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Santos releases 1H19 results

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LNG Industry,

Santos has released a statement announcing its 1H19 results, reporting both record EBITDAX and underlying profit.

According to the statement, the board of the company has decided to pay an interim dividend of US6.0 cents per share fully-franked. This is a 71% increase over the previous interim dividend. The dividend is in line with Santos’ sustainable dividend policy, which targets a range of 10 – 30% payout of free cash flow.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said: “Today’s announcement of half-year results demonstrates the strength of our cash-generative operating model and the successful integration of the Quadrant acquisition.

“Santos has delivered strong interim financial results with EBITDAX1 up 43% to a record US$1.3 billion and free cash flow1 up 74% to US$638 million. Underlying profit1 after tax increased by 89% to a record US$411 million.

“Consistent application of our disciplined operating model continues to deliver cost reductions and efficiencies, with normalised production costs2 down 5% to US$7.27/boe.

“Our forecast free cash flow breakeven oil price for 2019 is now reduced to ~US$31 per barrel, in-line with 2018 notwithstanding higher CAPEX this year. Every US$10 per barrel increment in average oil price above our free cash flow breakeven increases annual free cash flow by between US$300 million to US$350 million.

“Today’s results also demonstrate the successful integration of our Western Australian business following the acquisition of Quadrant. We are today increasing guidance on combination synergies to between US$50 and $60 million per annum.

“Strong free cash flows also underpin our brownfield growth strategy, including Dorado where successful appraisal during the first half has resulted in a 68% increase in gross 2C resources to 310 million barrels of oil equivalent. Santos has an 80% interest in Dorado.

“I am also pleased with the progress we are making toward FID on Barossa, including the award of major contracts and exclusive negotiations for the supply of backfill gas to Darwin LNG.

“We are in advanced discussions with a number of LNG buyers on firm offers for Barossa offtake volumes.

“In PNG, our signing of a binding letter of intent to farm-in to PRL 3 (P’nyang) marked an important milestone towards expansion of the PNG LNG plant. We look forward to working with our partners and the PNG Government to make expansion a reality.

“In the Cooper Basin, our focus on low-cost, efficient operations contributed to stronger first-half production and the highest number of wells drilled in 12 years. The Cooper Basin is now positioned to grow production and reserves.

“At GLNG, our disciplined operating model continues to support a development plan to unlock more gas over time. In the first half of 2019, we drilled a record 189 wells and progressed the Roma East and Arcadia upstream developments on schedule. GLNG remains on track to meet the six million tonne annualised LNG sales run-rate (including LNG volumes redirected to the domestic market) by the end of 2019.

“All of this growth activity is consistent with reaching our goal of more than 100 million barrels of oil equivalent production by 2025.

“This growth is enabled by our strong balance sheet and balanced asset portfolio, which provides sustainable free cash flow through the oil price cycle.”

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