How To Capitalise On The Cgs Gorgon Project

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1 Eastern Australia Business Unit Capturing the Future Moomba Investor Trip: September 211 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 expectations ti reflected in these statements t t 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 in various countries, approvals and cost estimates. All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated. 2 1

2 Today s key themes Introduction A. 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 Baulderstone VP Eastern Australia Business Unit Cooper Gas Business Oil & Offshore Energy Business Development & Technical Services N Lagonik L Dello A Kremor C Cruickshank CFO D Flew Strategy Commercial Marketing Finance Functional excellence 4 Driving profit, performance and accountability EABU Eastern Australia Business Unit 2

3 Today s key themes Introduction A. East coast market dynamics have shifted - Unprecedented east coast gas demand - Gas prices trending toward LNG netback B. Santos is ideally placed to capitalise C. Driving efficiencies and maximising margins in central Australia D. Delivering value in NSW CSG Closing messages 5 East Australian gas demand to triple by 22 Strong LNG demand + Australia s transition to a low carbon economy is driving unprecedented east coast gas demand growth. Five LNG trains sanctioned Gas-fired power generation to triple by 23 PJ/a 4, 3,5 3, 2,5 2, 1,5 1, Retail and C&I Power generation QCLNG (T1&2) GLNG (T1&2) APLNG T1 APLNG T2 Shell (T1&2) QCLNG T3 Source: Santos Proposed Sanctioned 6 3

4 Higher demand will push gas prices higher Gas prices will trend towards oil-linked international parity, circa $6 9 / GJ LNG demand Carbon pricing Gas-fired power generation demand Higher development costs Permanent structural shift in the east coast gas market unlocking the next wave of development. 7 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 2% East coast gas prices are low compared to other markets (UK, Europe and Asia) Growth index (Yr 2 = 1) 1,2 1, East coast gas Iron ore Copper Silver Coal Source: BMI 8 4

5 Today s key themes Introduction A. East coast market dynamics have shifted 9 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 in central Australia D. Delivering value in NSW CSG Closing messages Santos is ideally placed to capitalise Key attributes 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 commercialisation ensure Santos will capitalise on the transforming market dynamics and its strategic initiatives. 1 5

6 EABU has 1,6+ PJ of gas in eastern Australia (YE 21) A significant resource base with geographic and geological diversity, from which to build reserves and accelerate production. Amadeus Basin # 2P 123 2C 121 SE Qld (Non-GLNG) * 2P 157 2C 1,56 Cooper Basin 2P 868 2C 3,57 NSW CSG^ 2P 1,216 2C 2,987 Victoria 2P 369 2C All Santos share reserve and resource numbers are in PJ (as at 31 Dec 21) * Excludes Santos reserves and resources held within GLNG project ^ Post Eastern Star Gas acquisition and subsequent 2% sell-down to TRUenergy (per ASX release 18 July 211) # Post completion of the Mereenie acquisition and sell-down of Palm Valley/Dingo 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 PJ 35 Forecast reserve additions 2P r Targeting additional 2P reserve adds of circa 1, * PJ from the Cooper Basin by * Santos share (sales gas only) 6

7 Significant conventional resource potential Through infill drilling, Santos will unlock material upside in the Cooper Basin with potential to produce a further 5,7 PJ of conventional gas, based on US experiences. 48% recovery factor 2P 1,332 PJ 2C 1,848 PJ Conventional resource pie Original gas in place >16 Tcf YE 21 produced recovery factor of ~4% Produced 6,42 PJ Additional 2,52 PJ US experience 75% recovery factor (RF) All volumes gross 13 Infill has been a 1-year journey First tight gas fracture stimulation performed in Australia in 1983 Largest integrated t reservoir study in Australia highlighting infill potential New technology trials in Greater Tindilpie demonstrate commerciality Big Lake pad with 5-acre spacing First infill 2P reserve booking and further 2C resource booking 2+ well pad planned Australian first Successful First Moomba Nth independently State-of-theart on-shore infill pilot certified* infill Cowralli pad contingent drilling rigs 5-acre spacing with 2-acre resource booking introduced spacing 14 First pin-point, multi-stage fracturing technology to Australia * Certified by DeGolyer and MacNaughton Successful application of micro-seismic in the Cooper Moomba Nth and Moomba Sth pilot program with 5-acre spacing 7

8 Infill resource is conventional gas The Cooper Basin remains materially under-drilled compared to North American standards. Cowralli cross-section (5-1 acre spacing) ~15 Rock outcropping of Mesaverde River deposits 1-acre spacing 2-acre spacing 4-acre spacing frac stages in subsurface top continuous gas in subsurface top marine Mesaverde Channel sandstones The tighter drill spacing will access these conventional sands Cowralli cross-section demonstrates abundance of gas bearing sands throughout the field 15 Infill is low risk and economically robust Seven trials undertaken at 3-5 acre spacing have been successful, with the majority of the acreage yet to be evaluated Resource potential * (PJ) Infill projects Target 2C increase to resources 75% RF Greater Tindilpie 63 Tirrawarra 166 Moomba North 12 Moomba South 159 Big Lake Patchawarra 265 Big Lake Tirrawarra 12 Coonatie 6 Baryulah 92 Other 254 TOTAL 1,848 ~4,368 Ongoing trial fields 16 while Coonatie-2 has been the best individual well result in the Cooper Basin for over 1 years at 2 mmscf/day. * Gross volumes (as at 31 Dec 21) 8

9 New well construction techniques are a game changer Leading to 25%+ cost reduction Key benefits include: On-site simultaneous operations Ability to undertake continuous frac logistics Reduced surface impact Cost reduction from shared surface facilities Work over rig operations Multi-well pad drilling Low spacing deviated bores (1-15 degrees) with high spacing S- shape wellbores 17 Santos is leading the way on shale & other unconventional plays Prove gas content & recoverable volumes Achieve gas flow to surface Demonstrate commercial flows 2P reserve bookings Developed the Vertical well Horizontal well Evaluation across leading resource understanding Australia s first shale fracture and coring program in technology trials & optimisation Designing and acquiring further data for appraisal technology trials & optimisation Dedicated shale specific horizontal drilling trial broader Santos Cooper acreage Multiple horizontal and vertical appraisal wells 26 optimisation, specific Extensive fracturing Targeting initial Australia s first to optimise shale trials beyond levels shale reserve independently fracture stimulation currently tested in bookings in 213, certified shale & Dedicated shale well the Cooper and production in unconventional resource bookings achieved in 28 2C * 2,345 PJ including dedicated shale fracturing 2C * 2,6 PJ 2C * 4, PJ 215 2C * 4,8 PJ Outlook Outlook Outlook 18 * Santos share total shale and other unconventional resources 9

10 1:242.2 DT [Derived] /1/211 with the most comprehensive appraisal program Key shale appraisal programs are adjacent to existing processing facilities. Moomba North REM * Shale A Drill quarter Dedicated vertical shale gas well and shale-specific fracture stimulation and micro-seismic monitoring and fracture mapping Fracture stimulation in quarter 1 212, using of 8% Haliburton s Australian fracture capability Moomba North REM * Shale B Well design in progress for quarter drill and 213 fracture stimulation First horizontal well, 1,5+ feet lateral length with 1-2+ fracture stages South Australia Moomba North REM Shale A 4Q 211 Dedicated vertical shale well Core, logs, high rate stimulation Micro-seismic Tirrawarra Oil/Gas Merrimelia Gas Moomba Plant Dullingari Gas Ballera Plant Moomba North REM Shale B 4Q 212 Dedicated horizontal shale well 5 Multi stage fracture stimulation 1+ stages kilometres Micro-seismic Queensland 19 * REM Roseneath, Epsilon and Muturee shales zones Key technology trials specifically targeting shale Specifically targeted shale section fracs. We already know the tight sands above and below the REM shales produce gas. MOOMBA 81 [MD] 14. DT 4..2LLD 2.. GR 2. MD Moomba-81 Monitor well Moomba North Shale-A Treatment well TOOL 8 82 Casing patch or squeeze job US technology advancements allow real time micro-seismic monitoring of fracture accuracy and effectiveness Target frac zones REM Rose Epsi Murt Patc seismic μ s Epsilon Roseneath Murturee Plug Frac 1 Frac 2 Frac 3 7 High Strength Casing (~12, psi) Moomba-81 monitor well Stimulated rock volume area Moomba North Shale A treatment well 2 vc5dg base patc 94 5 ½ Casing ~35m 1

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) Developed conventional TOOL DARA URG plays Booked 2C 215 2C target REM shale 684 PJ ROSE EPSI MTRE REM shale Tight sands and mixed lithology 1,75 PJ Deep coal 586 PJ Total 2,345 PJ 4,8 PJ Gross gas thickness ~16 feet PATC Tight sands & mixed lithology Deep coal 21 * Santos share GRANITE 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 Owner-operator position 15 major satellite facilities incorporating field compression Gas storage facilities Extensive gathering systems and pipeline networks linking the fields (~6,km) Moomba and Ballera have substantial sales gas processing capability ~55 TJ/d with ability to upgrade South Australia Adelaide Moomba plant Sydney Ballera plant Jackson Queensland Legend Oil satellite Gas satellite Brisbane 22 11

12 NSW CSG 12,+ PJ opportunity Gunnedah Basin coals are world-class with appraisal program confirming confidence and known resources in excess of 12, PJ. 2P Contingent Prospective reserves resource (3C) resource (P5) Queensland Goondiwindi Santos* 1,216 PJ Gross 1,52 PJ Field/region Gas content (m 3 /t) Santos* 8,619 PJ Gross 11,832 PJ Permeability (md) Flow rate (mmscf/d) Santos* 5,188 PJ Gross 9,219 PJ Gas composition (CH 4 %) Net coal thickness (m) Fairview s % 5 15 Gunnedah s % 3 9 San Juan s % 12 3 Powder River >95% 12-8 PEL 6 Moree PEL 427 Walgett PEL 428 New South Wales PEL 434 Coonamble PEL 238 PEL 45 Coonabarabran PEL 462 PEL 433 Dubbo PEL 12 Narrabri PEL 1 Gunnedah Tamworth Quirindi PEL 452 PEL 456 Scone Gulgong 23 * Post Eastern Star Gas acquisition and subsequent 2% sell-down to TRUenergy (per ASX release 18 July 211) Attractive commercialisation options Value created by leveraging portfolio scale to accelerate development and meet customer demand. Darwin Consolidated Gunnedah Proposed pipeline position strengthens Existing pipeline portfolio capability Santos operations Conventional and Mt Isa unconventional fields in Mereenie Cooper Basin and Surat/Bowen Victoria add further Brisbane flexibility Moomba Dual channels to market provide ideal commercialisation flexibility, including gas swaps Pt Bonython Adelaide Otway Gunnedah Sydney Canberra Gippsland Melbourne 24 12

13 Today s key themes Introduction A. East coast market dynamics have shifted B. Santos is ideally placed to capitalise C. Driving efficiencies and maximising margins in central Australia - Accelerated drive on cost control and efficiency improvement - Application of North American technologies and development concepts - Oil continues to provide material upside D. Delivering value in NSW CSG Closing messages 25 Santos has a highly disciplined safety culture Safety and environmental excellence are core values for the business. People Process Environment 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 rate d) Total recordable case frequency r (per million man hours worked EABU TRCFR performance (Employees & contractors) YTD 211 Alarms per 1 min interval Moomba - average no. of alarms per 1 minutes per panel (four week moving average) m volume uncontained hydrocarbons YTD 26 13

14 Cooper Basin production outlook A material resource remains to be produced from the Cooper Basin Santos 75 PJ (14 TJ/d) contract to GLNG underpins Moomba operations Oil continues to provide material value Key infill fields deliver liquids rich production mmboe Flood impact underpinning a strong long-term business. Cooper Basin production * Outlook Oil and gas liquids Gas 27 * Indicative Santos share Driving reliability and cost efficiency gains 28 Pursuing multiple avenues to increase reliability and improve cost performance. Reliability improvement Cost and labour efficiencies Technology and automation Delivering improved uptime and maintenance cost reductions Rationalising and extending the life of facilities to deliver further cost reductions Innovative contracting strategies delivering cost reductions Labour efficiency programs increasing productivity 3% 25% 2% 15% 1% 5% % $m Production cost $ 25 2 Cooper gas downtime 1 in 3 year flood and rainfall Cooper gas production costs* Advanced process control Field telemetry 5 $4 $2 Collaboration environments $ Solid: Maintenance costs Shaded: Other production costs * Santos share $16 $14 $12 $1 $8 $6 $/boe 14

15 with focus on labour and contracting efficiencies Delivering a step-change in performance improvement. Maintenance labour productivity Efficient execution of work Process improvements Increased labour utilisation Delivering $5m pa savings * Construction and maintenance contract Improved contract strategy Supplier consolidation Increased resource flexibility Performance based contract 5% 4% Field labour utilisation 44% 39% 34% 4 3 Contractual savings * Annual savings Cummulative savings 3% 2% 25% Savings ($m) 2 1 1% % 21 Nov Dec Jan Feb Mar Apr May Jun Jul Aug * Santos share Down-hole efficiency improvements Saxon 183 Moomba wells Time v depth curve Contracted three new, state-of-theart onshore drilling rigs. Already achieved previous best drill time without 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 improvement Implementing pad developments Two well pad underway Six well pad late quarter and Planning for 2+ well pad for mid

16 providing material well construction cost savings For both infill and shale drilling campaigns, scale and factory mindset will generate large savings. Single well * 1-pad well drilling campaign * $m $m % decrease 25% decrease % - 5% 2 based on US 2 experiences 1 Old rigs New rigs Key improvements Contracting strategies Latest generation equipment Automation Efficiency improvements Old rigs New rigs 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,-9, feet with 4-5 pin point fracs) Oil opportunities continue to deliver Strong 2P oil reserve replacement in the Cooper Basin. mmbbls Oil 2P reserves * (25-1) YE5 Growth Production YE1 2C Upside Drilling Conversion to 2P reserves triggered by higher oil price technology success Exploration and development success 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 Future flood mitigation through economically attractive new field pipeline networks 32 * Santos share 16

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 Produced 15 mmbbls (35 oil wells) West Produced 1 mmbbl from six oil wells Nine well campaign in 212 Re-pressurising the reservoir through waterflood techniques to enhance oil recovery 4,5bbls/day trunkline increasing field uptime and reducing production costs An old field re-invigorated through h new techniques Six well campaign in 212 Evaluating trunkline investment to mitigate future flood events and field increase uptime Under developed field with potential ti to add up to 4mmbbls of 2P reserves New drilling program starting in LPG stripping upside Exciting unconventional gas potential 33 Today s key themes Introduction A. East coast market dynamics have shifted B. Santos is ideally placed to capitalise C. Driving efficiencies and maximising margins in central Australia D. Delivering i value in NSW CSG 34 - Significant resource base with material upside potential - Strategically positioned in Eastern Australia - Ability to prosecute NSW CSG Closing messages 17

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 Sound development capability: Dedicated team combined Eastern Star Gas / Santos people Broader Santos support and experience Prudent work program ($5m over the next three years) 35 Strategically positioned to capture the changing market dynamics. Sound geological understanding A A Late permian CSG play Breeza Shelf Late permian play Depth: 2 1,2 m (outcrops at surface) Individual seams up to 19m thick Good gas content 4-15m 3 /t Thick net coal package: 2-9 m Methane rich fairway Limited appraisal Early permian CSG play Early permian play Depth: 6 1,2 m Individual seams up to 3m thick High gas content Thick net coal package: 5-42 m Sound initial production performance from lateral pilots in PEL 238 Bohena Trough Bando Trough A A Toorawe enah Trough Murrurund i Trough Black Jack Outcrop 36 18

19 with favourable permeability and gas content Existing PEL 238 appraisal pilots producing >2.5TJ/day. Good to excellent permeability Permeability data derived from DSTs Interpreted permeability >1, md Master cleating identified in PEL 238 Good to excellent permeability consistent with results from PEL 238 lateral pilots High gas content similar to Bowen and Surat Basins 4 2m 3 /t (daf) High saturation confirmed by early gas breakthrough in PEL 238 pilots Typical coal Bohena coal Core sample Focus on demonstrating continuous, growing production from the pilots. 37 Gunnedah Basin PEL 238 World-class CSG assets resulting in competitive cost of production PEL 238 total pilot production history Excellent coal thickness 4, Tintsfield 9, Dewhurst 3,5 8, High permeability 3, Bibblewindi West 7, High gas content 6, 2,5 5, 2, 4, High Bcf/km 2 1,5 Bibblewindi 3, 1, Existing infrastructure 2, 5 1, Lateral technology Oct 26 Oct 27 Oct 28 Oct 29 Oct 21 Oct 211 Gas (Mscf) Water (bbl) Gas Water Santos focus on maximising optimal efficient operations and demonstrate continuous production

20 Exploration, appraisal and development pipeline Increas sing resource matur rity Narrabri (PEL 238): 1,52 PJ 2P reserves booked to date (gross) Bando (PEL 1 and 12): Positive appraisal results First pilot commissioned first gas after one week Targeting first 2P reserve bookings in 212 Murrurundi (PEL 456 & 452): High GIP due to very thick net coal (up to 9m) First lateral pilot well early 212 Tooraweenah (PEL 462 & 433): Exploration stage Tooraweenah Narrabri Bando Maules Creek Sub-Basin NEW ENGLAND FOLDBELT Murrurundi 39 Focussed work program Deliverability and reserves growth focus Narrabri (PEL 238): Demonstrate deliverability: Continuous flows from existing pilots New pilots to test drilling technology Build 2P reserves Bando (PEL 1 & 12): Commence appraisal program targeting 2P reserve build Trial lateral technology via additional pilots and coreholes PEL 428 PEL 427 Tintsfield pilot Bohena vertical pilot Bibblewindi West lateral pilot PEL 238 PEL 45 PEL 1& work program Coreholes Seismic Kahula phase 2 pilot Lateral pilots PEL 12 PEL work program Coreholes Seismic Lateral pilots Dewhurst pilot Bibblewindi vertical pilot Bibblewindi lateral pilot PEL 433 PEL 452 Kahula pilot PEL providing a strong basis for commercialisation. 2

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: Supplement existing pipeline infrastructure Major new power generation customers Potential link to Newcastle and Sydney 41 NSW CSG concerns 42 Segments of the community have concerns, which are being addressed and managed. The questions Water Land access Impact on agriculture Brine disposal Fracture stimulation Cumulative impact The facts In Namoi Catchment, NSW, forecast CSG water extraction of 5GL pa (8% of which will be re-used) compares to industrial and private use of ~54GL pa. Proved drilling techniques isolate coal seam from aquifers. Hundreds of metres of impervious rock between coal seams and surface aquifers. 5 agreements signed in Qld, 4 in NSW, with no court action. CSG operations affect only ~1% of the surface area. Beneficial water sufficient to irrigate over 5 hectares. Land restored completely after operations cease. Re-inject in deep saline aquifers, dispose in registered facilities. Used by the Australian oil and gas industry safely for over 5 years, additives safe and approved. NSW projects in discrete geographic and hydrogeological regions. Through investment, royalties and jobs, the benefits to the local communities are significant. 21

22 Today s key themes Introduction A. 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 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 * mmboe 6 Exploration Evaluation Approaching FID Sanctioned and producing Revenue $/boe Cooper shale and unconventional Gunnedah (phase 2) Sole Cooper 2P oil and gas (GLNG GSA) Victorian producing/sanctioned Mereenie and other oil Gunnedah (phase 1) Cooper infill (phase 2) Production Costs Other Costs Depreciation and depletion Margin whilst controlling increases in finding and development costs 44 * Assuming A$1/bbl oil price 22

23 Key take-aways Market Resource captured Infrastructure Capability Strategically positioned Unprecedented east coast gas demand will cause higher gas prices and provide opportunity for commercialisation with increased margin capture Santos has 1,+ 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 production and margin growth Santos is strategically well placed to capitalise on the dual channel markets through its extensive east coast portfolio asset position 45 Eastern Australia Business Unit Capturing the Future Moomba Investor Trip: September