Santos digs in on gas
NSW coal seam project a ‘core asset’
ENERGY firm Santos will once again back the controversial Narrabri coal seam gas project in NSW as it looks to boost production as part of its turnaround plan.
The controversial project will join the company’s existing core asset portfolio of five major assets, chief executive Kevin Gallagher said in an investor presentation yesterday.
The company has also forecast production will be largely stable in 2018, but expects sales to be lower during the year than its 2017 volumes.
Santos this year lodged with the state government an environmental impact statement for the Narrabri project in northwest NSW.
The explorer has for years faced opposition from local communities and anti-CSG activist groups wishing to stop the project from going ahead.
Yesterday, though, Mr Gallagher signalled renewed focus on the project, saying he hopes to secure environmental approvals by late 2018.
Narrabri has been sidelined since the company in late 2016 announced it would streamline its business to just five long-life natural gas assets — the Gladstone LNG terminal, stakes in Papua New Guinea projects, the Cooper Basin and Western Australian gas divisions and its prospective Northern Australian holdings.
Santos is looking to divest all other non-core assets as it tries to cut debt.
The strategy had positioned Santos to provide stable production for the next decade, Mr Gallagher said. “We have removed substantial cost, arrested the production decline in the Cooper, GLNG is ramping-up and PNG LNG is operating at record rates,” he said.
Santos expects to produce between 55 and 60 million barrels of oil equivalent (mmboe) in 2018, similar to the 2017 guidance of 58 to 60 million barrels. All the five major assets were set to deliver higher output in 2018, after allowing for major planned plant shutdowns at PNG LNG, Darwin LNG and Moomba.
Higher production from core assets will, however, be offset by natural field decline in the non-core assets.
It flagged capital expenditure in the range of $US825 million and $US875 million in 2018, a significant increase over the $US700-750 million range estimate for 2017.
Despite the increase, the free cash flow break-even point would stay within the $US35-40 a barrel range, it said, slightly higher than the $US32 a barrel level for 2017.
However, sales volume in 2018 is likely to be lower at 72 to 78 mmboe, mainly due to lower third-party sales and natural field decline from noncore assets, Santos said.
Shipments in 2017 are forecast to be between 79 and 82 mmboe. Santos is targeting net debt of $US2 billion by end-2019, from $US2.8 billion now.