Santos Achieves Record Annual Production and Sales Revenue in 2022
by PNG Business News - January 19, 2023
Photo: Santos Managing Director and Chief Executive Officer Kevin Gallagher. Photo credit: Attila Csaszar
Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos delivered record annual production and sales revenue in 2022, as strong base business performance positioned the company to benefit from higher commodity prices.
Free cash flow of around US$3.6 billion was also a record and reduced gearing to approximately 18.7 per cent at the end of the year. This strong free cash flow positions the company to provide higher returns to shareholders and in December, we announced a further US$350 million increase in the on-market share buyback to up to US$700 million.
“Our increased LNG position in Papua New Guinea following the Oil Search merger has driven our record performance. The LNG business is expected to remain strong with energy security being a top priority for our trading partners in the region,” Mr Gallagher said.
“We remain committed to supplying the domestic market at reasonable prices. Average realised price for east coast domestic gas for the quarter was US$7.74/GJ, less than half the average realised price for LNG.
“Given the strong customer demand for our product now and into the future, we will seek to backfill and sustain our core assets to deliver the critical fuels the world needs into the 2040s. But we will also seek to decarbonise these critical fuels, in-line with our emissions reductions targets, and produce clean fuels as customer demand evolves.”
Official press release can be found HERE
PNG Business News - August 02, 2021
Santos Agrees Proposed Merger with Oil Search
Photo Credit: JASON REED/REUTERS Santos and Oil Search have reached an agreement on the merger ratio under the proposed merger and the additional terms set out in this release (“Revised Merger Proposal”). Under the Revised Merger Proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held via a Scheme of Arrangement. Following approval of the Scheme, Oil Search shareholders will own approximately 38.5 per cent of the merged group and Santos shareholders will own approximately 61.5 per cent. The Board of Oil Search has confirmed that, subject to the completion of confirmatory due diligence and the agreement of a binding Merger Implementation Agreement, their intention is to unanimously recommend the Revised Merger Proposal, in the absence of a superior proposal and subject to an independent expert concluding that the scheme of arrangement is in the best interests of Oil Search shareholders. The Revised Merger Proposal implies a transaction price of A$4.29 per Oil Search share, based on the closing price of Santos and Oil Search shares on 19 July 2021 (being the day prior to disclosure of the first proposal). This represents a 16.8 per cent premium to the Oil Search closing price on 19 July and a 16.4 per cent premium to the one-month VWAP on that day. In addition, the proposal represents the opportunity to deliver compelling value accretion to both sets of shareholders. The merger of Santos and Oil Search would create a regional champion of size and scale with the following features: Diversified portfolio of high quality, long-life, low-cost assets across Australia, Timor-Leste, Papua New Guinea and North America with significant growth optionality Pro-forma market capitalisation of A$21 billion which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies Combined 2021 production of approximately 116 million barrels of oil equivalent Combined 2P+2C resource base of 4,983 million barrels of oil equivalent Investment grade balance sheet with more than US$5.5 billion of liquidity to self-fund development projects, whilst maintaining further optionality and flexibility to optimise the portfolio Target gearing of less than 30 per cent Strong ESG credentials including maintaining Oil Search’s social and community investment in Papua New Guinea and North America, including the Oil Search Foundation Substantial potential combination synergies. Santos has an excellent track record of integration and recently merged Quadrant Energy and ConocoPhillips’ WA and NT business unit into Santos, delivering more than US$160 million in annual synergies The combination would also create greater alignment in Papua New Guinea supporting the development of key projects including Papua LNG, deliver new jobs and help support the local economy. Oil Search shareholders would continue to participate in the merged entity and retain the opportunity to realise a premium for control as part of the merged entity. Santos Managing Director and Chief Executive Officer Kevin Gallagher said the potential merger of Santos and Oil Search is consistent with Santos’ disciplined strategy to grow around our core assets. “It represents a compelling combination of two industry leaders to create an unrivalled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets. “The merged company would have strong cash generation from a diverse range of assets which provides a strong platform for sustainable growth and continued shareholder returns. “The merger also builds on our industry-leading approach to ESG through the combination of Santos’ net-zero 2040 pathway, including its sector-leading CCS projects, and Oil Search’s unique social programs in PNG, underpinned by a strong balance sheet to fund the transition to a lower carbon future. “The Revised Merger Proposal represents an extremely attractive opportunity to deliver compelling value accretion to both Santos and Oil Search shareholders.” Santos and Oil Search have committed to conduct best endeavours due diligence subject to appropriate confidentiality arrangements over a period of approximately four weeks with the aim of entering into a Merger Implementation Agreement, which would contain conditions to completion of the merger such as regulatory approvals. Each party will be free to declare ordinary dividends in accordance with existing dividend policy through to signing of the Merger Implementation Agreement. Should a party declare a dividend outside its existing dividend policy before the signing of the Merger Implementation Agreement, there would be an appropriate adjustment to the merger ratio. Citigroup and JB North & Co are acting as financial advisers and Herbert Smith Freehills and Dentons are acting as legal advisers to Santos.
PNG Business News - August 23, 2021
Santos Enters Next Phase of Oil Search Merger
According to an official, Santos Ltd will stay disciplined and cost-conscious as it enters its next phase of expansion and progresses with the proposed merger with Oil Search Ltd. Despite lower average LNG prices, Santos managing director and chief executive officer Kevin Gallagher said this following a half-year report of a free cash flow of US$572 million (approximately K2 billion). “The proposed merger is a compelling combination of two industry leaders to create an unrivalled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets,” he said. “The merged company would have strong cash generation from a diverse range of assets which provides a strong platform for sustainable growth and continued shareholder returns.” The combination, according to Gallagher, would strengthen their industry-leading commitment to environmental, social, and corporate governance. This is accomplished by combining Santos' net-zero 2040 strategy, which includes industry-leading carbon capture and storage projects, with Oil Search's distinctive social programs in PNG, all of which are backed by a solid balance sheet to support the transition to a lower-carbon future. “I am pleased with the progress we are making on due diligence and look forward to the signing of a binding merger implementation deed in the coming weeks,” Gallagher said. Meanwhile, the half-year results included a record production of 47.3 mmboe (million barrels of oil equivalent), record sales volumes of 53.8 mmboe and an underlying profit of US$317 million (about K1.1 billion). “These results again demonstrate the resilience of our cash-generative base business and strong operational performance across our diversified asset portfolio,” he said. “Consistent application of our low-cost disciplined operating model continues to deliver cost reductions and efficiencies despite cost challenges across the industry and the Coronavirus (Covid-19)-related cost impacts in the base business.” Reference: The National (18 August 2021). “Firm Enters Next Phase In Merger”.
PNG Business News - July 22, 2021
Oil Search Considering Merging with Santos
Santos, an Australian oil firm, announced its plan to combine with Oil Search Limited. Santos proposed a non-binding indicative merger last month with the goal of making the two companies the regional energy champions. The proposed merged entity has a market capitalization of A$22 billion (K56 billion), putting it among the top 20 ASX-listed companies and the top 20 global oil and gas companies. This means, among other things, that the merger will have a diverse portfolio of high-quality, long-life assets spanning Australia and Papua New Guinea, a solid balance sheet with ample cash to support expansion choices, and an investment-grade credit rating. The merger plan, if approved, would be conducted through a Scheme of Arrangement in which Oil Search shareholders would receive 0.589 new Santos shares for each Oil Search share held, according to Santos in a market disclosure to the Australian Stock Exchange. Following the scheme's acceptance, Oil Search shareholders would control 37% of the combined company, while Santos shareholders would own 63%. Based on Santos' closing price on June 24, 2021, the ownership ratio suggested a transaction price of A$4.25 (10.92) per Oil Search share. This was a 12.3% premium to the Oil Search closing price of A$3.78 (K9.72) on June 24, 2021, and a 9.8% premium to the Mubadala block trade selling price of A$3865. (K9.92). Kevin Gallagher, managing director and chief executive officer of Santos, said the merger will bring more alignment to PNG, allowing for the development of important projects such as Papua LNG, as well as the creation of new employment and support for the local economy. Santos, according to Gallagher, has proposed a true merger in which ownership of the combined firm is based on proportionate contribution and value. “The strategic rationale for a merger is clear and offers superior value to Oil Search shareholders rather than continuing on a standalone basis. “Santos continues to believe that the Merger Proposal represents an extremely attractive opportunity to deliver compelling value accretion to both Santos and Oil Search shareholders.” Oil Search stated in its ASX market update that it is open to receiving and engaging with any proposal that is in the best interests of its shareholders. While the company's board of directors agrees with Santos that combining the two firms makes strategic sense, the conditions must be fair to the company's shareholders, which the terms proposed by Santos are not. Despite Santos shareholders holding 70% more shares than Oil Search shareholders, Oil Search maintains that the proposed conditions provide just a 6.8% premium based on Friday's closing share prices for Oil Search and Santos. According to the firm, no such proposal has been made at this time. Reference: Post-Courier (21 July 2021). "Oil Search Open To Merger with Santos".
Paul Oeka - March 27, 2023
Papua LNG project to Minimise Economic Challenges
Photo: Petroleum Minister Kerenga Kua Petroleum Minister Kerenga Kua has recently stated that the Papua LNG project is critical in addressing some of the economic challenges that are currently faced in the country. He said about K75 billion will be generated over a 15 year period when the project is in progress. He added that the initial stages of the project has commenced with K500 million said to be inputted into PNGs foreign exchange capacity in 2023. During a press conference on Thursday the 9th of March, The Petroleum minister highlighted the progressive stages of the Papua LNG project and emphasized the importance and significance of the benefits that the project will provide. According to studies the project life is expected to operate over a 15 year period that will generate about K75 billion and significantly boost Papua New Guinea's struggling economy. "The K75 billion benefit is inclusive of what comes to the state directly as levies, to Kumul Petroleum, to the landowners as royalties and the provincial governments. All of us put together are going to be collecting and sharing that benefit in the next 15 to 20 years", Kua said. Minister Kua said that studies for the Papua LNG project began in 2004 following the discovery by Interoil, the resource estimate is in the range of 6 trillion cubic feet of gas and 98 to 100 million barrels of condensive oil. The benefit of this project is immense and a positive component is the national content which is expected to positively impact GDP, export earnings, forex, revenue to impacted levels of government, landowner benefits and Job opportunities. Minister Kua said the project developer Total Energies will inject K500 million into the PNG economy in 2023. "The Papua LNG project is a project of national significance for Papua New Guinea and will stimulate business confidence and will provide a significant impetus for our economy", "The Marape-Rosso government places high priority on the delivery of the Papua LNG project, we have an improved deal for our people, and improved contribution for our national contractors and workforce. The government strongly supports the Papua LNG project and encourages all stakeholders including project partners to work diligently to deliver the project on time and on budget", Minister Kua said. Petroleum Secretary David Manau was also present at the conference, he highlighted that the petroleum department will work closely with impacted provincial governments and landowners as this is important in ensuring that all stakeholder grievances are discussed and addressed. In light of this, a development forum is expected in the third quarter of this year. Meanwhile, Kua also revealed a unique aspect of the upcoming project which will mitigate the project's carbon footprint and is set to make PNG in becoming the first country in the Asia Pacific region and only the second on the world to re-inject carbon dioxide back into the well pad in a LNG project. He said the re-inspection of carbon dioxide into the well pad is a significant step towards reducing the project's carbon footprint and will help mitigate the environmental impact of the project and contribute to Papua New Guinea's efforts to combat climate change. The Papua LNG project is a joint venture between the PNG government, TotalEnergies and Exxon Mobil. It is one of the largest investments in the country's history and is expected to generate significant revenue for PNG's economy. Total Energies holds 40.1 percent interest in Papua LNG, along with its joint venture partners Exxon Mobil (37.1 percent) and Santos(22.8 percent). The Papua New Guinea government may exercise a back-in right of up to 22.5 percent interest at the Final Investment Decision (FDI) planned by end of 2023 to early 2024 and production will be scheduled for four years later.
PNG Business News - March 27, 2023
WanPNG: The Skills Development and Jobs Platform for the People of Papua New Guinea
Wan PNG is a platform and community dedicated to expanding opportunities for local Papua New Guineans. Its goal is to increase the development and sustainable employment of local PNG talent, so everyone in our great nation can share in newfound resources and growing prosperity. With the goal of empowering individuals and businesses with the skills and people they need to succeed in the 21st century world, the Wan PNG platform spans three core areas for job seekers: Employment opportunities: Gain experience with internships, start earning with entry positions, or upgrade your career with the next big job. Career advice: Advance your career with expert advice and professional resources, and stay up-to-date on the latest news. Education and training: Expand your employment prospects by upgrading your knowledge, skills, and competencies through courses. For employers it provides: Free access to upload jobs and find the best talent. Smart matching between jobs and candidates. Diversity promoting candidate suggestions reaching a wide pool of talent. The platform's primary objective is to promote lifelong learning and employment and simultaneously bridge the skills gap in Papua New Guinea by providing accessible training opportunities to all its citizens. WanPNG believes that by investing in the development of its people, Papua New Guinea can unlock its full potential and become a more prosperous nation. WanPNG is now available for job seekers and employers. Visit the website now at www.wanpng.com to learn more.
PNG Business News - March 27, 2023
St John Ambulance First Aid Training for Workplace
The St John ambulance service responded to over 21,000 emergencies across Papua New Guinea in 2022. In addition to being Papua New Guinea’s main emergency ambulance service, St John is the nation’s leading first aid training provider equipping thousands of workers with essential first aid skills and knowledge. With just one day of training, St John’s expert first aid trainers can equip your workers with the basic skills to handle all kinds of first aid emergencies. Workplace accidents and injuries are a common occurrence and it is essential for employers to have a competent workforce that can respond effectively to emergencies. St John’s workplace first aid courses ensure your workforce is equipped with the first aid training to assist a sick or injured person. It also helps organizations comply with legal requirements, reduce workplace injuries and fatalities and promote a culture of safety and preparedness. The Papua New Guinea St John Ambulance provides training routinely in Port Moresby and Lae, and can facilitate training at any location in PNG, which makes it easy for workers to gain or maintain their first aid qualifications. St John’s first aid trainers come from a variety of backgrounds, enabling them to contribute real-life experiences to the training environment. Each course, based on St John Ambulance Australia’s training resources, goesthrough rigorous appraisal by training and health specialists including St John’s Papua New Guinea’s medical expert advisory panel - made up of some of the industry’s leading physicians and health professionals, who ultimately endorse the clinical training content components of the first aid courses. St John CEO Matt Cannon said, “this rigorous appraisal process gives clients the confidence of St John’s commitment to delivering the highest quality in training content and delivery in Papua New Guinea.” Workplace first aid courses cover a broad range of topics, including basic life support, wound care, bandaging, splinting, CPR and using an AED. Participants learn how to identify and manage different medical emergencies such as heart attacks, strokes, burns, fractures, and poisoning. Each training program is designed to be flexible and can be delivered on-site or at one of our training centres. If you want to ensure that your workplace is prepared to respond to emergencies, contact St John today to learn more about our workplace first aid training.