Santos has upgraded its 2020 production guidance to 87-89 million barrels of oil equivalent (mmboe) and lowered its production cost guidance to $8.00-8.50/boe.
The upgrade in production guidance, from 83-88 mmboe, is due to strong operating performance across the base business and represents 15-18 per cent production growth for the year and more than 50 per cent growth since 2015.
Santos is also on track to deliver the production cost reductions announced in March in response to the COVID pandemic, which sees 2020 guidance lowered to $8.00-8.50/boe. Capital expenditure is still expected to be approx. $900 million, consistent with the 38% reduction for the year announced in March.
Integration of the ConocoPhillips acquisition completed in May 2020 is proceeding well, with guidance on acquisition synergies upgraded to $90-105 million per annum.
Speaking at the company’s Investor Day in Sydney, Santos Managing Director and Chief Executive Officer Kevin Gallagher said the consistent and successful execution of Santos’ Transform-Build-Grow strategy has the company positioned for disciplined growth and sustainable shareholder returns.
'Our strategy has been to establish a disciplined low-cost operating model that delivers strong free cash flows through the oil price cycle. Our 2020 forecast free cash flow breakeven oil price is less than US$25 per barrel before hedging and around US$20 per barrel after hedging,' Mr Gallagher said.
'Our base business is strong with production levels expected to remain relatively steady for the next decade and providing significant free cash flow. This cash flow combined with a strong balance sheet and control over the timing of our major projects, means we are well positioned for disciplined growth.'
Santos also announced another significant step towards a final investment decision on the Barossa project with Darwin LNG approving tolling agreements to transport and process Barossa gas through DLNG.
Santos has today also announced an ambitious roadmap to net-zero emissions by 2040 and new emissions targets designed to support Australia’s commitment to the Paris Agreement, including a 26-30 per cent reduction in scope 1 and 2 emissions by 2030, and a commitment to actively work with customers to reduce their emissions.
'Our focus over the last three years on step change technologies such as carbon capture and storage has enabled a pathway that allows us to go further faster when it comes to emissions reduction,' Mr Gallagher said.
A live webcast of the Investor Day will be available on Santos’ website at www.santos.com from 9:00am AEDT today.