Australian LNG player Santos has lifted its 2025 production target further to 120 million barrels of oil equivalent, more than double 2018’s output.
Santos said on Tuesday that the new target, up from 100 mmboe set in 2018, represents a cumulative annual growth rate in production of over eight percent to 2025.
Santos managing director and CEO Kevin Gallagher said: “Our strategy has been to establish a disciplined low-cost operating model that delivers strong cash flows through the oil price cycle. Our 2019 forecast free cash flow breakeven oil price is now around $29 per barrel.
“The recently announced acquisition of ConocoPhillips’ interests in northern Australia and Timor-Leste will further reduce our breakeven oil price and deliver operating interests in long-life, low-cost conventional natural gas assets, and strategic LNG infrastructure.
“We are now positioned for disciplined growth leveraging existing infrastructure in all five of our core assets, which we believe will deliver 120 mmboe by 2025.”
According to the company, the disciplined growth portfolio includes Barossa LNG – targeting FID around the end of Q1 2020, Dorado liquids – targeting FEED-entry Q2 2020, PNG LNG expansion – targeting FEED-entry in 2020, GLNG ramp-up to 6.2 mtpa sales from 2020, and Cooper Basin production growth.
“Natural gas is forecast to supply a quarter of the world’s total energy demand by 2040. Through our Energy Solutions business, we are investing in projects to lower emissions and assessing the significant potential for carbon capture and storage in the Cooper Basin,” Gallagher added.
Santos narrowed 2019 production guidance to 74-76 mmboe from 73-77 mmboe, and sales volumes guidance to 93-95 mmboe, which previously stood at 90-97 mmboe.
Capex is expected to be approximately $1 billion including major growth while production in 2020 is expected to increase to between 79-87 mmboe, comprising 73-80 mmboe from the base business, excluding the ConocoPhillips acquisition and expected 25 percent sell-down to SK E&S, and 6-7 mmboe net from the acquired assets after the sell-down.
At completion of the acquisition and expected sell-down to SK E&S, Santos’ interest in Bayu-Undan and Darwin LNG will be 43.4 percent (11.5 pre-transactions). Santos’ incremental 31.9 percent interest would add approximately 6-7 mmboe production in 2020, assuming completion of both transactions occurs on March 31, 2020.
Capital expenditure in 2020 is expected to include approximately $950 million sustaining capex in the base business, and approximately $500 million major growth capex for Barossa, Dorado, and PNG LNG expansion. Barossa major growth capex assumes sell-down to Santos’ targeted 40-50% interest range.