offices in Adelaide, In 2006, a significant milestone was reached
Brisbane, Perth, Gladstone and Roma. with the first export of LNG from the Darwin • Cares – by taking the long-term
• Darwin LNG: mature brownfield
The company has 170 staff in Jakarta, LNG project. view to build a sustainable future
LNG growth.
and country offices in Port Moresby, for our company, our people and the
Hanoi, New Delhi and Bishkek. environments and communities in
which we operate.
Santos Annual Report 2008 149
David Lobb, Landholder Adviser, discussing Major announcements
development plans with Ross West and ‘Louie’
from the ‘Roleen’ property, Wallumbilla,
eastern Queensland. made by Santos during 2008
is an Australian company providing
energy for Australia and Asia.
Dates shown are when announcements
24 Jan 2007 Fourth Quarter Activities Report
were made to the exchanges where Santos’
19 Feb New investor relations executive appointed shares are listed: the Australian Securities
21 Feb 2007 Full Year Results: net profit $441 million Exchange (ASX) and NASDAQ.
14 Mar Further progress in PNG LNG As part of Santos’ continuous disclosure,
18 Mar Peter Coates appointed to Board the company informs the market of
information that may affect the company’s
20 Mar Mutineer-Exeter production recommences
share price. All material announcements
25 Mar Managing Director John Ellice-Flint retires disclosed to the ASX are published on
28 Mar 2007 Annual Report, Sustainability Report and Notice of Meeting released Santos’ website, www.santos.com.
7 Apr Reindeer project sanctioned The Santos website provides an email
8 Apr Pre-FEED contractors for GLNG appointed alert facility where people can register to
be notified, free of charge, of Santos’ news
23 Apr 2008 First Quarter Activities Report
announcements via email. It also provides
24 Apr Closure of the Moonie to Brisbane oil pipeline an RSS feed which allows people to view these
announcements using RSS reader software.
2 May 2008 Annual General Meeting
14 May John Ellice-Flint retirement benefits and entitlements
21 May Successful testing of Chim Sao North appraisal well
22 May PNG LNG gas agreement and FEED entry
29 May Santos and PETRONAS sign historic partnership for GLNG
3 Jun Santos investor seminar
4 Jun John Brookes production interruption
24 Jun John Brookes production interruption update
COmpany prOFIlE hIStOry vISIOn and StratEgy valuES 18 Jul GLNG partnership transaction with PETRONAS receives regulatory approvals
24 Jul 2008 Second Quarter Activities Report
Santos is an Australian oil and gas exploration Founded in 1954, our name was an acronym Santos’ vision is to be a leading energy company for Australia and Asia through We are a team that:
29 Jul David Knox appointed CEO and Managing Director
and production company with high quality for South Australia Northern Territory Oil delivering the base business, tapping our resource riches, being a great place to
assets and projects throughout Australia Search. Santos made its first significant work and doing it safely and sustainably to deliver a superior shareholder return. • Discovers – by opening our minds to 21 Aug 2008 Interim Results: record $304 million half-year net profit
and the Asia-Pacific region. discovery of natural gas in the Cooper Basin new possibilities, thinking creatively
21 Aug Gas-fired power station proposed for western Victoria
in 1963. The Moomba discovery in 1966 The company has a robust strategy to achieve this through: and having the courage to learn from
We supply over 20% of eastern Australia’s confirmed this region as a major petroleum successes and failures, to take on new 21 Aug $300 million off-market share buy-back announced
domestic gas and produced 54.4 million province and enabled gas supplies to Reliable base business Focused growth in Asia challenges, to capture opportunities 8 Sep Share buy-back booklet released
barrels of oil equivalent in 2008. We have the Adelaide to commence 40 years ago in 1969. and to resolve problems.
largest Australian exploration portfolio by area • Eastern Australia: safe, reliable • Vietnam: develop Chim Sao field 15 Sep Sidoarjo mudflow incident
of any company – 192,000 square kilometres. The 1980s saw Santos develop a major operations and market growth. and exploration-led growth. • Delivers – by taking personal 19 Sep Santos purchases 100% of WA-4-R (Spar gas field)
liquids business with the construction responsibility and pride in our work
• Western Australia: exploit asset position. • India/Bangladesh: Bay of Bengal 6 Oct $300 million off-market buy-back successfully completed
Santos is developing a multi-billion-dollar of a liquids recovery plant at Moomba to deliver timely, quality results that
exploration-led growth.
project to build a liquefied natural gas (LNG) and a fractionation and load-out facility • Indonesia: steady business with benefit Santos and help achieve our 8 Oct Santos secures Moly Metals gas supply contract
facility at Gladstone, Queensland – the at Port Bonython. During the 1990s Santos incremental growth. Delivering to our employees vision and strategy. 23 Oct 2008 Third Quarter Report
world’s first project to convert coal seam further expanded its interests in Australia
gas to LNG on a large scale. We are already and overseas. Significant growth in LNG • Technical excellence. • Collaborates – by recognising the value 27 Nov Executive Vice President Technical appointed
a producer of LNG through the Darwin LNG and power in diversity of thought and 8 Dec Deferral of Reindeer project
project, which has been exporting to Japan Since 2000, the company has continued to • Gladstone LNG (GLNG®): transformational • A collaborative workplace of capable communicating openly to understand the
since 2006. build its business in South East Asia while growth fuelled by Queensland coal and committed people. perspectives of others; demonstrating 11 Dec Santos interest in Brantas PSC
developing an Asian-focused business seam gas. leadership by sharing what we know and 17 Dec Peter Coates appointed Deputy Chairman
• Opportunities to grow and innovate.
Santos has more than 1,700 Australian- through exploration investment. respectfully challenging each other to
• Papua New Guinea LNG: project 22 Dec Bechtel appointed downstream FEED contractor for GLNG
based employees working across its achieve the best results for all.
underpinned by high quality gas reserves.
operations, and offices in Adelaide, In 2006, a significant milestone was reached
Brisbane, Perth, Gladstone and Roma. with the first export of LNG from the Darwin • Cares – by taking the long-term
• Darwin LNG: mature brownfield
The company has 170 staff in Jakarta, LNG project. view to build a sustainable future
LNG growth.
and country offices in Port Moresby, for our company, our people and the
Hanoi, New Delhi and Bishkek. environments and communities in
which we operate.
Santos Annual Report 2008 149
lNG PrOJECts AustrAliA AsiA
14 16 18
With abundant gas
resources underpinning
our growth projects,
Santos is uniquely placed
to meet Australia and
Asia’s energy needs.
Santos Annual Report 2008 1
2008 operating
and financial highlights
%
2008 2007 change
• SaleS revenue up 11% to record $2.8 billion;
Sales ($million) 2,761.8 2,488.5 11
production of 54.4 mmboe within guidance.
Operating profit before tax ($million) 2,533.2 718.6 253
• underlying net profit after tax up
Net profit after tax ($million) 1,650.1 359.3 359
42% to $572 million.
Cash flow from operations ($million) 1,473.2 1,213.9 21
• net profit after tax up 359% to record $1.7 billion.
Earnings per share (cents) 272.9 55.2 394
• full-year dividend up 5% to 42 centS per Share. Ordinary dividends per share (cents) 42.0 40.0 5
Cash flow per share (cents) 249.4 205.6 21
• proven and probable (2p) reServeS exceed 1 billion
barrelS of oil equivalent. Total shareholders’ funds ($million) 4,478.3 3,093.1 45
Return on average ordinary equity (%) 48.6 12.8 280
• Strong balance Sheet: $1.6 billion of caSh and
gearing of 10%. Return on average capital employed (%) 34.1 8.5 301
Net debt/(net debt plus equity) (%) 10.2 37.3 (73)
Net interest cover (times) 38.5 7.4 420
PRODUCTION BY PRODUCT SALES REVENUE OPERATING CASH FLOW NET PROFIT AFTER TAX
54.4 mmboe $2,762 million $1,473 million $1,650 million
61.0 59.1 1,550 1,650
60 56.0 54.4 3,000 2,750 2,762 1,500 1,458 1,473 1,500
47.1 2,500 2,463 2,489 1,214
1,200 1,200
40 2,000
1,501 900 900 762
1,500 605 643
600 600
20 1,000 355 359
500 300 300
0 0 0 0
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
Sales gas Crude oil LPG Sales gas Crude oil LPG
& ethane Condensate LNG & ethane Condensate LNG
DIVIDENDS PER SHARE RETURN ON EQUITY GEARING SAFETY PERFORMANCE
42 cents 48.6% 10.2% 5.8 Total recordable case frequency rate
(per million hours worked)
273 1,839 8
250 50 48.6 1,800 1,599 75.0 6.4 6.4
200 40 35.1 11,,250000 1,133 1,450 5602..05 6 4.9 5.3 5.8
150 124 103 30 19.9 23.8 900 37.5 4
150000 5433 38 40 5540 42 21000 12.8 3600000 32.5% 35.0% 30.2% 37.3% 510.2%06 2125..050 20
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
Earnings per share
Ordinary dividend per share Gearing Net debt
2 Santos Annual Report 2008
Progress made on the
growth strategy in 2008
LNG projects Australia Asia
page 14 page 16 page 18
• PETRONAS, one of the world’s largest LNG • Go-ahead given for the Reindeer gas • Successful Chim Sao North appraisal well
producers, selected to be Santos’ 40% project in the Carnarvon Basin, offshore drilled; reserves will underpin Santos’ first
partner in the development, operation Western Australia. oil development in Vietnam.
and marketing of the GLNG project.
• Santos made substantial contingent • Oyong phase 2 in Indonesia on track for
• Santos grew coal seam gas reserves resource booking of unconventional first gas in the third quarter of 2009.
significantly to underpin the GLNG project. reservoir gas in the Cooper Basin.
• Santos’ largest ever 2D seismic survey
• PNG LNG project formally entered the front • First coal seam gas exploration wells drilled undertaken in the Bay of Bengal.
end engineering and design phase following in the Gunnedah Basin in New South Wales.
the signing of key Government and joint
venture agreements.
Chris Bant, Wallumbilla gas operations,
eastern Queensland.
Santos Annual Report 2008 3
Transformational progress
Review by Stephen Gerlach, Chairman
$1.7 billion, boosted by a $1.2 billion after- held senior positions with BP, ARCO and Shell.
tax profit from the sale of the 40% interest Before his appointment, Mr Knox had served
in the GLNG project to PETRONAS. Underlying as Acting CEO following the retirement of
net profit after tax was $572 million, up John Ellice-Flint in March.
42% on last year.
Board renewal
For the fourth year in a row, Santos’ production
We have continued our ongoing process of
levels were within the company’s guidance
Board renewal with the appointment of Peter
range. Production of 54.4 mmboe was a solid
Coates as Deputy Chairman in December. He
performance, although down by 8% on 2007.
has been a Director of Santos since March 2008.
Off-market share buy-back
As part of this process, I intend to stand
The $300 million off-market share buy-back down from the Board and as Chairman on
was successfully completed in October. 31 December 2009. I then would have been
Santos repurchased 3.1% of its issued on the Board for 20 years and served as
capital at the maximum discount of 14%, Chairman for eight of those years.
Santos made substantial advances in its
enabling the company to efficiently return
strategic development and operational
surplus capital to shareholders. Mr Coates will take over as Chairman when
performance in 2008.
I step down. Peter has had a wealth of
The completion of the buy-back international corporate and commercial
Significant progress on Santos’ LNG projects
demonstrates our commitment to efficient experience and will serve shareholders
was central to our strategic advancement in
capital management and confidence in the well when he assumes that responsibility.
2008, while the solid performance of our
strength of our financial position.
base businesses in Australia and Indonesia
I have indeed been fortunate to have served
pushed revenue to record levels.
Shareholder cap lifted Santos shareholders and the company as a
Director and in recent years as Chairman over a
Santos’ early recognition of the opportunities On 29 November 2008, the South Australian
long period and I thank shareholders for their
to produce and export coal seam gas as LNG Government removed the shareholder cap
support of me. I am pleased the company will
has enabled the company to secure a leadership that restricted any one person from holding
be in such good shape when I step down at the
position in this globally significant energy play. more than a 15% share in Santos. We
end of the year.
welcome the cap’s removal at a time when
Strong share price performance Santos is poised to capitalise on the
Another longstanding Director, Judith Sloan,
In a year of unprecedented stock market development of its growth strategy. is also stepping down from the Board at the
volatility, Santos significantly outperformed conclusion of the Annual General Meeting
Brantas PSC transfer
the market. While other Australian stocks after 14 years as a Director.
dropped an average of 40% in 2008, Santos In December, we transferred our 18%
shares rose by 5%. interest in the Brantas PSC in Indonesia, She has at all times served the shareholders
the site of the Sidoarjo mudflow incident, and the company with distinction and made a
Santos was the fourth-best performing to a company associated with the project significant contribution to the work of the
company in the ASX 100 in 2008, and one operator. The transfer was a practical and Board and the strategic development of the
of only 10 to have positive total shareholder appropriate resolution to Santos Brantas’ company. The company will miss her presence
returns for the year. Santos has also minority, non-operator role in the PSC. and she retires from the Board with our best
produced top 10 total shareholder returns wishes for the future.
on a three-year basis. The mudflow incident, in particular the
impact on the local community, has been On behalf of the Directors, I would again like to
Dividend increase of considerable concern to Santos. We have thank everyone at Santos for their continuing
The Board of Directors declared a final supported relief efforts, which have been commitment to advancing the interests of
dividend of 20 cents per share, after an coordinated by the Indonesian Government shareholders.
interim payment of 22 cents. Shareholders since 2007.
therefore received a full-year dividend of
New CEO and Managing Director
42 cents, up from 40 cents in 2007.
In July, David Knox was appointed Chief
Record annual sales revenue Executive Officer and Managing Director Stephen Gerlach
Santos posted record annual sales revenue to lead the company through the next Chairman
of $2.8 billion in 2008, an 11% rise from the phase of its growth. Mr Knox has extensive
previous year. Net profit after tax was international oil and gas experience, having 16 March 2009
4 Santos Annual Report 2008
A year of strategy delivery
Review by David Knox, Chief Executive Officer
and Managing Director
2008 marked a significant chapter in challenging times and ensure the
the ongoing transformation of Santos, development of our key growth projects.
with major milestones met in delivering
our strategic objectives. In a challenging People and partnerships
economic environment, Santos is uniquely The oil and gas industry is built around
positioned to deliver growth. partnerships. Traditionally, this has been
about spreading the risk on major projects,
Our strategy is simple and robust: we will
but at Santos we see it as an opportunity
continue to develop the base business while
to reap the benefits that come from shared
pursuing growth through our suite of LNG
knowledge and experience.
projects and focused opportunities in Asia.
This strategy is underpinned by our confidence By combining our own expertise with that
in the long-term outlook for Australian and of our partners, we can ensure our projects
Asian energy demand, and the growing role are executed at a high standard. Building
of natural gas in providing clean energy. good partnerships has the additional benefit
of allowing access to more high-quality
The global financial crisis has led all prudent
opportunities in the future.
companies to review carefully their strategic
direction. At Santos, we have a strategy Cleaner energy through gas
that is right for the times. A strategy that
The importance of natural gas in meeting
enables us to negotiate the current lower
future energy demands will increase in the
oil price environment while proceeding with
coming years. Carbon emissions and their
our growth projects. A strategy that means
impact on climate are a real and serious
we will be in a position to benefit when the
problem. Natural gas will play a substantially
global financial environment improves and
larger role as economies transition to a
economic activity accelerates.
lower carbon emission footprint.
Our achievements in 2008 – posting record
The attraction of natural gas in a carbon-
revenues and securing our US$2.5 billion
constrained world is compelling. Carbon
GLNG partnership with PETRONAS – mean
emissions from gas-fired power generation
we are in a solid financial position. We have
are up to 70% lower than traditional power
a base business that is performing well and
sources in eastern Australia. Quite simply,
providing a stable revenue foundation.
if Australia is to reduce its emissions in an
The unprecedented market volatility in 2008 affordable fashion, natural gas will need to
saw the oil price drop from over US$150 in play a larger role in the nation’s energy mix.
June to below US$50 by year’s end. At
In a potentially unstable global climate,
Santos, the fixed price contracts that apply
security of energy supply is increasingly
to a large portion of our Australian gas
important to customers. Australia provides
business helped to smooth out the
a low-risk energy supply source in close
fluctuation in international energy prices.
proximity to emerging Asian markets. Santos
Lower energy prices have seen a contraction has the largest acreage portfolio in Australia
in some industry costs, and we are taking and a suite of growth opportunities
additional steps to ensure a tight rein on throughout Asia.
operating expenses right across our
Reserves growth
business.
In 2008, we grew our proven and probable
In an uncertain economic environment, (2P) oil and gas reserves by 134 mmboe,
Santos also has the ability to control its taking the total past the 1 billion barrel mark.
destiny with a well stocked store-cupboard
of world-class resources. Reserves availability to the GLNG project
increased by 142%, demonstrating the
Critically, we have the people and reserves build for the project is well on track.
partnerships we need to negotiate
Santos Annual Report 2008 5
‘I n an uncertain economic environment, Santos has
the ability to control its destiny with a well stocked
store-cupboard of world-class resources.’
Significant LNG progress A solid foundation
petronaS partnerShip for glng
The GLNG project achieved major milestones Our base business performed well in 2008,
in 2008 with the selection of a partner and meeting the production guidance for the year.
the appointment of a front-end engineering
and design contractor. The 19% rise in production in the Cooper
Basin Oil project in 2008 shows it remains on
In May, Malaysia’s national oil and gas a sound foundation. Substantial exploration
company PETRONAS joined Santos as and development work across the Cooper
our 40% partner in this world-leading Basin in 2008 highlighted the region’s
venture. PETRONAS purchased its stake continued growth potential.
for US$2.5 billion – with US$2 billion
received in July – an investment that The Reindeer gas project in Western Australia,
significantly advanced the project. The after being suspended briefly at the end of
fully aligned partnership with PETRONAS 2008, is again on track after the signing of a
will maximise the future value of GLNG. gas supply contract at market-leading prices.
Establishing a partnership with PETRONAS is a
GLNG took another big step forward in In Victoria, Kipper remains on schedule for
tremendous boost for Santos’ GLNG project. This
December when Bechtel was appointed first gas in the first half of 2011. Henry has
project will benefit greatly from PETRONAS’ industry
as the front-end engineering and design been slightly delayed due to difficulties with
knowledge and extensive customer base in Asia.
contractor for the gas liquefaction plant. the contracted pipelay barge. Fortunately,
PETRONAS has been involved in the LNG industry Bechtel is one of the world’s largest there will be no impact on our 2009
for more than 25 years. It has grown into the largest engineering and construction contractors. production as Casino is performing well.
LNG producer in Asia and the third-largest in the
The combination of Santos, PETRONAS and Our Indonesian operations have come of age
world, and operates the world’s largest integrated
Bechtel ensures GLNG is in safe and capable and now rank as part of our base business.
LNG facility at a single location. From that project
hands. We are on track to make a final With two good operating assets and the Oyong
alone, PETRONAS has successfully delivered more
investment decision on this project in the phase 2 development progressing well, this
than 5,700 LNG cargoes since the early 1980s.
first half of 2010. region will continue to be a significant part
of our base production.
Elsewhere, the PNG LNG project progressed
Wan Zulkiflee, PETRONAS Director and Vice President of
well, with a gas agreement signed and the Safety performance
its Gas Business; Hon Anna Bligh, Premier of Queensland;
and David Knox at the announcement of the Santos and project entering the front-end engineering I was disappointed that there was an upward
PETRONAS partnership. and design phase. The existing Darwin LNG trend in our injury rate in the first half of
project – our first LNG investment – 2008. All of us at Santos were saddened by
delivered another excellent year, with solid the tragic death of a contractor on an oil
production and scope for further expansion. rig in the Cooper Basin in January.
Growth in Asia We have conducted a thorough investigation
Our focus on growth in Asia is a key part of this incident and will continue to work
of Santos’ growth strategy. Indonesia is closely with employees and contracting
already a significant part of our business companies to reduce the risk of future
and presents opportunities for incremental incidents.
growth. Led by Oyong and Maleo, both
The injury rate for the first half of 2008 was
offshore East Java, Indonesian production
unacceptable and prompted a company-wide
increased by almost 40% in 2008, with
intervention, the Stop for Safety program.
output of 5.2 mmboe.
Through continued efforts, there has been
In Vietnam, successful appraisal wells were some improvement in our safety performance,
drilled at Chim Sao, with first oil expected which was demonstrated in the improved
in 2011. safety statistics for the second half of the year.
In the north of the Bay of Bengal, we
completed a 2D seismic survey and began a 3D
seismic survey of highly sought-after acreage.
6 Santos Annual Report 2008