260911 eastern australia business unit briefing final...finance driving profit, performance and...

13/10/2011

1

Eastern Australia Business UnitEastern Australia Business Unit

Capturing the FutureMoomba Investor Trip: 26-27 September 2011

Disclaimer & important notice

This presentation contains forward looking statements that are subject to

risk factors associated with the oil and gas industry. It is believed that the

t ti fl t d i th t t t bl b t th bexpectations reflected in these statements are reasonable, but they may be

affected by a range of variables which could cause actual results or trends to

differ materially, including but not limited to: price fluctuations, actual

demand, currency fluctuations, geotechnical factors, drilling and production

results, gas commercialisation, development progress, operating results,

engineering estimates, reserve estimates, loss of market, industry

competition, environmental risks, physical risks, legislative, fiscal and

regulatory developments, economic and financial markets conditions inregulatory developments, economic and financial markets conditions in

various countries, approvals and cost estimates.

All references to dollars, cents or $ in this document are to Australian

currency, unless otherwise stated.

2

13/10/2011

2

Today’s key themes

Introduction

A East coast market dynamics have shiftedA. East coast market dynamics have shifted

B. Santos is ideally placed to capitalise

C. Driving efficiencies and maximising margins in central Australia

D. Delivering value in NSW CSG

Closing messages

3

EABU introduction and today’s speakers

James BaulderstoneVP Eastern Australia Business Unit

Cooper Gas Business

Oil &Offshore

Energy Business

Development Development & Technical & Technical

ServicesServices

CFOCFO

N Lagonik L Dello A Kremor C CruickshankC Cruickshank D FlewD Flew

StrategyStrategyCommercialCommercial

MarketingMarketingFinanceFinance

Driving profit, performance and accountability

Functional excellence

EABU – Eastern Australia Business Unit4

13/10/2011

3


Introduction

A East coast market dynamics have shiftedA. East coast market dynamics have shifted- Unprecedented east coast gas demand

- Gas prices trending toward LNG netback


C. Driving efficiencies and maximising margins i t l A t liin central Australia


Closing messages

5

East Australian gas demand to triple by 2020

Strong LNG demand + Australia’s transition to a low carbon economy is driving unprecedented east coast gas demand growth.

PJ/a

4 000

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Five LNG trains sanctioned

Gas-fired power generation to triple by 2030

Proposed

Sanctioned

6

0

500

2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Retail and C&I Power generation QCLNG (T1&2)

GLNG (T1&2) APLNG T1 APLNG T2

Shell (T1&2) QCLNG T3

Source: Santos

13/10/2011

4

Higher demand will push gas prices higher

Gas prices will trend towards oil-linked international parity,circa $6–9 / GJ …

Gas fired power generation demand

LNG demandCarbon pricing

Permanent structural shift in the east coast gas market

Higher development costs

Gas-fired power generation demand

7

… unlocking the next wave of development.

Gas price increases are affordable

Expected higher domestic gas prices consistent with other energy and commodity price movements over the past decade.

Commodity price indices

Historically east coast domestic gas prices have been relatively flat

Gas cost is a small percentage of end-user price of both gas and electricity – circa 20%

East coast gas prices are

400

600

800

1,000

1,200

h in

de

x (

Yr

20

00

= 1

00

)

East coast gas prices are low compared to other markets (UK, Europe and Asia)

8

0

200

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Gro

wth

East coast gas Iron ore Copper Silver Coal

Source: BMI

13/10/2011

5


Introduction

A. East coast market dynamics have shiftedy

B. Santos is ideally placed to capitalise- Growing and diverse resource position – conventional, unconventional and CSG

- Owner and operator of critical infrastructure – processing, gathering systems transport and storage

- Portfolio scale and diversity to leverage commercialisation

C Driving efficiencies and maximising margins inC. Driving efficiencies and maximising margins in central Australia


Closing messages9

Santos is ideally placed to capitalise

Key attributes …

A large high quality reserve and resource base to A large, high-quality reserve and resource base to meet increased demand across eastern Australia

Owner, operator with access to critical infrastructure –processing, gathering systems, transport and storage

Portfolio scale and diversity to leverage

10

commercialisation

… ensure Santos will capitalise on the transforming market dynamics and its strategic initiatives.

13/10/2011

6

A significant resource base with geographic and geological diversity, from which to build reserves and accelerate production.

EABU has 10,600+ PJ of gas in eastern Australia (YE 2010)

Amadeus Basin#

SE Qld(Non-GLNG)*

2P 123

2C 121

Cooper Basin

NSW CSG^

2P 1,216

2C 2,987

2P 157

2C 1,056

All Santos share reserve and resource numbers are in PJ (as at 31 Dec 2010)* Excludes Santos reserves and resources held within GLNG project^ Post Eastern Star Gas acquisition and subsequent 20% sell-down to TRUenergy (per ASX release 18 July 2011)# Post completion of the Mereenie acquisition and sell-down of Palm Valley/Dingo 11

2P 868

2C 3,570Victoria

2P 369

2C 228

A proven record of strong reserve conversion

Infill drilling has resulted in a substantial resource to reserve conversion in the Cooper Basin.

Four years of continued Cooper gas 2P reserve* build

150

200

250

300

350Forecast

Targeting additional 2P reserve adds of circa 1,000* PJ from the Cooper

PJ

rese

rve a

dditio

ns

0

50

100

2007 2008 2009 2010 2011

pBasin by 2015

* Santos share (sales gas only)

12

2P r

13/10/2011

7

Significant conventional resource potential

Through infill drilling, Santos will unlock material upside in the Cooper Basin with potential to produce a further 5,700 PJ of conventional gas, based on US experiences.

2P2P1,332 1,332 PJPJ

AdditionalAdditional2,520 PJ2,520 PJ

2C2C1,848 PJ1,848 PJ

US experience75% recovery

f t (RF)

Conventional resource pie

Original gas in place >16 Tcf

48% recovery factor

13

ProducedProduced6,420 PJ6,420 PJ

factor (RF)

All volumes gross

YE 2010 produced recovery factor of ~40%

Infill has been a 10-year journey

New technology trials in Greater Tindilpie

demonstrate commerciality

L t i t t d

20+ well pad planned –

First infill 2P reserve booking and further 2C

resource booking

First tight gas fracture

stimulation performed in

Australia in 1983

2005

S f l

2004 2006 2007 2008 2009 2010 2011 2012 2013

Largest integrated reservoir study in

Australia highlighting infill

potential

Big Lake pad with 50-acre

spacing

planned Australian first

2000

Successful Moomba Nth

infill pilot program @

50-acre spacing

First pin-point, multi-stagefracturing technologyto Australia

First independently certified* infill

contingent resource booking

Successful application of

micro-seismic in the Cooper

Moomba Nth and Moomba Sth pilot

program with50-acre spacing

State-of-the-art on-shore drilling rigs introduced

Cowralli pad with 20-acre

spacing

14 * Certified by DeGolyer and MacNaughton

13/10/2011

8

Infill resource is conventional gas

The Cooper Basin remains materially under-drilled

compared to North American standards

10-acre spacing 20-acre spacing 40-acre spacing

Rock outcropping ofMesaverde River deposits

standards.

Cowralli cross-section(50-100 acre spacing)

Channel

top continuousgas in subsurfacetop continuousgas in subsurface

top marineMesaverdetop marineMesaverde

~1

50

0’

650’

3-5

fra

csta

ges in

su

bsu

rface

Cowralli cross-section demonstrates abundance of gas bearing sands throughout the field

The tighter drill spacing will access these conventional sands

Channelsandstones

15

Infill is low risk and economically robust

Resource potential* (PJ)

Target

Seven trials undertaken at 30-50 acre spacing have been successful, with the majority of the acreage yet to be evaluated …

Infill projects2C

resources

Targetincrease to

75% RF

Greater Tindilpie 630

Tirrawarra 166

Moomba North 120

Moomba South 159

Big Lake Patchawarra 265

Big Lake Tirrawarra 102

16

Coonatie 60

Baryulah 92

Other 254

TOTAL 1,848 ~4,368

… while Coonatie-20 has been the best individual well result in the Cooper Basin for over 10 years at 20 mmscf/day.

Ongoing trial fields

* Gross volumes (as at 31 Dec 2010)

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9

New well construction techniques are a game changer

Key benefits include:

On-site simultaneous

Leading to 25%+ cost reduction

operations

Ability to undertake continuous frac logistics

Reduced surface impact

Cost reduction from shared surface facilities

Work over rig operations

Multi-well pad drilling

17

Low spacing deviated bores (10-15 degrees) with high spacing S-shape wellbores

Santos is leading the way on shale & other unconventional plays …

Prove gas content & recoverable volumes

Achieve gas flowto surface

Demonstrate commercial flows

2P reserve bookings

V ti l ll

2004–2010 2011–2012 2012–2013 2013+

D l d th H i t l ll E l tiVertical well technology trials& optimisation

Designing and acquiring further data for appraisal optimisation, specific to optimise shale fracture stimulation

Dedicated shale well

Developed the leading resource understanding

Australia’s first shale fracture and coring program in 2006

Australia’s first independently certified shale &

Horizontal welltechnology trials& optimisation

Dedicated shale specific horizontal drilling trial

Extensive fracturing trials beyond levels currently tested in the Cooper

Evaluation across broader Santos Cooper acreage

Multiple horizontal and vertical appraisal wells

Targeting initial shale reserve bookings in 2013, and production in

18

Dedicated shale well including dedicated shale fracturing

certified shale & unconventional resource bookings achieved in 2008

the Cooper and production in 2015

4,800 PJ2C*

2C* 4,000 PJ

2C* 2,600 PJ2,345 PJ2C*

* Santos share – total shale and other unconventional resources

Outlook Outlook Outlook

13/10/2011

10

… with the most comprehensive appraisal program

Moomba North REM* Shale A

ll

Key shale appraisal programs are adjacent to existing processing facilities.

South AustraliaSouth AustraliaMoomba North REM Shale A Drill quarter 4 2011

Dedicated vertical shale gas well and shale-specific fracture stimulation and micro-seismic monitoring and fracture mapping

Fracture stimulation in quarter 1 2012, using of 80% Haliburton’s Australian fracture capability

Moomba Plant

Merrimelia Gas

Tirrawarra Oil/Gas

Dullingari Gas

Ballera Plant

4Q 2011 Dedicated vertical shale well Core, logs, high rate stimulation Micro-seismic

Moomba North REM* Shale B

Well design in progress for quarter 4 2012 drill and 2013 fracture stimulation

First horizontal well, 1,500+ feet lateral length with 10-20+ fracture stages

19

0 50

kilometres QueenslandQueensland

Moomba North REM Shale B4Q 2012 Dedicated horizontal shale well Multi stage fracture stimulation 10+ stages Micro-seismic

* REM – Roseneath, Epsilon and Muturee shales zones

Key technology trials specifically targeting shale

0.00 200.00GR MD

1:2402

140.00 40.00DT 0.20 2000.00LLD

0.20 2000.00DT [Derived] 1

MOOMBA 81 [MD]

Moomba-81Monitor well

Moomba North Shale-ATreatment well

Specifically targeted shale section fracs. We already know the tight sands above and below the REM shales produce gas.

Moomba-81 monitor well

Stimulated rock volume area

TOOL

Rose

Epsi

80

00

82

00

84

00

86

00

Casing patch or squeeze

job

se

ism

ic

Targetfrac

zones

US technology advancementsallow real time micro-seismic

monitoring of fracture accuracy and effectiveness

Frac 1

Frac 2

Epsi

lon

Rose

neath

20

Moomba North Shale A treatment well

Murt

Patc

vc50dg

base patc

88

00

90

00

92

00

94

00

5 ½” Casing

Plug

7” High Strength

Casing(~12,000 psi)

μs

~350m

zonesREM

Frac 3

Murt

ure

e

13/10/2011

11

Multiple unconventional gas plays exist

Numerous unconventional plays have provided Santos with the only independently certified 2C shale and unconventional resource bookings in the Cooper Basin. Moomba field

Resource potential* (PJ)

URG playsBooked

2C2015

2C target

REM shale 684 PJ

Tight sands and mixed lithology

1,075 PJ

TOOL DARA

ROSE EPSI MTRE

REM shale

Developed conventional

Gross gas

21

Deep coal 586 PJ

Total 2,345 PJ 4,800 PJPATC

GRANITE

Tight sands &mixed lithology

Deep coal

* Santos share

Gross gas thickness

~1600 feet

Existing infrastructure provides strategic advantage

Existing infrastructure reduces future capex and accelerates commercialisation timeframes for infill and shale developments when compared to greenfield developments.

Mt Isa

Ballera plant

Jackson

SouthAustralia

Owner-operator position

15 major satellite facilities incorporating field compression

Gas storage facilities

Extensive gathering systems and pipeline networks linking the

Brisbane

22

Moomba plant

Queensland

Legend

Oil satellite

Gas satellite

fields (~6,000km)

Moomba and Ballera have substantial sales gas processing capability ~550 TJ/d with ability to upgrade

Adelaide Sydney

13/10/2011

12

2Preserves

Contingent resource (3C)

Prospectiveresource (P50)

NSW CSG – 12,000+ PJ opportunity

Gunnedah Basin coals are world-class with appraisal program confirming confidence and known resources in excess of 12,000 PJ.

GoondiwindiQueenslandQueenslandese es esou ce (3C) esou ce ( 50)

Santos* 1,216 PJGross 1,520 PJ



Field/regionGas

content(m3/t)

Permeability(md)

Flow rate(mmscf/d)

Gascomposition

(CH4%)

Net coalthickness

(m)

Fairview 8 – 15 10 – 1000s 1 – 5 99% 5 – 15

PEL 427

PEL 428

PEL 6

PEL 238

PEL 434

PEL 450

Moree

Narrabri

GunnedahCoonamble

Walgett New South WalesNew South Wales

* Post Eastern Star Gas acquisition and subsequent 20% sell-down to TRUenergy (per ASX release 18 July 2011)

23

Gunnedah 5 – 20 1 – 100+s 2+ 75-98% 3 – 90

San Juan 9 – 19 5 – 100s 0.1 – 25 84-99% 12 – 30

Powder River 0.9 – 2 5 – 200 0.15 >95% 12 - 80

PEL 450

PEL 462

PEL 1PEL 12

PEL 433PEL 456

PEL 452

Tamworth

Quirindi

Scone

GulgongDubbo

Coonabarabran

Attractive commercialisation options

Consolidated Gunnedah position strengthens

Value created by leveraging portfolio scale to accelerate development and meet customer demand.

Darwin

Proposed pipeline

Existing pipelineposition strengthens portfolio capability

Conventional and unconventional fields in Cooper Basin and Victoria add further flexibility Moomba

Brisbane

Mt Isa

Mereenie

Surat/Bowen

Existing pipeline

Santos operations

Dual channels to market provide ideal commercialisation flexibility, including gas swaps

24

Melbourne

Adelaide

Pt Bonython

CanberraSydney

Gunnedah

OtwayGippsland

13/10/2011

13


Introduction

A. East coast market dynamics have shiftedy



- Accelerated drive on cost control and efficiency improvement- Accelerated drive on cost control and efficiency improvement

- Application of North American technologies and development concepts

- Oil continues to provide material upside


Closing messages25

Santos has a highly disciplined safety culture

PeoplePeople ProcessProcess EnvironmentEnvironment

Safety and environmental excellence are core values for the business.

Top quartile Australian O&G industry safety performance

Strong leadership, good systems and governance

Effective contractor engagement

Balanced focus on people and plant safety

Clear standards of design, operations and maintenance

Focus on human factors, such as managing alarms

Minimising our footprint

Low impact seismic lines and pipeline laying techniques

Effective pipeline integrity management

Moomba - average no. of alarms per 10 minutes per panel(f k )

2011 volume uncontained hydrocarbons

EABU TRCFR performance(Employees & contractors)ra

te

d)

26

0

10

20

30

2007 2008 2009 2010 2011

(four week moving average)

0

200

400

600

2005 2006 2007 2008 2009 2010 2011 YTD

y

0

2

4

6

8

2005 2006 2007 2008 2009 2010 YTD 2011

( p y )

Tota

l re

cord

able

case

fre

quency

r

(per

mill

ion m

an h

ours

work

ed

Ala

rms

per

10 m

in inte

rval

m3

13/10/2011

14

Cooper Basin production outlook

A material resource remains to be produced from the Cooper Basin …

mmboe

Cooper Basin production*

10

15

20

25

30

Outlook

Flood impact

Santos’ 750 PJ (140 TJ/d) contract to GLNG underpins Moomba operations

Oil continues to provide material value

0

5

2006 2008 2010 2012 2014 2016 2018 2020

Oil and gas liquids Gas

Key infill fields deliver liquids rich production

27* Indicative Santos share

… underpinning a strong long-term business.

Driving reliability and cost efficiency gains …

Pursuing multiple avenues to increase reliability and improvecost performance.

Delivering improved uptime and maintenance cost reductions

Reliability25%

30%

Cooper gas downtime

1 in 30 year flood and rainfall

Cost and labour

efficiencies

Innovative contracting strategies delivering cost reductions

Labour efficiency programs increasing productivity

Rationalising and extending the life of facilities to deliver further cost reductions

Reliability improvement

0%

5%

10%

15%

20%

2007 2008 2009 2010 2011 2012 2013 2014

$12

$14

$16

200

250

$m

Cooper gas production costs*

28

Technology and

automation

Advanced process control

Field telemetry

Collaboration environments $-

$2

$4

$6

$8

$10

$12

0

50

100

150

2007 2008 2009 2010 2011 2012 2013 2014

$/b

oe

Pro

duct

ion c

ost

$

Solid: Maintenance costsShaded: Other production costs* Santos share

13/10/2011

15

… with focus on labour and contracting efficiencies

Delivering a step-change in performance improvement.

Maintenance labour Maintenance labour productivity productivity

Construction and Construction and maintenance maintenance

contractcontract

Efficient execution of work Process improvements Increased labour utilisation Delivering $5m pa savings*

34%

39%

44%

40%

50%Field labour utilisation

Improved contract strategy Supplier consolidation Increased resource flexibility Performance based contract

30

40Contractual savings*

Annual savings

Cummulative savings

25%

0%

10%

20%

30%

2010 Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2011

29* Santos share

-10

0

10

20

2011 2012 2013 2014 2015 2016

Savin

gs

($m

)

Down-hole efficiency improvements …

Already achieved previous best drill time

Contracted three new, state-of-the-art onshore drilling rigs.

Saxon 183 – Moomba wellsTime v depth curve

y pwithout benefit of full campaign style program:

Saxon drill rig performance exciting

− Equal best Cooper drill time after four wells

− Substantial fuel savings (>25%)

− Rig move times showing similar improvementimprovement

Implementing pad developments

− Two well pad underway

− Six well pad late quarter 4 2011 and

− Planning for 20+ well pad for mid- 2012

30

13/10/2011

16

…providing material well construction cost savings

For both infill and shale drilling campaigns, scale and factory mindset will generate large savings.

Single well* 10-pad well drilling campaign*

0

1

2

3

4

5

6

7

0

20

40

60

80

12% decrease 25% decrease

35% - 50%based on US experiences

$m $m

0

Old rigs New rigs

0

Old rigs New rigs

Key improvements Contracting strategies Latest generation equipment Automation Efficiency improvements

Key improvements Reduced move time and costs Improved logistics efficiency (fracs) Reduced surface facilities Reduced environmental impact

31* Full cycle well construction and connection (~8,000-9,000 feet with 4-5 pin point fracs)

Oil opportunities continue to deliver …

Strong 2P oil reserve replacement in the Cooper Basin.

Exploration and development success t 75%

Oil 2P reserves* (2005-10)mmbbls

rate over 75%

Leveraging extensive existing infrastructure and efficiency improvements to:

− Enable timely connection for new wells to optimise payback and rate of return

− Incremental tolling revenue from third party crude producers

mmbbls

21 1729

68

40

60

80

100

120

140

party crude producers

Future flood mitigation through economically attractive new field pipeline networks

Conversion to 2P reserves triggered by higher oil price technology success

32

* Santos share

25 29

0

20

YE05 Growth Production YE10 2C UpsideDrilling

13/10/2011

17

… quality exploration and appraisal opportunities

Applying enhanced technology and recovery techniques creates material value to new, old and under-developed fields.

Charo field Cook field Mereenie field

East

Nine well campaign in 2012 An old field re-invigorated th h t h i

Under developed field with t ti l t dd t

EastProduced15 mmbbls(35 oil wells)

WestProduced 1 mmbbl

from six oil wells

33

Re-pressurising the reservoir through waterflood techniques to enhance oil recovery

4,500bbls/day trunkline increasing field uptime and reducing production costs

through new techniques

Six well campaign in 2012

Evaluating trunkline investment to mitigate futureflood events and field increase uptime

potential to add up to 40mmbbls of 2P reserves

New drilling program starting in 2012-13

LPG stripping upside

Exciting unconventional gas potential


Introduction

A. East coast market dynamics have shiftedA. East coast market dynamics have shifted



D D li i l i NSW CSGD. Delivering value in NSW CSG

- Significant resource base with material upside potential

- Strategically positioned in Eastern Australia

- Ability to prosecute NSW CSG

Closing messages34

13/10/2011

18

NSW CSG – high quality CSG assets

Top quartile CSG asset:

14,619 PJ 3P + 3C contingent and 9,219 PJ prospective (gross)

2,797 PJ 3P reserves in PEL 238 (gross)

Multiple commercialisation options:

Domestic and export markets

Field development optimisation

Pipeline routes

Key risks manageable:

Stakeholder support (water, land access, approvals)

Geological and environmental

35

Sound development capability:

Dedicated team – combined Eastern Star Gas / Santos people

Broader Santos support and experience

Prudent work program ($500m over the next three years)

Strategically positioned to capture the changingmarket dynamics.

A A’

Breeza ShelfLate permianCSG play

Sound geological understanding …

Late permian play

Depth: 200–1,200 m ( t t f )

BlackJackOutcrop

BohenaTrough

Early permianCSG play

Early permian play

Depth: 600–1,200 m(outcrops at surface)

Individual seams up to 19m thick

Good gas content 4-15m3/t

Thick net coal package: 2-90 m

Methane rich fairway

Limited appraisal

A A’Bando Trough

Tooraweenah

Trough Murrurundi Trough

Individual seams up to 30m thick

High gas content

Thick net coal package: 5-42 m

Sound initial production performance from lateral pilots in PEL 238

36

13/10/2011

19

…with favourable permeability and gas content

Good to excellent permeability High gas content similar to Bowen and Surat Basins

Existing PEL 238 appraisal pilots producing >2.5TJ/day.

Permeability data derived from DSTs

Interpreted permeability >1,000 mD

Master cleating identified in PEL 238

Good to excellent permeability consistent with results from PEL 238 lateral pilots

4–20m3/t (daf)

High saturation confirmed by early gas breakthrough in PEL 238 pilots

Focus on demonstrating continuous, growing productionfrom the pilots.

Typicalcoal

Bohenacoal

37

Core sample

Excellent coal thickness

World-class CSG assets resulting in competitive cost of production …

Gunnedah Basin – PEL 238

9,0004,000

PEL 238 total pilot production history

Tintsfield Dewhurst Excellent coal thickness

High permeability

High gas content

High Bcf/km2

Existing infrastructure

L t l t h l 0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Wa

ter

(bb

l)

Ga

s (

Mscf)

Bibblewindi

Dewhurst

Bibblewindi West

Lateral technology

… Santos focus on maximising optimal efficient operations and demonstrate continuous production.

00

Oct 2006 Oct 2007 Oct 2008 Oct 2009 Oct 2010 Oct 2011

Gas Water

38

13/10/2011

20

Exploration, appraisal and development pipeline

Narrabri (PEL 238):

1,520 PJ 2P reserves booked to date (gross) Narrabri

rity

Bando (PEL 1 and 12):

Positive appraisal results

First pilot commissioned – first gas after one week

Targeting first 2P reserve bookings in 2012

Murrurundi (PEL 456 & 452):

High GIP due to very thick net coal

NEW ENGLAND FOLDBELT

Bando

Tooraweenah

M di

Maules Creek Sub-Basin

sing r

eso

urc

e m

atu

r

High GIP due to very thick net coal (up to 90m)

First lateral pilot well early 2012

Tooraweenah (PEL 462 & 433):

Exploration stage

39

Murrurundi

Incr

eas

Narrabri (PEL 238):

Focussed 2012-13 work program

PEL 428 PEL 427

Tintsfield pilot

PEL 238 2012-13 work programCoreholesSeismicLateral pilots

Deliverability and reserves growth focus …

Demonstrate deliverability:

− Continuous flows from existing pilots

− New pilots to test drilling technology

Build 2P reserves

Bando (PEL 1 & 12):

C i l

PEL 450

PEL 1

PEL 238

Dewhurst pilotBohena vertical pilot

Kahula pilot

Bibblewindi lateral pilot

Bibblewindi vertical pilot

Bibblewindi West lateral pilot

PEL 1&12

Commence appraisal program targeting 2P reserve build

Trial lateral technology via additional pilots and coreholes

40

PEL 12

PEL 433 PEL 452

2012-13 work programCoreholesSeismicKahula phase 2 pilotLateral pilots

... providing a strong basis for commercialisation.

13/10/2011

21

Strategically positioned for market access

A number of pipeline options available to enable commercialisation.

Northern options:

Several possible routes and connection points available

Northern options traverse prospective CSG areas

Southern routes:

41

Supplement existing pipeline infrastructure

Major new power generation customers

Potential link to Newcastle and Sydney

NSW CSG concerns

The questions The facts

In Namoi Catchment NSW forecast CSG water extraction of 5GL pa

Segments of the community have concerns, which are being addressed and managed.

Water

In Namoi Catchment, NSW, forecast CSG water extraction of 5GL pa (80% of which will be re-used) compares to industrial and private use of ~540GL pa.

Proved drilling techniques isolate coal seam from aquifers. Hundreds of metres of impervious rock between coal seams and surface aquifers.

Land access 500 agreements signed in Qld, 40 in NSW, with no court action.

Impact on agriculture

CSG operations affect only ~1% of the surface area. Beneficial water sufficient to irrigate over 500 hectares.Land restored completely after operations cease.p y p

Brine disposal Re-inject in deep saline aquifers, dispose in registered facilities.

Fracture stimulationUsed by the Australian oil and gas industry safely for over 50 years, additives safe and approved.

Cumulative impact NSW projects in discrete geographic and hydrogeological regions.

42

Through investment, royalties and jobs, the benefits to the local communities are significant.

13/10/2011

22


Introduction

A. East coast market dynamics have shifted




Closing messages

43

EABU portfolio can deliver 2x production within the next decade

Outlook reflects strong production growth with growing margins …

Production by development phase Revenue and costs per barrel*

Sanctionedand producing

Approaching FID

Evaluation

80

Revenue $/boeExploration

20

30

40

50

60mmboe

Gunnedah (phase 1)Cooper infill (phase 2)

Gunnedah (phase 2)Sole

20

30

40

50

60

70

80

Cooper shale and unconventional

44

0

10

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

… whilst controlling increases in finding and development costs

Cooper 2P oil and gas(GLNG GSA)Victorian producing/sanctionedMereenie and other oil

0

10

2010 2015 2020

Production Costs

Depreciation and depletion Margin

Other Costs

* Assuming A$100/bbl oil price

13/10/2011

23

Key take-aways

MarketUnprecedented east coast gas demand will cause higher gas prices and provide opportunity for commercialisation with increased margin capture

Resource captured

Infrastructure

Capability

Santos has 10,000+ PJ of geographic and geologically diverse resources to supply the increased demand

Santos is well placed due to its owner/operator position of key infrastructure to accelerate development at reduced cost

Santos has a proven track record of strong resource to reserve conversion and efficient operations to deliver the

45

Capability

Strategically positioned

reserve conversion and efficient operations to deliver the production and margin growth

Santos is strategically well placed to capitalise on the dual channel markets through its extensive east coast portfolio asset position

Eastern Australia Business UnitEastern Australia Business Unit

Capturing the FutureMoomba Investor Trip: 26-27 September 2011

260911 eastern australia business unit briefing final...finance driving profit, performance and...

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