Originally posted by Shashlik
Well lets see how the price of oil unfolds. Twelve months from now, STO would hopefully have smashed out another $billion and that show basically pay off Quadrant. Then what? What does Big Kev have plans for? How do you create some serious value?
Value is created by growth which for an Exploration company comes from
Acquisitions &
Organic growth. STO has shown that buying Quadrant's assets added 19 mmboe production data on top of their 70 mmboe's and 2P-220 mbboe reserves, so that's growth via Acq'ns.
Organic growth on the other hand comes from developing their own assets & selling the product to get the maximum benefit from the Commodity cycles. (e.g their 2013-2014 revenue stream when oil prices were high & cash boost coming from PNG).
Next phase for Santos will come from the following 3 key assets :
1) farming in at
P'nyang which has a 2C resource of 4.36 tcf gas (100% basis) held between Exxon, OSH & JX Nippon.
2)
Barossa which has a certified 2C resource of 4.3 tcf gross basis, with STO holding 25% in that project or 1.1 tcf net gas. Unlike BayuUndan this has a low liquids content. So once BayuUndan goes offline, Barossa gas to DLNG will offset any production drop.
3)
Dorado appraisal wells next year & fast-track to Development thereafter.
Note without Quadrant's Oil assets, STO dont have any oilfields left in the West. They sold Stag a few years ago to Jadestone. In July this year, their operated field Mutineer-Exeter and the nearby Fletcher-Funcane cluster were depleted & the FPSO departed which is why the 2 QE Oil assets, ie VanGogh-Coniston-Novara cluster & Pyrenees JV with BHP, are crucial as these will bring in the petro-dollars for the 2H-2018 & 2019. For 1H-'18 they've averaged USD75/bbl which was 7% premium to Brent prices.
4) Rest of the growth will b from the Cooper, GLNG & Eastern QLD assets.
There aren't any assets left in Victoria or Oilfields in Vietnam, which makes their task to focus & deliver on their growth strategy pretty straight-fwd in my view.
Slides 13, 14, 22 & 67 from the Invstr show state all this very clearly so are worth a read until the
Qtrly results are released on the
18th Oct.
(20min delay)
