Santos releases COVID-19 response and business update
Published by Will Owen,
Santos has provided an update on the measures it is taking in response to COVID-19 and the current lower oil price environment.
“We have implemented a series of measures to protect the health and safety of our people, including restricting travel and meetings, implementing social distancing measures across all of our sites and making changes to field and office access arrangements,” says Santos Managing Director and CEO Kevin Gallagher.
“We are confident in the business continuity and contingency plans that have been implemented and will continue to monitor and introduce additional measures in accordance with Australian Government health advice to protect our people and maintain operations. It is vitally important, in the current global and national crisis, that companies like Santos continue to provide secure energy supplies for our customers.”
Disciplined, low-cost, efficient operations
Santos has announced financial measures that it deems appropriate to the current environment:
- $550 million (38%) reduction in 2020 capital expenditure.
- $50 million reduction in 2020 cash production costs.
- A target 2020 free cash flow breakeven oil price of $25 per barrel.
In relation to LNG, forecast major growth capital expenditure has been reduced by $350 million, reflecting re-phasing in expenditure for the Barossa and PNG LNG expansion projects.
Balance sheet position
Santos’ balance sheet remains strong. Free cash flow generation in the first two months of 2020 was $186 million, resulting in cash on hand of $1.2 billion at the end of February.
Net debt was $3.1 billion, including approximately $400 million in AASB16 lease liabilities.
Santos has liquidity of $3.1 billion, comprising $1.2 billion in cash and $1.9 billion in committed undrawn debt facilities with maturities predominantly ranging from two to five years.
Near-term drawn debt maturities are minimal with $60 million in corporate debt maturing in 2020 and $62 million in 2021 (excluding PNG LNG non-recourse project finance which is funded from project cash flows).
Outlook – CEO comments
“The initiatives announced today demonstrate we are taking decisive action to ensure Santos is well-positioned in a lower oil price environment,” says Kevin Gallagher.
“Whilst the current oil price dynamic is challenging, the eventual recovery will create opportunities for companies positioned to act on them. Our strategy to leverage existing assets and infrastructure remains unchanged and we expect to pursue these exciting opportunities when conditions permit.”
“However, given the uncertain economic impact of COVID-19 combined with the lower oil price, we expect to defer FID on Barossa until business conditions improve. Barossa remains an important project for Santos due to its brownfield nature and its low cost of supply.”
“The current environment is a time for discipline. In the short term, we will remain focused on the health and safety of our people and delivering our production target for 2020, whilst not compromising on safety or asset integrity.”
“Santos today is in control of our capital expenditure profile. All our major capital projects are yet to take final investment decisions, providing flexibility in commitment timing and our production levels from our current assets are relatively steady for the next four or five years without any new growth projects.”
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/23032020/santos-releases-covid-19-response-and-business-update/
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