Australia's Santos aims to more than double production to 100 mil boe/year by 2025
Australia-based petroleum producer and LNG exporter Santos plans to almost double its current production level to more than 100 million barrels of oil equivalent by 2025, helped by its acquisition of Quadrant Energy including the Dorado oil discovery, and higher output from three LNG projects it has interests in, the company said Wednesday.
The production target underscores the turnaround for a company that had been reeling from high costs at its LNG projects in eastern Australia and forced to cut jobs when oil prices tumbled a few years ago.
Santos is now positioned for growth following the strategy it implemented in 2016, Santos managing director and CEO Kevin Gallagher said at the company's investor day presentation in Sydney.
Since the beginning of 2016, Santos has sold off non-core assets and focused on its five long-life gas assets, which are generating free cash flow of about $40/boe, Gallagher said.
"Our strategy has been to establish a disciplined low-cost operating model that delivers strong cash flows through the oil price cycle," he said. Gallagher said Santos was now able to fund growth with cash flows at a $65/b long-term oil price.
NYMEX November WTI settled at $71.57/b and ICE November Brent at $81.34/b Wednesday.
"Subject to regulatory approvals, the recently announced acquisition of Quadrant Energy will further reduce our breakeven oil price and deliver operatorship of a high quality portfolio of low-cost, long-life conventional Western Australian natural gas assets," he said.
Santos said its growth portfolio also includes the Barossa backfill to Darwin LNG -- with a final investment decision targeted by the end of next year -- a PNG LNG expansion and proposed farm-in to P'nyang, and growth at its Australian Cooper Basin, Gladstone LNG and eastern Queensland assets.
RBC Capital Markets oil and gas analyst Ben Wilson said in a research note Thursday that the growth target was within reach for Santos.
"We see 100 million boe as very much achievable, particularly given the Dorado oil development target IP [initial production] rate is lowballed at 50,000 b/d," RBC said in the note, adding that it believes Dorado can produce as much as 80,000-100,000 b/d.
Santos said a two- to three-well appraisal program is planned for 2019 for the Dorado development with FEED (front-end engineering and design) targeted for 2020.
Wilson said first oil could start around 2023.
Santos agreed to buy Quadrant Energy for $2.15 billion in August. Quadrant holds an 80% interest in the Dorado joint venture, with Carnarvon holding the balance.
source: S & P Global Platts
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