Santos today announced its half-year results for 2022, reporting record free cash flow of US$1.7 billion and underlying profit of US$1.3 billion. The results reflect significantly higher oil and LNG prices compared to the corresponding period due to stronger global energy demand combined with a higher interest in PNG LNG following the Oil Search merger.

Santos intends to return US$605 million to shareholders (equivalent to US18 cents per share) under the company’s capital management framework, comprising a 38 per cent increase in the interim dividend to US7.6 cents per share unfranked (US$255 million) and an increase in the previously announced on-market share buyback from US$250 million to US$350 million.

The US$350 million on-market buyback is inclusive of the US$250 million initial on-market buyback announced in April 2022, of which US$174 million had been completed by the end of June 2022. Santos intends to return the remaining US$176 million to shareholders via onmarket share buybacks during the remainder of 2022.

2022 First-half highlights

Portfolio optimisation nearing completion

• Completed sell-down of Barossa to JERA for $327 million
• Advanced discussions with shortlisted parties for the sale of 5% in PNG LNG with expected proceeds in line with market consensus valuation

Project and cost discipline

• Barossa project is 43% complete and Moomba CCS is 20% complete
• Production cost and capex guidance reduced
• Achieved annual merger synergies of $106 million and guidance range increased to $110-125 million

Disciplined and phased development

• Pikka Phase 1 sanctioned with first oil expected in 2026
• Upside in further Bedout appraisal and optimisation of the integrated Dorado development concept

Disciplined capital management

• Board approved new capital management framework targeting increased returns to shareholders
• On-market share buyback increased to $350 million
• Strengthened balance sheet with 22.5% gearing at end June

Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos delivered record production, free cash flow and underlying earnings in the first half 2022 as the company benefited from strong customer demand for our products and higher commodity prices.

“Demand for our products has remained strong in both Australia and internationally, due to increased demand and shortages of supply from producing nations due global underinvestment in new supply,” Mr Gallagher said.

“We are seeing these issues play out in the significant shift in global energy policy towards energy security as a key priority.

“Our critical fuels not only play a key role in the energy security of Australia and Asia, but they also provide affordable and reliable alternatives to switch from higher emitting fuels.

“Today’s results demonstrate the strength of Santos, with strong diversified cashflows and capacity to provide sustainable shareholder returns, fund new developments and the transition to a lower carbon future.

“Strong first half free cash flows mean we are in a position to deliver higher shareholder returns through an increase in the interim dividend and on-market buyback, consistent with our disciplined capital management framework.”

Santos also announced today a final investment decision has been taken to proceed with the Pikka Phase 1 oil project located on the North Slope of Alaska. Further detail is available in Santos’ separate ASX announcement on the project dated 17 August 2022.

Santos is also in advanced discussions with shortlisted counterparties for the sale of a five per cent interest in the PNG LNG project. Throughout this process, there has been strong interest from reputable counterparties with expected proceeds in-line with market consensus valuation. Santos intends to retain a 37.5 per cent stake in PNG LNG.

KeyFacts Energy: Santos Australia country profile