More annual reports from Santos Ltd:
2023 ReportPeers and competitors of Santos Ltd:
Mid-Con Energy Partners LPAnnual Report
2023
1 About us
2 Financial overview
4 Letter to shareholders
6 Board of Directors
10 Santos leadership team
14 Reserves Statement
19 Directors’ Report
37 Remuneration Report
70 Financial Report
142 Directors’ Declaration
143 Independent Auditor’s Report
150 Auditor’s Independence Declaration
151 Securities exchange and shareholder information
153 Glossary
156 Corporate directory
This Annual Report 2023 is a summary of Santos’ operations,
activities and financial position as at 31 December 2023.
All references to dollars, cents or $ in this document are to
US currency, unless otherwise stated.
An electronic version of this report is available on Santos’
website, www.santos.com
Santos’ Corporate Governance Statement can be viewed at:
www.santos.com/about-us/corporate-governance
ACKNOWLEDGEMENT
Santos acknowledges the Traditional Custodians of the
land and water on which we work upon and pays respect
to Elders past and present. We extend this respect to all
Indigenous People and recognize your continuing cultural
and spiritual connections to your Country.
DISCLAIMER AND FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are
subject to risk factors associated with the oil and gas, and
carbon capture and storage industries. It is believed the
expectations reflected in these statements are reasonable,
but they may be affected by a range of variables that 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, reserves and
resource estimates, loss of market, industry competition,
environmental risks, carbon emissions reduction and
associated technology risks, physical risks, legislative, fiscal
and regulatory developments, economic and financial market
conditions in various countries, approvals, conduct of joint
venture participants and contractual counterparties, and cost
estimates, reputational risk and social licence, stakeholder risk
and activism. The forward-looking information in this report
is based on management’s current expectations and reflects
judgements, assumptions, estimates and other information
available as at the date of this document and/or the date of
Santos’ planning processes. There are inherent limitations
with scenario analysis. Scenarios do not constitute definitive
outcomes. Assumptions may or may not be, or prove to be,
correct and may or may not eventuate, and scenarios may be
impacted by factors other than assumptions made. Except
as required by applicable regulations or by law, Santos does
not undertake any obligation to publicly update or review
any forward-looking statements, whether as a result of new
information or future events. Forward-looking statements
speak only as of the date of this report or the date planning
process assumptions were adopted as relevant. Our strategies
and targets will adapt given the dynamic conditions in which
we operate; it should not be assumed that any strategies,
targets or implementation measures are inflexible or frozen
in time. No representation or warranty, express or implied,
is given as to the accuracy, completeness or correctness,
likelihood of achievement or reasonableness of any forward-
looking information contained in this report. Forward-looking
statements do not represent guarantees or predictions of
future performance. They involve known and unknown risks,
uncertainties and other factors, many of which are beyond
Santos’ control, and which may cause actual results to differ
materially from those expressed in the statements contained
in this report. As referred to and articulated in the section
Unreasonable Prejudice on page 33 of this report, Santos has
omitted some information in relation to the Group’s business
strategies, prospects and likely developments in operations
and the expected results of those operations in future
financial years on the basis that such information, if disclosed,
would be likely to result in unreasonable prejudice.
About us
Santos provides reliable, affordable energy for progress
and seeks to provide lower carbon energy over time.
Santos is a global energy company with operations
across Australia, Papua New Guinea, Timor-Leste and
the United States.
At Santos, our goal is to be a global leader in the
energy evolution to low carbon fuels that help the
world decarbonise and continue to provide the reliable,
affordable energy the world needs for modern life and
human progress.
Santos is an important Australian domestic gas supplier and LNG supplier in Asia.
We are committed to supplying critical fuels such as oil and gas, and abating
emissions through carbon capture and storage, energy efficiency projects, use
of renewables in our operations and high-quality carbon credits.
Santos will also seek to develop low carbon fuels as customer demand evolves.
For 70 years, Santos has been working in partnership with local communities,
providing jobs and business opportunities, safely developing natural gas
resources and from there powering industries and households.
Santos seeks to deliver long-term value to shareholders through our diverse
portfolio of high-quality, long-life, low-cost oil and gas assets, carbon storage
resources and infrastructure.
The Santos portfolio is resilient across a range of decarbonisation scenarios.
Santos has a climate transition action plan that will continue to evolve for the
global energy evolution.
Santos has a regional operating model with a strong local focus. The Company’s
operating structure comprises three regional business units focused on enabling
and executing corporate strategy. Two functional divisions – Santos Energy
Solutions and Santos Upstream Gas and Liquids – are accountable for global
portfolio management and strategy.
1
Santos Annual Report 2023 Financial overview
Sales volume
mmboe
Sales revenue
US$million
Production
mmboe
107.1
104.2
112.3
96.4
94.5
7,790
5,889
75.5
89.0 92.1
103.2
91.71
4,033
3,387
4,713
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
1
2023 pre-PSC production 92.2 mmboe
Free cash flow
US$million
Underlying net profit after tax
US$million
Net profit/(loss) after tax
US$million
3,641
2,128
1,504
1,138
740
2,461
1,423
2,112
1,416
946
719
287
674
658
(357)
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
Unit production costs
US$ per boe
Capital expenditure
US$million
Net debt
US$million
8.04 7.76 7.82
7.24
8.53
2,625
2,069
1,387
1,016
858
5,157
4,264
3,664
3,325
3,450
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
2
Santos Annual Report 2023 2023 Sales volumes
mmboe
2023 Production
mmboe
Own product
80.8
Third-party product
15.6
Oil
Sales gas to LNG
7.5
49.1
Sales gas and ethane 29.7
Condensate
LPG
4.4
1.0
2023 Sales revenue
US$million
Sales revenue
Average realised oil price
US$ per barrel
LNG
3,668
Sales gas and ethane
1,130
Oil
Condensate
LPG
650
390
51
110.1
87.6
72.0
76.1
47.7
2019
2020
2021
2022 2023
2023 Results
Sales volume
mmboe
Production
mmboe
Average realised oil price
US$ per barrel
US$million
Net profit/(loss) after tax
Underlying net profit after tax US$million
US$million
Sales revenue
US$million
Operating cash flow
US$million
Free cash flow
US$million
EBITDAX
US$million
Total assets
US cents
Earnings per share
US cents per share
Dividends declared
US$million
Share buy-back executed
Number
Number of employees
2019
94.5
75.5
72.0
674
719
4,033
2,046
1,138
2,457
16,509
32.4
11.0
0
2,178
2020
107.1
89.0
47.7
(357)
287
3,387
1,476
740
1,898
17,656
(17.1)
7.1
0
2,722
2021
104.2
92.1
76.1
658
946
4,713
2,272
1,504
2,805
30,009
30.8
14.0
0
3,786
2022
112.3
103.2
110.1
2,112
2,461
7,790
4,558
3,641
5,646
28,856
63.0
22.7
384
3,550
2023
96.4
91.7
87.6
1,416
1,423
5,889
3,258
2,128
4,083
29,756
43.4
26.2
316
3,864
3
Santos Annual Report 2023 Letter to shareholders
KEITH SPENCE
Chair
KEVIN GALLAGHER
Managing Director and
Chief Executive Officer
4
Dear fellow shareholders,
The year 2023 was another innovative and successful
12 months for Santos as we continue to make strong progress
on delivering our strategy through backfilling and sustaining
our upstream production and midstream infrastructure
and developing the low carbon fuel opportunities and
decarbonisation services the world needs.
Strong operating performance supporting increased
returns to shareholders
Santos delivered annual production of 91.7 mmboe, sales
revenue of US$5,889 million and free cash flow of more than
$2.1 billion, which is an outstanding achievement in what has
been a challenging year.
Our balance sheet is strong with net debt of $4.3 billion and
gearing at 18.4 per cent, excluding leases, at year end.
We announced returns to shareholders by way of dividends
of $852 million for the year and also by completing the
remaining $316 million of our previously announced share
buy-back program.
Our Company is now able to generate compelling cash
flows to drive shareholder returns, develop major energy
and carbon capture and storage (CCS) projects whilst
maintaining a strong balance sheet.
Optimising our diverse portfolio, maintaining
disciplined growth, and exploring strategies to
unlock shareholder value
Drilling has recommenced at the Barossa field and the
project is 66.4 per cent complete with first gas expected
in Q3 2025.
Our Pikka project in Alaska continues to progress on time
and on budget and reached 37.4% complete at end of 2023.
Santos and Kumul Petroleum Holdings Limited (Kumul)
have agreed an amendment to the Sale Agreement
where Kumul has taken an effective interest in the Santos
entity that holds the 2.6 per cent sale interest. Kumul paid
US$352 million to Santos (equivalent to a ~1.6 per cent
interest) on 31 January 2024 to allow partial completion of
the transaction.
One of two Angore wells in PNG have been successfully
drilled and production liner run to well total depth in
January 2024. Reservoir characteristics align with pre-drill
expectations.
In Timor-Leste, our Bayu-Undan CCS project FEED is nearing
completion after legislation was passed by the Australian
Parliament on amendments to London Protocol’s for cross
border provisions for CO2 export and geological sequestration,
which was a critical development for the project.
Santos Annual Report 2023 We enter 2024 focused on executing our strategy to provide the critical energy
the world continues to demand, progressing our Climate Transition Action
Plan to decarbonise ours and our customers’ products and deliver sustainable
returns to shareholders as a result.
Decarbonisation through CCS and new fuels
Outlook
In 2023, we have seen significant progress on our Moomba
CCS project in the Cooper Basin, which is 80 per cent
complete now just months away from first injection of CO2
into the natural reservoirs which have previously held the
gas for millennia.
We enter 2024 focused on executing our strategy
to provide the critical energy the world continues to
demand, progressing our Climate Transition Action
Plan to decarbonise ours and our customers’ products
and deliver sustainable returns to shareholders as a result.
The 2023 IEA NZE Report says about 6GTpa of storage from
CCS will be required by 2050 – that’s more than 100 times
higher than today’s operational capacity.
At Santos, we have been busy getting ahead of the game.
In 2023, we signed numerous agreements to investigate
carbon capture storage supply chains, essentially laying
the foundations for a new Australian industry where Santos
will import CO2 from our Asian partners and store it safely
underground to help our region reach its Net Zero goals.
It’s also pleasing that we were able to add another 40 million
tonnes of 2C CO2 contingent storage resource – increasing
our total CO2 storage resource to 140 million tonnes in the
Cooper Basin which is further evidence we are building on
our decarbonisation strategy.
We have also established agreements with several major
Asian partners for the development of carbon-neutral
e-methane, made by combining green hydrogen with CO2
obtained from carbon capture of industrial emissions or
direct air capture.
The advantage of e-methane is that it has the same
properties and chemistry as natural gas, and can use
existing gas pipelines, LNG facilities and gas distribution
networks, making it a potential carbon-neutral substitute
for natural gas which would save trillions of dollars in energy
transition costs.
Santos is well positioned to provide the decarbonisation
services and the critical low carbon fuels our region needs
through the energy evolution.
We are expanding and developing our LNG portfolio by
delivering on Barossa with first gas expected in the third
quarter of 2025. We are also progressing Papua LNG
towards FID. First oil from Pikka is expected in the first half
of 2026. These projects will transform Santos and provide
long-term value for shareholders.
In summary, we are well positioned to deliver shareholder
returns, backfill and sustain our existing business, complete
our major projects, and progress our decarbonisation plans.
On behalf of the Board and management team we would like
to take this opportunity to thank you, our shareholders, for
your ongoing trust and support.
Yours sincerely,
Signature to come
KEITH SPENCE
Chair
KEVIN GALLAGHER
Managing Director and Chief Executive Officer
5
Santos Annual Report 2023 Board of Directors
KEITH SPENCE
KEVIN GALLAGHER
Chair
BSc (First Class Honours in Geophysics), FAIM
Mr Spence is an independent non-executive
Director. He joined the Board on 1 January
2018, and became Chair on 19 February 2018.
He is also Chair of Santos Finance Limited and
Chair of the Nomination Committee.
Mr Spence has over 40 years’ experience
in managing and governing oil and gas
operations in Australia, Papua New Guinea,
the Netherlands and Africa.
A geologist and geophysicist by training,
Mr Spence commenced his career as an
exploration geologist with Woodside
Petroleum Limited in 1977. He subsequently
joined Shell (Development) Australia, where he
worked for 18 years. In 1994, he was seconded
to Woodside to lead the North West Shelf
Exploration team. In 1998, he left Shell to
join Woodside. He retired from Woodside in
2008, after a 14-year tenure in top executive
positions in the company. Mr Spence has
expertise in exploration and appraisal,
development, project construction, operations
and marketing.
On retirement Mr Spence took up several
board positions, working in oil and gas, energy
including geothermal, wind, solar and power
from waste, mining, and engineering and
construction services and renewable energy.
This included Clough Limited, where he served
as Chairman from 2010 to 2013; Geodynamics
Limited, where he served as a non-executive
Director from 2008 to 2016 (including as
Chairman from 2010 to 2016); Verve Energy
and Synergy (after merger with Verve) where
he served as a non-executive Director from
2009 to 2014, Oil Search Limited, where he
served as a non-executive Director from 2012
to 2017; Murray and Roberts Holdings Limited,
where he served as a non-executive Director
from 2015 to 2020 and Base Resources,
serving as Chairman from 2015 to 2021.
Mr Spence is also a past Chair of the National
Offshore Petroleum Safety and Environmental
Management Authority Board. He led the
Commonwealth Government’s Carbon Storage
Taskforce from 2008 to 2010 and chaired
the Carbon Capture and Storage Flagship
Independent Assessment Panel from 2008
to 2012.
Other current directorships: Non-executive
Director of IGO Limited (since 2014).
Former directorships in the last three years:
Chair of Base Resources Limited (2015 to
2021) and Murray and Roberts Holdings
Limited (2015 to 2020).
Managing Director
and Chief Executive Officer
BEng (Mechanical) Hons, FIEAust
Mr Gallagher has more than a decade
of experience leading major oil and gas
companies and over two decades of
international experience within the industry.
He joined Santos as Managing Director and
Chief Executive Officer on 1 February 2016, and
has led significant transformation and growth
of the Company, delivering a competitive
advantage in the energy evolution.
Mr Gallagher commenced his career as a drilling
engineer with Mobil North Sea, before joining
Woodside in Australia in 1998. At Woodside,
Mr Gallagher led the drilling organisation
through a rapid growth phase, delivering several
Australian and international development
projects and exploration campaigns, before
leading the Australian oil business. He was Chief
Executive Officer at Clough Limited from 2011
until his appointment at Santos.
Under his long-term leadership, Santos
has become Australia’s second-largest
independent natural gas and liquids producer
after implementing a focused strategy to build
and grow around five core long-life, producing
natural gas assets in Australia, Papua New
Guinea and Timor-Leste.
The strategy has included successful
acquisitions of Quadrant Energy and
ConocoPhillips’ Australia-West business,
and a merger with Oil Search.
Mr Gallagher has implemented a disciplined
low-cost operating model and strengthened
the balance sheet to support the Company’s
strategy. This has created a strong cash-
generative business that has delivered a
series of record results. He has also positioned
Santos to leverage the critical role natural gas
will play in delivering energy security through
the energy transition to Net Zero emissions.
In pursuit of the Company’s Vision2040 and
net-zero Scope 1 and 2 emissions, Mr Gallagher
is executing the Company’s three-horizon
strategy – backfill and sustain, decarbonisation
and low carbon fuels. Santos’ three-horizon
strategy will be delivered through a regional
operating model with a strong local focus. The
Company’s operating structure is comprised
of three regional business units focused on
enabling and executing corporate strategy. Two
functional divisions, Santos Energy Solutions
and Santos Upstream Gas and Liquids, are
accountable for global portfolio management
and strategy.
6
Santos Annual Report 2023 YASMIN ALLEN AM
GUY COWAN
EILEEN DOYLE
BCom, FAICD
BSc (Hons), Engineering, FCA (UK) MAICD
BMath (Hons), MMath, PhD, FAICD, FTSE
Ms Allen is an independent non-executive
Director. She joined the Board on
22 October 2014, and is Chair of the People,
Remuneration and Culture Committee, and a
member of the Audit and Risk Committee and
the Nomination Committee.
Mr Cowan is an independent non- executive
Director. He joined the Board on 10 May
2016, and is the Chair of the Audit and Risk
Committee, member of the Nomination
Committee and a Director of Santos
Finance Limited.
Mr Cowan had a 23-year career with Shell
International in various senior commercial and
financial roles. His last two roles were as CFO
and Director of Shell Oil US and CFO of Shell
Nigeria. He was CFO of Fonterra Co-operative
Ltd between 2005 and 2009.
Other current directorships: Chair of
Queensland Sugar Limited (since 2009), the
Stahmann Webster Group (since 2021), Port
of Brisbane (since 2021), AFF Cotton Pty Ltd
(since 2021), Winson Group Pty Ltd (since
2014) and Director of Ability First Australia
(since 2015).
Former directorships in the last three years:
Health and Plant Protein Ltd (2018 to 2021).
Ms Allen has extensive experience in finance
and investment banking, including senior
roles at Deutsche Bank AG, ANZ and HSBC
Group Plc. This includes as former Chairman
of Macquarie Global Infrastructure Funds, and
a former Director of EFIC (Export, Finance
and Insurance Corporation).
Other current directorships: Director of
Cochlear Limited (since 2010), ASX Limited
and ASX Clearing and Settlement boards
(since 2015), First Acting President of the
Australian Government Takeovers Panel (since
2017), Chair of Future Skills Organisation
(since 2020), Chair of Tiimely (since 2021) and
Director of QBE Insurance (since 2022). She
was made a Member of the Order of Australia
in 2023 for significant service to finance and
business, and to the not-for-profit sector.
Former directorships in the last three years:
Director of the George Institute for Global
Health (2014 to 2023), Chair of Faethm.ai
(2020 to 2021), National Portrait Gallery (2013
to 2022) and Chair of Advance (2018 to 2022).
Dr Doyle is an independent non-executive
Director. She joined the Board on
17 December 2021, and is a member of the
Environment, Health, Safety and Sustainability
Committee.
Dr Doyle’s career spans the building
materials, research, infrastructure, industrials,
superannuation and logistics sectors. This
includes senior operational roles at BHP
Limited and CSR Limited culminating in her
appointment as CEO of CSR’s Panel’s Division.
Dr Doyle was previously Deputy Chairman
CSIRO and Chairman of Port Waratah Coal
Services and The Hunter Research Foundation.
She was Director of Austrade, OneSteel, Boral
Ltd, GPT Group Ltd, Bradken Ltd, Knights
Rugby League Pty Ltd, State Super Financial
Services, Ross Human Resources Ltd and
Oil Search Ltd. Dr Doyle was Australia’s first
Fulbright Scholar in Business in 1993. She
is a Foundation Fellow of the Australian
Association of Angel Investors and a Fellow
of the Australian Academy of Technology and
Engineering.
Other current directorships: Dalrymple Bay
Infrastructure Limited (since 2020), NEXTDC
Limited (since 2020), Hunter Angels Trust
(since 2012), Airservices Australia (since 2021)
and Kinetic Group (2023).
Former directorships in the last three years:
GPT Group Limited (2010 to 2019), Boral
Limited (2010 to 2020) and Oil Search Limited
(2016 to 2021).
7
Santos Annual Report 2023 Board of Directors
continued
VANESSA GUTHRIE AO
PETER HEARL
JANINE MCARDLE
DSc, PhD, BSc (Hons), FAICD, FTSE
Dr Guthrie is an independent non-executive
Director. She joined the Board on 1 July 2017,
and is a member of the People, Remuneration
and Culture Committee and the Environment,
Health, Safety and Sustainability Committee.
Dr Guthrie has more than 30 years' experience
in the resources sector in diverse roles such
as operations, environment, community and
Indigenous affairs, corporate development and
sustainability.
She has qualifications in geology, environment,
law and business management including a
PhD in Geology. Dr Guthrie was awarded
an Honorary Doctor of Science from Curtin
University in 2017 for her contribution to
sustainability, innovation and policy leadership
in the resources industry. In 2021, she became
an Officer of the Order of Australia for her
contribution to the mining and resources
sector and as a role model for women in
business.
Other current directorships: Tronox Holdings
PLC (since 2019), Lynas Rare Earths Ltd (since
2020), Cricket Australia (since 2021) and Orica
Limited (since 2023), Pro-Chancellor of Curtin
University, Board member of Infrastructure
Australia (since 2021).
Former directorships in the last three years:
Lead Independent Director and Deputy Chair
of AdBri Limited (2018 to 2023), Director of
Australian Broadcasting Corporation
(2017 to 2021).
BComm (UNSW with Merit), FAICD, MAIM,
MAMA
Mr Hearl is an independent non-executive
Director. He joined the Board on 10 May 2016,
and is Chair of the Safety and Sustainability
Committee, a member of the People,
Remuneration and Culture Committee and the
Nomination Committee. He earlier served on
the Company’s Audit and Risk Committee.
During an 18-year career in the oil industry
with Exxon in Australia and the USA, Mr Hearl
held a variety of senior marketing, operations,
logistics and strategic planning positions.
He joined YUM Brands (formerly PepsiCo
Restaurants) as KFC Australia’s Director of
Operations in 1991. Subsequently, he had
several senior international leadership roles,
as well as President of Pizza Hut USA, before
assuming the global role of YUM Brands’ Chief
Operating and Development Officer in 2006,
based in Dallas, Texas and Louisville, Kentucky,
from where he retired in 2008.
Other current directorships: Chairman of
Endeavour Group Ltd (since 2021), Trustee
of the Stepping Stone Foundation, a Sydney-
based NFP (since 2020) and member of its
Investment Committee (since 2018).
Former directorships in the last three years:
Director of Telstra Ltd (2014 to 2021).
BS (Chemical Engineering), MBA, NACD
Governance Fellowship, WCD, Carnegie Mellon
CERT-Cyber Security Oversight
Ms McArdle is an independent non-executive
Director. She joined the Board on 23 October
2019, and is a member of the Audit and Risk
Committee and the Environment, Health,
Safety and Sustainability Committee.
Ms McArdle has extensive global energy
experience in engineering and design,
physical and financial energy commodities
trading, risk management and M&A. She is
the founder and CEO of Apex Strategies,
a global consultancy business providing
advisory services to companies engaged in
the oil and gas industry and more recently
in the development of tools and strategies
to facilitate achievement of corporate
energy transition goals. Prior to forming
Apex Strategies, she worked for Apache
Corporation in the United States for 13 years,
where she was an Executive Officer and held
various executive roles including President,
Kitimat LNG Co., Senior Vice President of
Global Gas Monetization, and Vice President,
Worldwide Oil and Gas Marketing with P&L.
She also had operational responsibility for the
evacuation and sale of all of the company’s
oil and gas production worldwide and the
development and execution of their LNG
strategy. Prior to joining Apache, Ms McArdle
worked as an executive with Aquila Energy
for nine years with P&L responsibilities across
trading, M&A and B2B e-commerce, first in the
United States and then in the United Kingdom,
as Managing Director of Aquila Energy Ltd,
Aquila’s European Energy Trading Subsidiary.
During this time, she was a key architect in the
design and implementation of the ICE Trading
platform and served on the ICE Board of
Directors from 2000 to 2002.
Ms McArdle was recognised nationally as one
of the top 50 most powerful women in the
oil and gas industry in 2014 and was the 2016
recipient of the Houston Business Journal’s
Women in Energy Leadership award for
Women of Influence.
Other current directorships: Director of
Antero Midstream Corp (US) (since 2020)
and Director of Advantage Energy Ltd (CA)
(since 2022).
Former directorships in the last three years:
Director of Halcon Resources (US)
(2018 to 2019).
8
Santos Annual Report 2023 MICHAEL UTSLER
MUSJE WERROR
BSc (Ptrl Eng), GAICD, MAICD
BSc (Chem), MBA, MProfAcc
Mr Werror is an independent non-executive
Director. He joined the Board on 17 December
2021, and is a member of the People,
Remuneration and Culture Committee.
Mr Werror brings over 20 years of leadership
experience in the mining and resources
sector in Papua New Guinea (PNG). He was
Managing Director and Chief Executive Officer
of Ok Tedi Mining Limited from June 2020 to
December 2022.
Mr Werror commenced his long career at
Ok Tedi as a graduate in 1988, and previously
held various roles and responsibilities including
managing health, safety and environment,
mine closure planning, tax credit scheme
projects, Government affairs and leading
community relations in Western Province,
PNG.
Other current directorships: Executive
Director of Mayur Resources Limited
(since 2024).
Former directorships in the last three years:
Oil Search Limited (2021), Managing Director
and CEO of Ok Tedi Mining Ltd (2020
to 2022), Chair of Ok Tedi Development
Foundation (2020 to 2022) and Chair
of Western Province Health Authority
(2019 to 2023).
Mr Utsler is an independent non-executive
Director. He joined the Board on 3 May
2022, and is a member of the Audit and Risk
Committee.
Mr Utsler has worked in the Energy Industry
for more than 40 years, across multiple
international areas. During his career, he has
built deep knowledge and experience in the
upstream, midstream and downstream areas
of the energy industry. In addition, he has
developed experiences in power generation,
alternative energy solutions and some aspects
of carbon management. He has had extensive
involvement in fostering technological
solutions for driving efficiencies in operations.
He has held senior leadership and executive
positions with Amoco, BP (including President
of the Gulf Coast Restoration Organisation
– GCRO and SVP BP Alaska Exploration);
Woodside Energy and New Fortress Energy.
In September 2020, Mr Utsler joined Otto
Energy as its Chief Executive Officer and
Managing Director. He was further appointed
Otto Energy’s Executive Chairman from
November 2020 to 2023.
Mr Utsler is a former non-executive Director
of Integrated Asset Solutions and a former
Director of Oil Search Limited. He has
previously served on a variety of not-for-
profit boards including the West Australian
Symphony Orchestra.
Former directorships in the last three years:
Oil Search Limited (2021), Integrated Asset
Solutions (2017 to 2021) and Chair of Otto
Energy (since 2020 to 2023).
9
Santos Annual Report 2023 Santos leadership team
KEVIN GALLAGHER
MICHAEL ABBOTT
DAVID BANKS
Managing Director
and Chief Executive Officer
BEng (Mechanical) Hons, FEIAust
Mr Gallagher’s biography can be
read on page 6.
Group General Counsel and
Executive Vice President
Environment and Governance
Executive Vice President
Upstream Gas and Liquids
BE (Hons), MBA, GAICD
BA, LLB, MBA
Mr Abbott joined Santos in
July 2023 and is Group General
Counsel and Executive Vice
President Environment and
Governance. In this role Mr Abbott
is responsible for overseeing
the Company’s Legal, Company
Secretary, Business Integrity,
Government Relations, Risk, Audit
and Compliance, Environment
Approvals, Cultural Heritage
and First Nations Engagement
functions. He previously held the
role of Group Legal Counsel and
Senior Vice President External
Affairs.
Mr Abbott has over 30 years’
experience as a lawyer, and
17 years in various corporate
roles with responsibilities
including legal, internal audit,
risk, governance, external affairs
security and properties. He has
held leadership roles at Woodside
and Ampol and prior to that was
a salaried partner at Baker &
McKenzie in Hong Kong.
He has also served on the Board
of APPEA.
Mr Abbott has Bachelor of Laws,
Bachelor of Arts and Master of
Business Administration degrees
from the University of Western
Australia.
Mr Banks joined Santos in
2018 and is Executive Vice
President Upstream Gas and
Liquids, with responsibility for
the Company’s Upstream Gas
and Liquids functional division,
including strategy and portfolio
management, and transformation
and integration. Mr Banks
previously held the role of Chief
Operations Officer, Chief Technical
and Marketing Officer and has
also led the Onshore Operating
Division as Executive Vice
President Onshore Oil and Gas.
He has over 30 years of global
oil and gas industry experience.
He started his career with
Schlumberger in South-East
Asia before joining BHP. While
at BHP, Mr Banks’ roles included
executive, operational, technical
and functional leadership roles
including General Manager
Shale Oil, Vice President HSE,
Vice President Shale Drilling
and Completion and Bass Strait
Asset Manager.
Beyond business and function
leadership, Mr Banks led BHP
Petroleum’s Transformation and
the integration of the US shale
assets.
10
Santos Annual Report 2023
BRETT DARLEY
BRUCE DINGEMAN
JODIE HATHERLY
JANETTE HEWSON
Executive Vice President
Eastern Australia and Papua
New Guinea
BEng (Civil), FIEAust Eng Exec
Mr Darley joined Santos in
December 2018. He previously led
the Offshore Operating Division as
Executive Vice President Offshore
Oil and Gas.
He has 30 years of experience in
the upstream oil and gas industry,
both in Australia and overseas,
with technical, operational,
commercial and management
experience across varied assets,
onshore and offshore.
Before moving to Santos, Mr
Darley held senior leadership
roles including Chief Executive
Officer of Quadrant Energy,
Managing Director and Region
Vice President for Apache Energy
Limited, Vice President of Drilling
and Completions at Woodside
Energy and Drilling Manager at
Santos.
Mr Darley holds a Bachelor of
Civil Engineering degree from the
University of Queensland and is a
Chartered Engineer.
Executive Vice President Alaska
CEO Santos Foundation
BEng (Petroleum), MBA (Hons)
BA, LLB, GAICD
Ms Hatherly was appointed CEO
of the Santos Foundation and a
director of Santos Foundation
(Australia) upon its establishment
in July 2023.
Prior to this, from 2019
Ms Hatherly was General Counsel
and Company Secretary of the
Santos Group.
Ms Hatherly joined Santos from
INPEX Australia, where she was
General Counsel and General
Manager Legal for the Ichthys
LNG project and INPEX’s Australia
business.
Ms Hatherly commenced her
career in the private sector,
working in the UK and Australia
and has served on the advisory
board of the Curtin University
Law School as well as Muscular
Dystrophy WA.
Mr Dingeman joined Santos in
December 2021 as part of the
Company’s merger with Oil
Search. He had been working
in Oil Search’s Alaska Business
Unit since 2018, where he served
as COO before assuming his
current role.
Mr Dingeman joined Santos with
more than 35 years of global oil
and gas industry experience.
He began his career in Alaska,
and since that time has held a
wide range of technical, financial,
and executive leadership roles
covering a number of international
and domestic locations at
ConocoPhillips, Talisman, CASA
Exploration, Naftogaz and Oil
Search.
Mr Dingeman holds a Bachelor’s
degree in Petroleum Engineering
from the University of Wyoming
and a Master of Business
Administration from Duke
University, where he was named
a Fuqua scholar. He is an active
member of the Society of
Petroleum Engineers and is a
registered Professional Engineer
in Texas.
Executive Vice President,
Environment, Sustainability
& Governance
Bachelor of Arts (Modern
Asian Studies)/ Bachelor of
Laws, GAICD
Ms Hewson joined Santos in
May 2022 as the Executive
Vice President, Environment,
Sustainability & Governance.
Ms Hewson has more than
25 years of experience in the
resources industry having spent
much of her career in functional
and operations leadership roles at
Peabody and South 32. Janette’s
previous leadership roles include
sustainability, environment,
engineering services, supply
chain, procurement, government
relations, projects delivery, legal
services and operations roles.
She has developed a reputation
as an industry expert on policy
and ESG issues impacting the
resources sector.
She has served on the Climate
Advisory Panel for the Minerals
Council of Australia, and the
Boards of the Queensland
Resources Council, NSW Minerals
Council and Low Emissions
Technology Australia. Ms Hewson
has a Bachelor of Laws degree
from Queensland University of
Technology and a Bachelor of
Arts (Modern Asian Studies) with
a major in Japanese language
from Griffith University.
11
Santos Annual Report 2023 Santos leadership team
continued
KIM LEE
ANTHEA MCKINNELL
ANTHONY NEILSON
VINCENT SANTOSTEFANO
Executive Vice President
People, Culture and Brand
BSc Biological Sciences
Ms Lee joined Santos in January
2023, as the Executive Vice
President, People and Culture. She
is responsible for delivering the
People strategy at Santos, as well
as providing leadership support
to internal communications and
branding.
Ms Lee has more than 20 years of
experience in a number of senior
executive roles across Australia
and internationally. She has
worked in many diverse industries
including fast moving consumer
goods (FMCG), building products,
paper and packaging, hospitality,
tourism and gaming in both large
private and ASX-listed companies.
Most recently, Ms Lee held
senior executive roles as Chief
People and Performance Officer,
Transformation and Chief of Staff
at The Star Entertainment Group.
Ms Lee has previously served as
non-executive director for Not
for profit, Women in Gaming and
Hospitality and is an accredited
Gallup Global Strengths Coach.
She has a Bachelor of Science
(Biological Sciences) degree from
Latrobe University.
Chief Financial Officer
Chief Commercial Officer
BComm Accounting and Taxation,
FCA, GAICD
Ms McKinnell joined Santos in
2019 and became Chief Financial
Officer in 2022. With more than 19
years of experience in the oil and
gas industry, she has held several
senior executive roles. These
include SVP Finance and Treasury,
VP Global Operations Planning
and Performance, and Acting
CFO at Woodside Energy prior to
commencing with Santos in 2019
as Deputy Chief Financial Officer.
Ms McKinnell has extensive
experience in debt and equity
capital markets having led the
raising of US$1.85 billion in the
144A bond market since 2021.
As CFO, she has oversight of
finance, tax, treasury, planning,
information systems and investor
relations functions at Santos.
Ms McKinnell is a Fellow of
Chartered Accountants Australia
and New Zealand, holds a Master
of International Tax from the
University of Melbourne and a
Bachelor of Commerce from
Curtin University.
BComm, MBA, FFin, FCA
Mr Neilson joined Santos
in 2016, and was appointed
Chief Commercial Officer in
January 2022.
He is responsible for the
commercial function as well as
business development, marketing
and trading, and corporate supply
chain. He previously held the role
of Chief Financial Officer, with
responsibility for the finance,
tax, treasury, planning, business
development, commercial,
investor relations and IT functions.
Mr Neilson brings over 25 years
of experience in chartered
accounting, banking and
corporate financial roles including
over 20 years’ experience in the
upstream and downstream oil and
gas industry.
Prior to joining Santos, he was
CEO of Roc Oil Company Ltd
(ROC), which was acquired in
2014 by Hong Kong-listed investor
Fosun International Limited.
Previously, he was Chief Financial
Officer of ROC (ASX listed) and
has held commercial, finance
and business services roles at
Caltex Australia, Credit Suisse
First Boston (London) and Arthur
Andersen (Sydney).
Mr Neilson holds a Masters of
Business Administration from
AGSM. He is also a Fellow of
the Financial Services Institute
of Australasia, and a Fellow of
Chartered Accountants Australia
and New Zealand.
Executive Vice President
Western Australia, Northern
Australia and Timor-Leste
BEng (Civil), SPE
Mr Santostefano rejoined Santos
in September 2023 as Executive
Vice President Western Australia,
Northern Australia and Timor-
Leste, after being engaged
in various management and
technical consulting assignments
as well as a Board non-executive
Director.
Previously he spent over
four years at Santos as Chief
Developments and Operations
Officer, where he was responsible
for supporting the business during
the turnaround and for the profit
and loss of all operating assets.
Throughout his career
Mr Santostefano has held
technical and leadership roles
at Esso Australia, Beach Energy
and Woodside Energy. He was at
Woodside for over 16 years and
his last senior executive role prior
to leaving was Chief Operations
Officer where he was responsible
for all their operating assets.
Mr Santostefano is one of
Australia’s most experienced and
respected oil and gas operational
executives with a strong track
record in onshore and offshore
process safety and asset integrity.
He is also well known for his
deep organisational and cultural
change capability and has a
proven track record for leading
teams in a disciplined operating
model to deliver reliable and safe
operations.
12
Santos Annual Report 2023 ALAN STUART-GRANT
STEVEN TRENCH
TRACEY WINTERS
Executive Vice President Santos
Energy Solutions
BSc (Business Administration),
GAICD
Mr Stuart-Grant joined Santos
in August 2023 as Executive
Vice President, Santos Energy
Solutions. He is accountable for
Santos Energy Solutions global
portfolio management and
strategy.
He has more than 20 years’
experience in the energy and
industrial sectors. He previously
held senior positions at Ampol
Limited and in the oil and
gas department of Glencore
plc, which followed extensive
experience in private equity and
investment banking in Sydney,
London and Singapore.
Mr Stuart-Grant is a graduate
of the Harvard Business School
Advanced Management Program.
Executive Vice President
Operations and Technical
Services
BEng (Civil) Hons, MBA, GAICD
Mr Trench joined Santos in 2021
and was appointed Executive
Vice President, Operations and
Technical Services Corporate
Function in December 2023.
He is responsible for global
operations management systems,
capabilities and performance
oversight across production
operations, asset integrity and
process safety, production
planning and allocation, major
project assurance, drilling and
completions and health, safety
and security. In his previous roles
at Santos, Mr Trench led the
Company’s developments and
projects, drilling and completions,
production operations,
decommissioning and supply
chain functions.
He has 25 years of global
experience in the oil and
gas industry. Before joining
Santos, he spent 22 years at
Woodside Energy where he
held technical and operational
leadership roles across drilling
and completions, supply
chain logistics, development
and project coordination,
production operations and
asset management, including
leadership of the North West Shelf
Project’s Karratha LNG asset. He
also served in strategy, business
management and governance
roles, including as Vice President
of Strategic Planning.
Chief Strategy Officer
and Chief of Staff
BSc (Australian Environmental
Studies)
Ms Winters joined Santos in
2017 and is Chief Strategy
Officer and Chief of Staff,
responsible for corporate
and ESG strategy, media and
external communications, and
management of the CEO office.
Her previous roles include Head
of Government and Public Affairs
and Strategic Adviser External
Affairs.
Ms Winters joined Santos with
30 years of experience in the
oil and gas industry, in diverse
roles including government
and regulatory affairs,
media and communications,
environment, land access, project
commercialisation, construction
and asset management. She held
a senior role in federal resources
and energy policy and politics
for seven years, and over more
than a decade built a successful
government approvals and
environmental management
consultancy, serving some of
Australia’s largest resource
companies and delivering major
project approvals for some of the
nation’s largest gas and pipeline
projects.
From 2011 to 2016, Ms Winters
drove the environmental
approvals and land access
processes to deliver the QCLNG
project. In 2016 to 17, she advised
Caltex Australia on public affairs
and strategic issues management,
in particular wage underpayment
by franchisees.
13
Santos Annual Report 2023 Reserves Statement
for the year ended 31 December 2023
RESERVES AND RESOURCES
At 31 December 2023, Santos’ proved plus probable (2P) reserves are 1,661 million barrels of oil equivalent (mmboe), and the
2C contingent resources are 3,325 mmboe.
Before production of 92 mmboe, 2P reserves increased by 8 mmboe inclusive of reserve adds in the Cooper Basin primarily
across central fields (+8 mmboe), in the Queensland coal seam gas fields (+5 mmboe) and in the Papua New Guinea (+1
mmboe) fields. These additions were partially offset by a 7 mmboe reduction in reserves in Western Australia across the
Pyrenees and Reindeer fields.
The annual 2P reserves replacement ratio (RRR) was 9 per cent, 2P organic RRR was 9 per cent and the three-year RRR was
354 per cent. The 2P reserves held in international assets comprise 42 per cent of Santos’ total 2P reserves.
The 2C contingent resources increased to 3,325 mmboe at the end of 2023. Additions were primarily from Northern
Australia with a positive revision to the Tanumbirini field of 108 mmboe.
The CO2 storage capacity remains unchanged at 9 million tonnes 2P capacity. The 2C contingent storage resource has
increased 40 million tonnes to 131 million tonnes in Cooper Basin.
RESERVES AND 2C CONTINGENT RESOURCES (SANTOS SHARE AS AT 31 DECEMBER)
Santos share
Proved reserves
Proved plus probable reserves
2C contingent resources
Unit
mmboe
mmboe
mmboe
2023
998
1,661
3,325
2022
% change
1,028
1,745
3,280
(3%)
(5%)
1%
RESERVES AND 2C CONTINGENT RESOURCES BY PRODUCT (SANTOS SHARE AS AT 31 DECEMBER)
Santos share
Proved reserves
Proved plus probable reserves
2C contingent resources
KEY METRICS
Sales gas
PJ
Crude oil
mmbbl
Condensate
mmbbl
LPG
000 tonnes
4,923
8,106
14,741
118
207
617
32
57
154
372
791
3,482
Total
mmboe
998
1,661
3,325
Annual proved reserves replacement ratio
Annual proved plus probable reserves replacement ratio
Three-year proved plus probable reserves replacement ratio
Organic annual proved plus probable reserves replacement ratio
Organic three-year proved plus probable reserves replacement ratio
Developed proved plus probable reserves as a proportion of total reserves
Reserves life1
1 The 2P reserves life as at 31 December 2023 using production of 92 mmboe.
67%
9%
354%
9%
210%
36%
18 years
14
Santos Annual Report 2023
PROVED RESERVES
Santos share as at 31 December 2023
Asset
Cooper Basin
Queensland & NSW1
PNG
Northern Australia
& Timor-Leste
Western Australia
USA (Alaska)
Total 1P
Sales gas
PJ
Crude oil
mmbbl
Condensate
mmbbl
LPG
000 tonnes
All products
mmboe
Developed Undeveloped
260
1,003
2,092
1,268
300
-
4,923
9
-
12
-
6
90
118
3
-
15
12
2
-
32
372
-
-
-
-
-
372
42
125
199
-
44
-
409
18
48
187
229
16
90
588
Proportion of total proved reserves that are unconventional
1 Queensland proved sales gas reserves include 841 PJ GLNG and 156 PJ other Santos non-GLNG-operated Eastern Queensland assets.
Proved reserves reconciliation
Product
Sales gas
Crude oil
Condensate
LPG
Total 1P
Revisions
and
extensions
Net
acquisitions
and
divestments
2022
Production
5,090
(459)
292
118
34
382
1,028
(8)
(5)
(123)
(92)
8
2
112
61
-
-
-
-
-
Unit
PJ
mmbbl
mmbbl
000 tonnes
mmboe
Total
60
172
386
229
60
90
998
17%
2023
4,923
118
32
372
998
15
Santos Annual Report 2023
Reserves Statement
for the year ended 31 December 2023
continued
PROVED PLUS PROBABLE RESERVES
Santos share as at 31 December 2023
Asset
Cooper Basin
Queensland
& NSW1
PNG
Northern Australia &
Timor-Leste
Western Australia
USA (Alaska)
Total 2P
Sales gas
PJ
Crude oil
mmbbl
Condensate
mmbbl
LPG
000 tonnes
All products
mmboe
Developed Undeveloped
583
1,862
2,892
2,045
725
-
8,106
16
-
17
-
10
165
207
6
-
21
24
6
-
57
791
-
-
-
-
-
791
82
139
277
-
100
-
598
46
181
257
374
40
165
1,063
Proportion of total proved plus probable reserves that are unconventional
Total
128
320
534
374
140
165
1,661
19%
1 Queensland proved plus probable sales gas reserves include 1,432 PJ GLNG and 423 PJ other Santos non-GLNG-operated Eastern Queensland assets.
Proved plus probable reserves reconciliation
Unit
PJ
mmbbl
mmbbl
000 tonnes
mmboe
2022
Production
8,493
(459)
217
63
929
1,745
(8)
(5)
(123)
(92)
Revisions
and
extensions
Net
acquisitions
and
divestments
72
(2)
(2)
(15)
8
-
-
-
-
-
2023
8,106
207
57
791
1,661
Product
Sales gas
Crude oil
Condensate
LPG
Total 2P
16
Santos Annual Report 2023
2C CONTINGENT RESOURCES
Santos share as at 31 December 2023
Asset
Cooper Basin
Queensland & NSW
PNG
Northern Australia & Timor-Leste
Western Australia
USA (Alaska)
Total 2C
2C Contingent resources reconciliation
Sales gas
PJ
Crude oil
mmbbl
Condensate
mmbbl
LPG
000 tonnes
All products
mmboe
1,119
2,985
4,580
4,679
1,377
-
14,741
30
-
8
-
142
438
617
17
-
55
63
19
-
1,678
-
-
-
1,804
-
252
513
846
863
411
438
154
3,482
3,325
Revisions
and
Unit
2022
extensions Discoveries
Net
acquisitions
and
divestments
mmboe
3,280
53
1
(8)
2023
3,325
Product
Total 2P
CO2 STORAGE
Storage capacity and 2C contingent resources as at 31 December 2023
CO2 Storage
Proved capacity
Proved plus probable capacity
2C contingent resources
Unit
MtCO2
MtCO2
MtCO2
2022
2023
% change
6
9
91
6
9
131
-
-
44
17
Santos Annual Report 2023
Reserves Statement
for the year ended 31 December 2023
continued
7. Unless otherwise stated, all references to
Abbreviations and conversion factors
Abbreviations
Conversion factors
1P
2P
GJ
LNG
LPG
mmbbl
mmboe
proved reserves
proved plus
probable reserves
gigajoules
liquefied natural gas
liquefied petroleum gas
million barrels
million barrels of oil
equivalent
NGLs
natural gas liquids
PJ
tcf
TJ
petajoules
trillion cubic feet
terajoules
Conversion factors
Sales gas
and ethane, 1 PJ
Crude oil,
1 barrel
Condensate,
1 barrel
LPG, 1 tonne
171,937 boe
1 boe
0.935 boe
8.458 boe
petroleum reserves, contingent resources and
CO2 storage quantities in this reserves
statement are Santos’ net share. PNG LNG is
carried at 42.5 per cent and includes the 2.6 per
cent sell down to Kumul.
8. Reference points for Santos’ petroleum reserves
and contingent resources and production are
defined points within Santos’ operations where
normal exploration and production business
ceases, and quantities of produced product are
measured under defined conditions prior to
custody transfer. Fuel, flare and vent consumed
to the reference points are excluded.
9. Petroleum reserves, contingent resources and
CO2 storage are aggregated by arithmetic
summation by category and, as a result, proved
reserves may be a very conservative estimate
due to the portfolio effects of arithmetic
summation.
10. Petroleum reserves, contingent resources and
CO2 storage are typically prepared by
deterministic methods with support from
probabilistic methods.
11. Any material concentrations of undeveloped
petroleum reserves that have remained
undeveloped for more than 5 years: (a) are
intended to be developed when required to
meet contractual obligations; and (b) have not
been developed to date because they have not
yet been required to meet contractual
obligations. Development will comprise well
construction and connection activities.
12. Petroleum reserves replacement ratio is the ratio
of the change in petroleum reserves (excluding
production) divided by production. Organic
reserves replacement ratio excludes net
acquisitions and divestments.
13. Information on petroleum reserves, contingent
resources and CO2 storage quoted in this
reserves statement is rounded to the nearest
whole number. Some totals in the tables may not
add due to rounding. Items that round to zero
are represented by the number 0, while items
that are actually zero are represented with a
dash (-).
14. Qualified Petroleum Reserves and Resources
Evaluators
Name
Employer
Professional
organisation
P Lyford
Santos Ltd
SPE, SPEE
N Pink
Santos Ltd
SPE, SPEE
A White
Santos Ltd
SPE
J Rudd
Santos Ltd
SPE
S Lawton
Santos Ltd
SPE
A Western
Santos Ltd
SPE
M Ireland
Santos Ltd
SPE, SPEE
J Hattner
NSAI
SPE, AAPG
SPE: Society of Petroleum Engineers
SPEE: Society of Petroleum Evaluation
Engineers
AAPG: American Association of Petroleum
Geologists
Notes
1. This reserves statement:
a.
b.
c.
is based on, and fairly represents,
information and supporting documentation
prepared by, or under the supervision of, the
qualified petroleum reserves and resources
evaluators listed in note 14 of this reserves
statement. Details of each qualified
petroleum reserves and resources
evaluator’s employment and professional
organisation membership are set out in note
14 of this reserves statement;
as a whole has been approved by Paul
Lyford, who is a qualified petroleum reserves
and resources evaluator and whose
employment and professional organisation
membership details are set out in note 14 of
this reserves statement;
is issued with the prior written consent of
Paul Lyford as to the form and context in
which the estimated petroleum reserves and
contingent resources and the supporting
information are presented.
2.
3.
The estimates of petroleum reserves, contingent
resources and CO2 storage quantities contained
in this reserves statement are as at 31 December
2023.
Santos prepares its petroleum reserves and
contingent resources estimates in accordance
with the 2018 Petroleum Resources
Management System (PRMS) and CO2 storage
capacity and contingent storage resource
estimates in accordance with the 2017 CO2
Storage Resources Management System (SRMS)
sponsored by the Society of Petroleum
Engineers (SPE).
4. This reserves statement is subject to risk factors
associated with the oil and gas industry. It is
believed that the expectations of petroleum
reserves and contingent resources reflected in
this statement are reasonable, but they may be
affected by a range of variables that 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, 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.
5.
All estimates of petroleum reserves, contingent
resources and CO2 storage reported by Santos
are prepared by, or under the supervision of, a
qualified petroleum reserves and resources
evaluator or evaluators. Processes are
documented in the Santos Reserves Policy,
which is overseen by a Reserves Committee. The
frequency of reviews is dependent on the
magnitude of the petroleum reserves and
contingent resources and changes indicated by
new data. If the changes are material, they are
reviewed by the Santos internal technical
leaders and externally audited.
6. Santos engages independent experts Gaffney,
Cline & Associates, Netherland, Sewell &
Associates, Inc., RISC Advisory Pty Ltd and
Ryder Scott Company to audit and/or evaluate
reserves, contingent resources and CO2 storage.
Each auditor found, based on the outcomes of
its respective audit and evaluation, and its
understanding of the estimation processes
employed by Santos, that Santos’ 31 December
2023 petroleum reserves, contingent resources
and CO2 storage quantities in aggregate
compare reasonably to those estimates
prepared by each auditor. Therefore, in the
aggregate, the total volumes summarised in the
tables included in this reserves statement
represent a reasonable estimate of Santos’
petroleum reserves, contingent resources and
CO2 storage position as at 31 December 2023.
18
Santos Annual Report 2023
Directors’ Report
DIRECTORS’ REPORT
The Directors present their report together with the consolidated Financial Report of the consolidated entity, being Santos
Limited (Santos or the Company) and its controlled entities, for the financial year ended 31 December 2023, and the
Auditor’s Report thereon. Information in the Annual Report referred to in this report, including the Remuneration Report, or
contained in a note to the financial statements referred to in this report, forms part of, and is to be read as part of, this report.
DIRECTORS, DIRECTORS’ SHAREHOLDINGS AND DIRECTORS’ MEETINGS
Directors and Directors’ shareholdings
The names of Directors of the Company during the year ended 31 December 2023, and up to the date of this report and
details of the relevant interest of each of those Directors in shares in the Company at the date of this report are as set out
below:
Surname
Allen
Cowan
Doyle
Other names
Yasmin Anita
Guy Michael
Eileen Joy
Gallagher
Kevin Thomas (Managing Director and CEO)
Guthrie
Hearl
McArdle
Spence
Utsler
Werror
Vanessa Ann
Peter Roland
Janine Marie
Keith William (Chair)
Michael Jesse
Musje Moses
1
Includes shares received as a result of the 2020 LTI vesting.
The above-named Directors held office during the financial year.
Shareholdings in Santos Limited
48,883
45,487
47,367
1,876,1681
39,188
48,808
50,000
119,945
20,000
1,620
There were no other persons who acted as Directors at any time during the financial year and up to the date of this report.
All shareholdings are of fully paid ordinary shares. No Director holds a relevant interest in a related body corporate of
Santos Limited.
At the date of this report, Mr Gallagher holds 2,505,486 share acquisition rights (SARs) and 150,521 restricted shares.
No other Director holds options or SARs.
Details of the qualifications, experience and special responsibilities of each Director are set out in the Directors’ biographies
on pages 6 to 9 of this Annual Report. This information includes details of other listed company directorships held during the
last three years.
19
Santos Annual Report 2023
Directors’ Report
Directors’ Report
continued
Directors’ meetings
The number of Directors’ meetings and meetings of committees of Directors held during the financial year and the number
of meetings attended by each Director are set out below:
Table of Directors’ meetings
Environment
Health,
Safety &
Sustainability
Committee
Audit & Risk
Committee
Attended/
Held1
Attended/
Held1
4 of 4
4 of 4
n/a
n/a
n/a
n/a
4 of 4
n/a
4 of 4
n/a
n/a
n/a
4 of 4
4 of 4
4 of 4
4 of 4
4 of 4
n/a
n/a
n/a
People,
Remuneration
& Culture
Committee
Attended/
Held1
4 of 4
n/a
n/a
n/a
4 of 4
4 of 4
n/a
n/a
n/a
4 of 4
Nomination
Committee
Attended/
Held1
3 of 4
4 of 4
n/a
n/a
n/a
4 of 4
n/a
4 of 4
n/a
n/a
Directors’
meetings
Attended/
Held1
14 of 15
15 of 15
15 of 15
15 of 15
14 of 15
14 of 15
15 of 15
15 of 15
15 of 15
15 of 15
Director
Allen
Cowan
Doyle
Yasmin Anita
Guy Michael
Eileen Joy
Gallagher
Kevin Thomas
Guthrie
Hearl
McArdle
Spence
Utsler
Werror
Vanessa Ann
Peter Roland
Janine Marie
Keith William
Michael
Musje Moses
1 Reflects the number of meetings held during the time the Director held office, or was a member of the Committee, during the year.
20
Santos Annual Report 2023 OPERATING AND FINANCIAL REVIEW
Santos’ principal activities during 2023 were the exploration, development, production, transportation and marketing of
hydrocarbons, and the development of decarbonisation technologies such as carbon capture and storage. Revenue is
derived primarily from the sale of gas and liquid hydrocarbons.
A review of the operations and the results of those operations of the consolidated entity during the year is as follows:
Summary of results table
Production volume
Sales volume
Product sales
EBITDAX1, 2
Exploration and evaluation expensed
Depreciation and depletion
Impairment loss
Change in future restoration assumptions
EBIT2
Net finance costs
Taxation expense
Net profit/(loss) for the period and attributable to equity holders of Santos
Underlying profit for the period3
Underlying earnings per share (cents)4
2023
mmboe
91.7
96.4
2022
mmboe
Variance
%
103.2
112.3
US$million
US$million
5,889
4,083
(86)
(1,858)
(75)
(18)
2,046
(227)
(403)
1,416
1,423
43.6
7,790
5,646
(148)
(1,747)
(328)
(221)
3,202
(254)
(836)
2,112
2,461
73.4
(11)
(14)
(24)
(28)
(42)
6
(77)
(92)
(36)
(11)
(52)
(33)
(42)
(41)
1 EBITDAX (earnings before interest, tax, depreciation and depletion, exploration and evaluation expensed, net impairment loss and change in future restoration
assumptions).
2 EBIT (earnings before interest and tax), EBITDAX and underlying profit are non-IFRS measures that are presented to provide an understanding of the
underlying performance of Santos’ operations.
3 Underlying profit excludes the impacts of asset acquisitions, disposals and impairments, as well as items that are subject to significant variability from one
period to the next, including the effects of commodity hedging. Please refer to page 25 for the reconciliation from net profit to underlying profit for the period.
4 Underlying earnings per share represents underlying profit for the period divided by the weighted average number of shares on issue during the year. The
non-IFRS financial information is unaudited; however, the numbers have been extracted from the financial statements that have been subject to audit by the
Company’s auditor.
Sales volume
mmboe
Product sales revenue
US$million
Production volume
mmboe
107.1
104.2
112.3
96.4
94.5
7,790
5,889
75.5
89.0 92.1
103.2
91.75
4,033
3,387
4,713
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
2019
2020
2021
2022 2023
Sales volumes of 96.4 million barrels
of oil equivalent (mmboe) was 14 per
cent lower than the previous year. This
was primarily due to lower volumes in
Western Australia due to natural field
decline, lower volumes from Bayu-
Undan as field approaches end of life,
and change to Cooper processing
arrangement for third party oil now
classified as net other revenue.
Sales revenue of $5.9 billion was
24 per cent lower compared to the
previous year, primarily due to lower
realised prices for LNG and crude oil
and lower production volumes. The
average realised oil price decreased
20 per cent to US$87.6/bbl, and the
average realised LNG price decreased
18 per cent to US$12.7/mmBtu.
Production of 91.75mmboe was 11 per
cent lower than prior year. This was
primarily due to lower gas production
in Western Australia and Cooper Basin,
lower volumes from Bayu-Undan as the
field approaches end of life, and lower
production in PNG due to natural field
decline.
5 2023 pre-PSC production is 92.2 mmboe.
21
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
Review of operations
A new organisational structure was announced in May 2023 establishing two functional divisions and a new regional
operating model. The two functional divisions are Upstream Gas and Liquids and Santos Energy Solutions.
The three regional Business Units are Eastern Australia and PNG, Western and Northern Australia and Timor-Leste, and
Alaska, and which execute both Upstream Gas and Liquids and Santos Energy Solutions activities.
Upstream Gas and Liquids Functional Division
The Upstream Gas and Liquids business includes an Asian market-focused world class LNG business comprising three
projects – Papua New Guinea LNG, Gladstone LNG, and the Darwin LNG project which will receive backfill gas from the
Barossa project currently in development. The Papua LNG project in PNG will comprise a fourth LNG development and is
currently in front end engineering and design in advance of a proposed final investment decision in 2024.
The division also includes three natural gas and liquids businesses in Western Australia, Eastern Australia and PNG and
Alaska. In Western Australia Santos is a leading producer of domestic gas and produces liquids for the international market.
Eastern Australia and PNG business unit production comprises of production from Cooper Basin, Queensland and NSW
operations, as well as operated and non-operated gas and oil fields in PNG. In Alaska, the company holds a portfolio of
leases and is developing the Pikka Phase 1 project which is expected to reach first oil in 2026.
Santos Energy Solutions Functional Division
Santos Energy Solutions principal activities are operating midstream assets, progressing technologies that support the
decarbonisation of ours' and others' products, including carbon capture and storage, the generation of high-quality carbon
credits and development of low carbon fuels.
Santos Energy Solutions has a three-hub strategy for CCS and potential low carbon fuels, which includes Moomba CCS, Bayu-
Undan CCS and Western Australian CCS (Reindeer). Additionally, Santos is building a portfolio of nature-based projects that
aim to deliver emissions reductions and tradeable emissions reduction units. Santos Energy Solutions will continue to invest
in technologies to enable the advancement of low carbon fuels and subsequently progress and scale up these projects as the
technologies advance and customer demand evolves.
The Moomba CCS Project took FID in November 2021, with first injection expected in mid 2024. Moomba CCS is 80 per cent
complete and is on track for ACCU generation within the next 12 months.
A decision to enter FEED for the proposed Bayu-Undan CCS project was announced in March 2022.
Santos is seeking to develop a carbon capture and storage hub in Western Australia and is working with potential industrial
CCS customers in north-west Western Australia.
Santos Energy Solutions business includes the generation of carbon credits from CCS projects and the development of a
portfolio of nature-based projects to generate emissions reduction units, supplemented by the acquisition of on-market
carbon credits which are either ACCUs or are registered under another internationally recognised standard. Moomba CCS
is expected to generate credits from first injection in 2024. In 2023, Santos executed agreements to build a portfolio of
projects supporting the development of five nature-based projects across Queensland, Alaska and Papua New Guinea, to
generate carbon credits. Further, in 2023 Santos entered into forward contracts for the purchase of 2.5 million ACCUs at
fixed prices to be delivered and paid between December 2023 and January 2027. In December 2023, 50,000 ACCUs were
purchased at a cost of $1 million. These ACCUs have been disclosed in Note 3.3 Intangible Assets in the FY23 Financial
Report.
Santos Energy Solutions EBITDAX was $212 million in 2023 from Revenue of $379 million. Decarbonisation related asset
additions and acquisitions were $113 million in 2023. See Note 2.1 Segment Information in the Financial Report for further
information.
22
Santos Annual Report 2023 Regional Business Units1
Eastern Australia and Papua New Guinea Business Unit
Cooper Basin
The Cooper Basin produces natural gas, gas liquids and crude oil. Gas is sold primarily to domestic retailers and industry
participants. It is also used for the production of liquefied natural gas with gas liquids and crude oil sold in domestic and
export markets.
Santos’ strategy in the Cooper Basin is to deliver value by being a low-cost business, increasing its reserves position,
investing in new technology to lower development and exploration costs and reducing emissions. It also aims to increase
utilisation of infrastructure including the Moomba and Port Bonython plants (Santos 66.7 per cent interest). Santos is also
focused on reducing emissions by investing in CCS. The Moomba CCS Project took FID in November 2021 with first injection
expected in mid 2024.
Cooper Basin
Production (mmboe)
Sales volume (mmboe)
Revenue (US$m)
Production cost (US$/boe)
EBITDAX (US$m)
Capex (US$m)
2023
13.6
13.6
699
10.94
389
512
2022
14.0
16.6
1,065
9.55
512
419
Cooper Basin EBITDAX was $389 million, 24 per cent lower than 2022. This was primarily due to lower realised prices and
lower volumes.
Santos’ share of Cooper Basin sales gas and ethane production of 56.9 petajoules (PJ) was 2 per cent lower than the
previous year (57.8 PJ). There were no Cooper Basin third-party oil sales volumes in 2023 following implementation of
revised crude oil processing agreements from 1 July 2022, under which third-party purchases and sales of crude are now
classified as net other revenue, rather than sales revenue and third-party purchase costs. There is no impact to net profit and
cashflow as a result of the new arrangements.
Queensland and NSW
The GLNG project in Queensland produces liquefied natural gas (LNG) for export to global markets from the LNG plant at
Gladstone. Gas is also sold into the domestic market. Santos has a 30 per cent interest in GLNG.
The LNG plant has two LNG trains with a combined capacity of 8.6 mtpa. Production from Train 1 commenced in September
2015 and Train 2 in May 2016. Feed gas is sourced from GLNG’s upstream fields, Santos portfolio gas and third-party suppliers.
The LNG plant produced 5.92 million tonnes of LNG in 2023 and shipped 100 cargoes. Annual LNG production was lower
than the previous year (6.1 million tonnes) due to lower volumes of third-party gas supply.
Santos aims to build GLNG gas supply through upstream development, extract value from existing infrastructure and drive
efficiencies to operate at lowest cost.
Santos is also progressing the proposed Narrabri domestic gas project in NSW. In December 2022, the Narrabri Gas Project
received a positive determination from the National Native Title Tribunal. A Notice of Appeal was received in January 2023
and was heard by the Federal Court in August 2023, with a decision now expected in early 2024. Santos is continuing to
progress land access agreements and environmental surveys to finalise the Hunter Gas Pipeline route alignment and have
commenced preliminary works on supporting infrastructure.
On 17 November 2023, Santos was advised by the Department of Climate Change, Energy, the Environment and Water
(DCCEEW) that two valid reconsideration requests had been received regarding the federal government's decision on
the Hunter Gas Pipeline under the Environment Protection Biodiversity Conservation Act 1999 (Cth). Santos is actively
participating in the process.
1
Includes both Upstream Gas and Liquids and Santos Energy Solutions functional divisions.
23
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
Queensland and NSW
Production (mmboe)
Sales volume (mmboe)
Revenue (US$m)
Production cost (US$/boe)
EBITDAX (US$m)
Capex (US$m)
2023
13.9
20.3
1,332
6.22
795
274
2022
14.0
20.4
1,538
5.67
984
213
Queensland and NSW EBITDAX of $795 million decreased by 19 per cent, compared to 2022. This was as a result of lower
realised prices.
Papua New Guinea
The PNG LNG project produces LNG for export to global markets, as well as sales gas and gas liquids, of which Santos has
a 42.5% working interest. The LNG plant near Port Moresby has two LNG trains with capacity to produce more than eight
million tonnes per annum. Production from both trains commenced in 2014.
The PNG LNG plant produced 8.4 million tonnes of LNG in 2023 and shipped 113 cargoes. Annual LNG production was
slightly lower than the previous year (8.6 million tonnes), primarily due to Hides reservoir decline, offset by higher Santos
operated gas production from Kutubu and SE Gobe fields.
In September 2023, Santos executed a binding sale agreement to sell Kumul Petroleum Holdings (Kumul) a 2.6 per cent
participating interest in PNG. In addition, Santos agreed to grant Kumul a call option to acquire a further 2.4 per cent
participating interests in PNG LNG for a cash purchase price of $524 million (plus a proportionate share of project finance
debt) (‘the Call option’). The Call option must be exercised on or before 30 June 2024, and is subject to completion of the
Sale Agreement having occurred and the satisfaction of customary conditions including necessary regulatory approvals and
third-party consents.
In January 2024, Santos announced a partial completion of the sale of 2.6 per cent of PNG LNG to Kumul. Santos and Kumul
agreed an amendment to the Sale Agreement where Kumul has taken an effective interest in the Santos entity that holds the
2.6 per cent sale interest. Kumul has paid $352 million to Santos (equivalent to a ~1.6 per cent interest) on 31 January 2024,
to allow partial completion of the transaction.
The amendment provides additional time for Kumul to pay the remaining purchase price of $241 million. Until final completion,
Santos retains control of the entity holding the 2.6 per cent and in order to assist with purchase of the remaining interest,
future project distributions associated with the interest sold to Kumul will be applied to acquiring the remaining interest.
The Papua LNG project (Santos 22.8 per cent interest before PNG government back-in) is a proposed LNG project
that would share certain midstream infrastructure with PNG LNG. In 2023, the project continued to progress technical,
commercial, regulatory, social and environmental planning activities. In March 2023, in conjunction with the operator,
TotalEnergies, Santos announced it had launched fully integrated front-end engineering and design (FEED) studies. A FID is
expected in 2024.
Santos operates the Kutubu, Agogo, Moran and Gobe fields. These fields produce oil and raw gas, with the gas being sent to
PNG LNG, delivering 22 per cent in 2023 of PNG LNG gas supply.
PNG
Production (mmboe)
Sales volume (mmboe)
Revenue (US$m)
Production cost (US$/boe)
EBITDAX (US$m)
Capex (US$m)
2023
40.5
38.8
2,884
6.32
2,342
477
2022
41.9
39.4
3,459
6.73
2,920
300
PNG EBITDAX of $2,342 million decreased 20 per cent compared to 2022, mainly due to lower realised prices and lower
volume, offset by lower production costs.
Western Australia, Northern Australia and Timor-Leste Business Unit
Northern Australia and Timor-Leste
Santos’ business in Northern Australia and Timor-Leste is focused on the Bayu-Undan field supplying the Darwin LNG
(DLNG) project (Santos 43.4 per cent interest).
Production from Bayu-Undan was significantly lower than 2022 due to natural field decline. Production from the field is
expected to continue this decline and cease in early 2024. The project produced 0.4 million tonnes of LNG in 2023 and
24
Santos Annual Report 2023 shipped seven cargoes of LNG. LNG production has ceased and the project will produce and sell gas into the domestic
market until such time as offshore production ceases.
A decision to enter FEED for the proposed Bayu-Undan CCS project was announced in March 2022. The project could
potentially safely and permanently store up to 10 million tonnes of CO2 per annum. The FEED work includes engineering
and design for additional CO2 processing capacity at Darwin LNG, plus repurposing of the Bayu-Undan facilities for carbon
sequestration operation after gas production ceases. The project is targeting FID in 2025. At cessation of production at
Bayu Undan, the Darwin LNG plant will be refurbished to take gas from the Barossa project.
Following FID in 2021, Santos is progressing development of the Barossa gas and condensate project (Santos 50 per cent
interest) to backfill Darwin LNG. The project was 66.4 per cent complete at the end of 2023. Key activities in 2023 include
progression of FPSO construction and mobilisation to the shipyard in Singapore and recommencement of gas export pipelay
activities.
The Barossa project is one of the several potential CO2 sources for Bayu-Undan CCS.
Northern Australia and Timor-Leste
Production (mmboe)
Sales volume (mmboe)
Revenue (US$m)
Production cost (US$/boe)
EBITDAX (US$m)
Capex (US$m)
2023
2.6
2.6
141
39.79
66
517
2022
5.5
5.6
630
25.48
498
549
Northern Australia and Timor-Leste EBITDAX of $66 million was 87 per cent lower than 2022, primarily due to lower
production from natural field decline in the Bayu-Undan field.
Western Australia
Santos is one of the largest producers of domestic natural gas in Western Australia and is also a significant producer of oil and
condensate. Santos’ assets include 100 per cent ownership and operatorship of the Varanus Island and Devil Creek domestic
gas hubs, a 28.6 per cent interest in the Macedon gas hub, and a leading position in the highly prospective Bedout Basin.
Santos’ share of Western Australia domestic gas production of 99PJ was 28 per cent lower than the previous year (137 PJ),
primarily due to natural field decline and the temporary shutdown of the John Brookes platform for repairs to the main gas
trunkline connecting John Brookes to the Varanus Island gas processing facilities. Santos’ share of crude oil production of
3.3 mmbbl was in line with the previous year.
A FID decision on the proposed Dorado integrated oil and gas project (Santos 80 per cent interest) was deferred in 2022,
in order to undertake further work on the integrated development concept. Santos continues to work on these plans and is
targeting Dorado being FID ready in 2024.
Santos is seeking to develop a CCS hub in Western Australia and is working with potential industrial CCS customers in north-
west WA.
Western Australia
Production (mmboe)
Sales volume (mmboe)
Revenue (US$m)
Production cost (US$/boe)
EBITDAX (US$m)
Capex (US$m)
2023
21.1
21.4
853
9.87
596
255
2022
27.8
28.8
1,097
7.49
976
384
Western Australia EBITDAX of $596 million was 39 per cent lower than 2022, predominantly driven by lower volumes.
Alaska Business Unit
Santos’ assets in Alaska are composed of exploration and development licences, including the Pikka Unit (Santos 51 per
cent equity interest), Horseshoe Unit (Santos 51 per cent equity interest), and Quokka Unit (Santos 46.6 per cent equity
interest). They are all located on the North Slope of Alaska, a world-class oil province with more than 50 years of oil and gas
development and extensive existing infrastructure.
25
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
Santos, as operator of the Pikka Unit, took FID on Pikka Phase 1 in August 2022. Phase 1 of the project is expected to produce
80,000 barrels of oil per day gross, with first oil expected in 2026. Capital expenditure to nameplate capacity is expected
to be US$2.6 billion gross (US$1.3 billion Santos share). Santos is committed to delivering a net-zero project (Scope 1 and
2 emissions, equity share) from first production and has agreements in place with Alaska Native corporations to deliver
nature-based emissions reduction projects.
The Pikka Project was 37.4 per cent complete at 31 December 2023. Major project contracting activities were completed and
drilling activities have commenced with five wells completed during the year. Facilities module fabrication is in advanced
stages and mobilisation to site has commenced. Pipe installation and pipelay activities have commenced.
Net profit
The 2023 net profit attributable to equity holders of Santos Limited of $1,416 million is $696 million lower than the net profit
of $2,112 million in 2022. This decrease is primarily due to lower realised pricing and lower volumes, offset by lower hedging
costs and impairment charges.
Net profit includes items before tax of $29 million ($7 million after tax), as referred to in the following table. Underlying profit
was $1,423 million, $1,038 million lower than 2022.
Reconciliation of net profit/(loss) to underlying profit1
2023 US$million
2022 US$million
Gross
Tax
Net
Gross
Tax
Net profit after tax attributable to equity holders of Santos Limited
Add/(deduct) the following:
Net gains on sales of non-current assets
Impairment losses
Fair value adjustments on commodity hedges
Acquisition and disposal related items
Underlying profit1
(5)
75
–
(41)
29
2
(23)
–
(1)
(22)
1,416
(3)
52
–
(42)
(7)
1,423
Net
2,112
(13)
224
98
40
(15)
2
(104)
(42)
(11)
328
140
51
504
(155)
349
2,461
1 Underlying profit is a non-IFRS measure that is presented to provide an understanding of the underlying performance of Santos’ operations. The measure
excludes the impacts of asset acquisitions, disposals and impairments, as well as items that are subject to significant variability from one period to the next,
including the effects of commodity hedging. The non-IFRS financial information is unaudited; however, the numbers have been extracted from the financial
statements that have been subject to audit by the Company’s auditor.
26
Santos Annual Report 2023 Financial position
Summary of financial position
Exploration and evaluation assets
Oil and gas assets and other land, buildings, plant and equipment
Restoration provision
Other net assets1
Total funds employed
Net debt2
Net tax (liabilities)/assets3
Net assets/equity
2023
US$million
2022
US$million
Variance
US$million
2,462
19,510
(4,338)
2,767
20,401
(4,264)
(862)
15,275
2,271
18,223
(3,931)
2,648
19,211
(3,450)
(918)
14,843
191
1,287
(407)
119
1,190
(814)
56
432
1 Other net assets are composed of trade and other receivables, prepayments, inventories, contract assets, other financial assets, share of investments in equity
accounted associates and joint ventures, goodwill and assets classified as held-for-sale (excluding amounts included within net debt), offset by trade and other
payables, contract liabilities, provisions, other financial liabilities and liabilities classified as held-for-sale (excluding amounts included within net debt).
2 Net debt reflects the net borrowings position and includes interest-bearing loans, net of cash, commodity hedges, and interest rate and cross-currency swap
contracts (inclusive of amounts classified as held-for-sale).
3 Net tax (liabilities)/assets are composed of deferred tax assets and tax receivable, offset by deferred tax liabilities and current tax payable (excluding amounts
included within net debt).
Impairment of assets
During the Company’s regular review of asset carrying values, Santos undertook an impairment review as part of the
preparation of its 2023 full-year accounts.
At 31 December 2023, non-cash after-tax impairment losses of $52 million were recognised. The after-tax impairment losses
relate to the impairment of late-life producing assets ($39 million) and exploration and evaluation assets ($13 million).
Exploration and evaluation assets
Exploration and evaluation assets were $2,462 million, compared to $2,271 million at the end of 2022. The increase of $191
million was primarily due to 2023 capital expenditure across Cooper Basin, Queensland & New South Wales and PNG,
including Papua LNG FEED.
Oil and gas assets and other land, buildings, plant and equipment
Oil and gas assets and other land and buildings, plant and equipment of $19,510 million was $1,287 million higher than in
2022. This was mainly due to 2023 capital expenditure across Cooper Basin, GLNG, WA Offshore, PNG and Alaska, and
movements in PNG LNG assets held for sale; offset by depreciation and depletion charges of $1,858 million.
Restoration provision
Restoration provision balances have increased by $407 million to $4,338 million, mainly due to revised restoration cost
estimates.
Net debt
Net debt of $4,264 million was $814 million higher than at the end of 2022, driven by major growth capex, capital returns
through dividends and buy-backs, offset by over $2.1 billion in free cash flow generated.
Net tax (liabilities)/assets
Net tax liabilities of $862 million have decreased by $56 million in comparison to 2022. This is due to the increase in carried
forward tax losses recognised in relation to the Pikka project and increases in carried forward PRRT credits, that is offset
by an increase in the deferred tax liability in relation to derivative financial instruments as a result of movements in the
accounting value of swaps, derivatives and contractual assets.
Net assets/equity
Total equity increased by $432 million to $15,275 million at year end. This increase primarily reflects the net profit after tax
attributable to owners of Santos of $1,416 million, which was offset by payments of dividends to shareholders of $777 million
and on-market share purchases of $316 million.
27
Santos Annual Report 2023
Directors’ Report
Directors’ Report
continued
Future commitments
Due to the nature of Santos’ operations, the Company has future obligations for capital expenditure, for which no amounts
have been provided in the financial statements. Santos also has certain requirements to perform minimum exploration work
and spend minimum amounts of money pursuant to the terms of the granting of petroleum exploration permits, in order to
maintain rights of tenure.
The minimum exploration commitments are less than the normal level of exploration expenditures expected to be
undertaken by the Company.
Oil price hedging
The objectives of Santos’ oil price hedging policy are to reduce the effect of commodity price volatility and support annual
capital expenditure growth plans. During 2023, the Group executed 18 million barrels of Brent Crude oil hedges maturing
throughout 2024 in the form of zero-cost collars. Pricing was executed at a floor price of $75/bbl and $80/bbl and an
average cap of $90.94 and $90.15, respectively. There was no realised gain or loss recognised for the year ended
31 December 2023 (2022: loss of $140 million).
As at 31 December 2023, the Company has 18 million barrels of Brent Crude oil hedges for Cal 2024 with a fair value of
$89 million.
Business strategy and prospects for future financial years
Business Strategy
Santos’ purpose is to provide reliable and affordable energy to help create a better world for everyone.
Santos’ current backfill and sustain, decarbonisation and low carbon fuels strategy builds on the successful execution of the
previous Transform, Build and Grow strategy. From 2016, the Transform, Build and Grow strategy transformed Santos into a
safer, more reliable and lower-cost producer positioned for disciplined growth and sustainable shareholder returns.
Santos’ strategy is focused on backfill and sustaining our core assets to deliver the critical fuels the world needs into the
2040s. Santos will seek to decarbonise these critical fuels, in line with our target of net-zero emissions (Scope 1 and 2, equity
share) by 2040, and also seeks to develop low carbon fuels as customer demand evolves.
Santos’ strategy aims to deliver a lower carbon intensity base business that creates a strong foundation to provide
sustainable shareholder returns and fund the energy transition.
To deliver the transition, the business is structured into two functional divisions: Santos Upstream Gas and Liquids, and
Santos Energy Solutions.
The Upstream Gas and Liquids functional division includes an Asia market-focused LNG business with projects in PNG,
Gladstone and Darwin, two Australian domestic gas businesses (west and east coast) and an oil development in Alaska.
Santos Energy Solutions is our transition business to a lower carbon energy future and is composed of the development
of lower carbon processing of Santos and third-party gas and liquids, decarbonisation, carbon solutions and carbon
management services. Santos Energy Solutions will seek to develop low carbon fuels as market and customer
demand evolves.
Prospects for future financial years
Energy security is a top priority for countries in our region. Natural gas is expected to supply around a fifth of the world’s
total energy needs until at least 2050, according to the International Energy Agency 2023 Stated Policies Scenario.
Santos remains confident in the long-term underlying demand for energy, and particularly natural gas, due to Asian
economic growth, the rising global population, rapid urbanisation in developing economies and growing demand for lower-
emissions fuels. Santos is also investing in projects to lower emissions such as CCS.
Production in 2024 is expected to be in a range of 84 to 90 million barrels of oil equivalent (mmboe), lower than 2023 (91.7
mmboe). This is primarily due to the expected cessation of production from the Bayu-Undan field in early 2024, combined
with natural field decline in Western Australia domestic gas. Capital expenditure in 2024 is expected to be approximately
US$1.25 billion for sustaining capital, and approximately US$1.6 billion for major projects. Guidance assumes current Santos
interest in all projects.
28
Santos Annual Report 2023 Material business risks
The achievement of Santos’ purpose and vision, business strategy and future financial performance is subject to various
risks, including the following material business risks. Santos undertakes steps to identify, assess and manage these risks and
operates under a Board-approved enterprise-wide Risk Management Framework.
The risks described below are not an exhaustive list of the risks facing us or that may develop in the future. There may be
additional risks not described below, not presently known to us, or that we currently consider to be immaterial that could
turn out to be material in the future.
Strategic Risks
Volatility in oil and gas prices
Our business relies primarily on the production and sale of oil and gas products (including LNG) to a variety of buyers under
a range of short and long-term contracts. All oil, a majority of the LNG, and a portion of the gas produced in our portfolio are
sold under sales contracts where the sale price is linked to global benchmark prices for oil such as Brent crude. Spot sales of
our LNG are predominantly sold at prices linked to either global benchmark prices for oil or the Platts Japan-Korea-Marker
(‘JKM’), which is the LNG benchmark price assessment for spot physical cargoes. Sales of domestic gas typically occur
under sales contracts of varying terms at fixed prices indexed to inflation.
Fluctuations in the global oil, LNG and domestic gas markets and any extended or substantial decline in demand or prices
for oil and gas, may materially affect our financial position and results of operations and/or ability to fund our activities.
Increases and decreases in oil and gas prices affect the amount of profit and cash flow available for servicing our funding
requirements and capital expenditure. Such fluctuations may also impact on our ability to borrow money or raise additional
capital, and may also impact our credit rating. Lower oil and gas prices may reduce our reserves and/or the amount of oil
and natural gas that we can produce economically.
Santos’ disciplined operating model and Hedging Policy assists to mitigate oil price risk exposure. Santos measures
commodity price exposures and monitors market conditions and may enter into hedging transactions as appropriate.
Additional measures include a clear focus on cash flow management, operational and cost efficiencies, and debt reduction.
Oil and gas reserves development
Reserve and resource quantities are inherently uncertain and may not materialise. Significant uncertainties are inherent in
the reservoir geology, the seismic and well data available and other factors such as project development and operating
costs, together with relevant commodity prices. The process of estimating oil and gas reserves and resources is complex.
Estimated reserve quantities are based on interpretations of geophysical, geological and reservoir models and assessments
of the technical feasibility and commercial viability of producing the reserves. These assessments require assumptions to be
made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes.
A failure to successfully develop existing reserves may impact Santos’ ability to fully support LNG, gas or oil under customer
contracts.
Santos has adopted a reserves management process that is consistent with the Society of Petroleum Engineers’ Petroleum
Resource Management System and complies with ASX requirements for Australian publicly listed companies. The
Company’s reserves and resources estimations are subject to independent audits and evaluations on a rolling basis.
Santos applies an integrated management system across all aspects of business performance, including reserves estimation
and delivery. Progress against key reserves metrics is routinely reviewed by Senior Management and the Board, and reserves
estimates are published annually.
Exploration and reserves replacement
Santos’ long-term prospects are also directly related to the success of efforts to replace existing oil and gas reserves as they
are depleted through production, from either exploration or acquisition, in support of the Company’s strategy to backfill and
sustain production through existing assets. Exploration activities are subject to geological and technological uncertainties
and the failure to replace utilised reserves is a risk inherent in the industry.
Exploration risks are managed through an established exploration prospect evaluation methodology and risking process.
Demand and market
The demand for oil, gas, LNG and other products Santos markets may be adversely affected by a range of external factors
including the level of economic activity in the markets we serve, the level of worldwide economic activity, geopolitical
developments and military conflicts in major oil and gas producing and trading regions such as the Russian invasion of
Ukraine, the Middle East crisis, and tensions in the Taiwan Strait. External factors also include the weather, the ability of
the Organization of the Petroleum Exporting Countries (OPEC) and other producing regions (including North America
29
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
and Russia) to influence global production levels and prices, the price and availability of new technology, the availability
and cost of alternative sources of energy and the transition away from fossil fuels and changes in environmental and other
regulations.
The Company’s strategy development process considers independent oil, gas and LNG market forecasts, and other relevant
macro-economic factors to enable the delivery of plans in support of the Company’s purpose and vision.
Project development
Santos’ strategy is robust and resilient to external volatility and aims to deliver shareholder value across three horizons,
namely backfill and sustain, decarbonisation and low carbon fuels. Investment is undertaken in a variety of oil and gas
projects to backfill and sustain our infrastructure assets to supply oil and gas to a variety of customers. In addition, there is
increasing investment towards decarbonisation projects such as the Moomba CCS Project.
With any major project we undertake, there is a risk that the project may cost more or take longer to complete than we
expect or that it may fail to perform as planned, resulting in inadequate returns on our investment.
The risks we face in developing major projects include:
• delay or failure to obtain and maintain the necessary government approvals or changes in the regulatory
requirements during the development process
• delay or failure to obtain and maintain land access, including agreements with native title holders or other traditional
custodians as well as loss of community support
failures in design, engineering or construction
failures by contractors to perform their obligations
•
•
• procurement issues, including equipment fabrication delays and logistical and sourcing challenges due to disruption
in global supply chains, labour shortages, inflation and geopolitical instability
•
•
•
unexpected geological conditions, including as a result of failure to correctly interpret geological data
environmental, health or safety issues
inadequate governance, risk management and decision-making.
Developing our major projects takes a number of years. During this period, market conditions, including those relating to
costs, supply and demand fundamentals, financing conditions, geopolitical conditions (including sanctions) and the status
of counterparties (including contractors and off-take partners) may change from those that we have forecasted, and these
changes may adversely impact our ability to deliver on our various project objectives.
In addition to financial losses, poor or failed delivery of major projects could result in damage to our reputation and
relationships with project partners, threats to our social licence to operate, reduced workforce prospects and reduced ability
to invest in our business.
Santos has a comprehensive project development process, supported by effective governance, risk management and
reporting practices. Progress and performance of material projects is actively reviewed by Senior Management and the
Board.
Joint venture arrangements
Much of Santos’ business is carried out through joint ventures. The use of joint ventures is common in the oil and gas
exploration and production industry, and serves to mitigate the risk and associated costs of exploration, production and
operational failure. However, failure of agreement or alignment with joint venture partners, or the failure of third-party joint
venture operators, could have a material impact on Santos’ business. The failure of joint venture partners to meet their
commitments, share costs and liabilities can result in increased cost to Santos.
Santos has defined critical expectations and requirements for participation and operation of joint ventures in order to
optimise the Company’s commercial and operational interests. The Company works closely with its joint venture partners to
reduce the risk of misalignment in joint venture activities.
Operational risks
Technical and engineering
Santos is exposed to technical and engineering risks in relation to our explorations, development, production and
decommissioning activities, such as well control incidents (for example, blowouts, explosions or fires), failure of drilling and
completions equipment, pipeline or facilities integrity failure incidents (for example, loss of containment, spills, explosions
or fires), major processing or transportation incidents (including marine and aviation incidents), release of hydrocarbons or
30
Santos Annual Report 2023 other substances, security incidents and other process safety risks, which may have an adverse effect on our profitability
and results of operations.
An integrated operational excellence system and development, drilling, and safety systems are applied across all operational
activities to manage and monitor operations performance and material risk controls. The operational excellence system
includes relevant technical, operational, asset reliability and integrity standards and incident management standards, and
competency requirements. The system is designed to ensure the Company meets regulatory and industry standards in
operations.
Access and licence to operate
Santos has interests in areas that may be subject to claims by communities and landowners who may have concerns over the
social or environmental impacts of oil and gas operations, or the distribution of oil and gas royalties and access to mining-
and petroleum-related benefits. This has the potential to impact on land access or result in community unrest and activism,
and may adversely impact the Company’s reputation.
A number of Santos’ interests are subject to one or more claims or applications for native title determination. In Australia,
compliance with the requirements of the Native Title Act 1993 (Cth) can delay the grant of mineral and petroleum tenements
and subsequent timing of exploration, development and production activities.
Santos and its operating joint venture partners work closely with relevant stakeholders including governments, communities,
landowners and Indigenous groups to address concerns wherever practicable and we seek an outcome where local
communities benefit from Santos’ presence in their communities. In addition, Santos and its operating joint venture partners
develop and employ security and risk management plans, and are committed to conducting operations in a way that
protects the security of personnel, facilities, operations and surrounding communities.
Santos has a long history of safe and reliable operations and working with communities and landholders across the country.
Land access agreements are in place and a team of experienced community and land access representatives work with
Indigenous stakeholders, landholders and communities to ensure issues are understood and addressed appropriately.
Human rights
Human rights risks include the use of force by public and private security forces, interference with Indigenous community
land access or cultural heritage, sexual harassment and discrimination, and the labour practices of suppliers and contractors.
These are particularly relevant where operations, or the operations of suppliers, customers and joint venture partners,
occur in high-risk jurisdictions, including PNG. The occurrence of any of these risks may result in the loss of social licence to
operate, litigation or reputational damage. Training and awareness covering key human rights topics, such as responsible
security and modern slavery, is conducted for employees in key functions including Security and Procurement. Grievance
mechanisms are in place and overseen at Board Committee level. Santos is committed to respecting human rights and
continues to improve human rights-related controls in line with its Human Rights and Modern Slavery Policy.
Cyber security
Cyber security risks, including threats to information and operational systems from computer viruses, unauthorised access,
cyber-attack and other similar disruptions, have evolved rapidly and can impact all sectors of the economy, including the
energy sector. The increasing technological advances in operations require monitoring and protection to ensure cyber
security threats are appropriately managed and prevented. Cyber security risks may lead to disruption of critical business
processes, a breach of privacy and theft of commercially sensitive information. A cyber event may lead to adverse impacts
on Santos’ profitability and reputation.
Santos has established a cyber security risk management capability, with the American National Institute of Standards
and Technology (NIST) Cyber Security Framework, which defines cyber security controls that fall under the categories of
‘Identify, Protect, Detect, Respond and Recover’. Cyber Security is incorporated into Santos’ risk management and assurance
processes and practices across the Company’s business and operational information management systems.
Workforce
Santos’ future success is significantly influenced by the expertise and continued service of certain key Executives and
technical personnel. An inability to attract and retain such personnel, caused by a range of factors, could adversely affect
business continuity.
Employment arrangements underpinned by competitive benchmarked remuneration are designed to attract and retain
executive talent and employees in business-critical roles. Talent management and succession planning frameworks are
established for employee development, career planning, and key people risks management.
31
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
Environmental, safety and sustainability risks
Health, safety and environment
The size, nature and complexity of Santos’ operations pose risks in relation to the health and safety of employees and
contractors, and a range of environmental risks exist when carrying out exploration and production activities. Environmental
incidents and real or perceived threats to the environment, or the amenity of local communities, could result in the loss of
Santos’ licence to operate. This could lead to delays, disruption or the shutdown of exploration and production activities.
Santos has a comprehensive approach to management of health, safety and environmental risks. The Company’s
management system integrates technical and engineering requirements with personal health and safety requirements, in
order to comprehensively manage health, safety and environmental risks within Company operations.
Climate change
Santos anticipates its activities will be subject to increasing regulation and costs associated with climate change and the
management of carbon emissions. Risks are identified and managed in two broad categories: Physical, relating to acute and
chronic effects of climate change on Santos’ operations and Transitional, arising from the move into a lower carbon economy.
Risks associated with climate change are incorporated into policy and strategy. The Company monitors climate change
risk and proactively takes steps to mitigate any impacts on its objectives and activities. Santos’ net-zero Scope 1 and Scope
2 emissions 2040 target remains a strong focus in the delivery of its strategic commitments. Along with specific projects
focused on reducing emissions, an emissions reduction and minimisation focus forms part of the Company’s routine
operations.
Financial risks
The financial risk management strategy seeks to ensure Santos can fund its corporate objectives and meet its obligations
to stakeholders. Financial risk management is carried out by a central treasury department that operates in line with a
Board-approved policy and framework. The framework and principles for overall financial risk management address specific
financial risks, such as commodity price risk, foreign exchange risk, interest rate risk and credit risk, approved derivative and
non-derivative financial instruments, and liquidity management.
A hedging policy is in place in order to mitigate the effect of commodity price volatility. Santos measures commodity price
exposure and monitors commodity market conditions and may enter into hedging transactions as appropriate.
An interest rate policy is in place with the objective of mitigating the effect of interest rate volatility. We are exposed to
interest rate risk arising from our borrowings. Borrowings issued at variable rates expose us to cash flow interest rate risk.
Borrowings issued at fixed rates expose us to fair value interest rate risk. Increases in interest rates, either through increases
in base rates or borrowing margins, may reduce our cash flow and profitability.
Foreign currency
Santos is exposed to foreign currency risk principally from commercial transactions and valuations of assets and liabilities
that are denominated in a currency that is not our functional currency, United States Dollars. Our exposure to foreign
currency risk arises principally through the sale of products denominated in currencies other than our functional currency
and capital and operating expenditure incurred in other currencies, principally the Australian dollar and, to a lesser extent,
the Papua New Guinea kina.
Santos also holds investment interests in domestic operations in which net assets are exposed to foreign currency translation
risk.
A foreign currency hedging policy is in place with the objective of mitigating the effect of foreign currency exchange rate
volatility which predominantly arise from operating and capital expenditure incurred in Australian dollars. Santos measures
foreign currency exposure and monitors foreign currency market conditions and enters into hedging transactions as
appropriate.
Credit
We are also exposed to credit risk through investments in cash and cash equivalents, derivative financial instruments and
deposits with or undrawn committed liquidity from banks and financial institutions, as well as credit exposures to customers
including outstanding receivables and committed transactions. We may be exposed to potential financial loss if the
counterparties to those investments and transactions fail to perform as contracted. We monitor our exposure to credit risk
on an ongoing basis through the management of concentration risk and ageing analysis.
32
Santos Annual Report 2023 Access to capital and liquidity
Santos has debt obligations and relies on access to debt and equity financing to conduct its business, in particular, the
development of large-scale projects. There is a risk that we may not be able to access equity or debt capital markets to
support our business objectives, or successfully refinance debt facilities on commercially favourable terms, or at all. The
ability to secure financing, or financing on acceptable terms, may be adversely affected by ESG factors, the Company's
financial position volatility in the financial markets, or by a downgrade by Credit Rating Agencies.
Santos had $4.5 billion in liquidity (cash and undrawn committed bank facilities) available as at 31 December 2023.
Contract and counterparty risks
As part of our ongoing commercial activities, Santos is party to a number of material contracts including finance
agreements, infrastructure access agreements, agreements for the sale and purchase of hydrocarbon, transportation
agreements, joint venture agreements, and engineering, procurement and construction (EPC) contracts. Santos also enters
into sale and purchase contracts with third parties for the sale and purchase of natural gas, LNG and other products.
The economic effects of these contracts over their term may be impacted by fluctuations in commodity prices, price
reviews, operational performance and other market conditions. Failure to perform material obligations under these contracts
by Santos and/or the applicable counterparties, or to secure any extensions or amendments to these contracts, may result in
a material impact on Santos’ operations and financial results.
Santos tracks key contractual obligations and monitors performance across its material contracts.
Political and legal risks
Political, legal and regulatory
Santos’ business is subject to various laws and regulations in each of the jurisdictions in which it operates that relate to the
development, production, marketing, pricing, transportation and storage of its products. A change in the laws that apply
to the Company’s business, or the way it is regulated, could have a materially adverse effect on Santos’ business, on the
results of operations and the Company’s financial performance. For example, a change in government regime, taxation laws,
environmental laws or land access laws could have a material effect on the Company.
The domestic gas business and GLNG project, including its ability to purchase gas, develop future growth projects and
meet supply commitments, may also be adversely impacted by any governmental intervention, including limitations on LNG
export volumes, domestic gas price caps and the redirection of gas from export to domestic markets. Any such intervention
may also have broader implications for the future of the gas industry in Australia.
Continuous monitoring of legislative and regulatory changes and associated risks is undertaken, and regular engagement
with regulators and governments supports the management of risks arising from these changes.
Litigation and disputes
Santos’ business means it is likely involved in litigation, disputes or regulatory actions arising from a wide range of matters.
Santos may also be involved in investigations, inquiries or disputes including debt recoveries, commercial and contractual
disputes, native title claims, land tenure and access disputes, environmental claims or occupational health and safety claims.
Any of these claims or actions could result in delays, increase costs or otherwise adversely impact Santos’ assets and
operations, and adversely impact Santos’ financial performance and future financial prospects.
Santos has an experienced legal team that monitors and manages potential and actual claims, actions and disputes.
Unreasonable prejudice
As permitted by sections 299(3) and 299A(3) of the Corporations Act 2001 (Cth), Santos has omitted some information
from the Operating and Financial Review and Directors’ Report in this annual report in relation to the Group’s business
strategies, future prospects and likely developments in operations and the expected results of those operations in future
financial years. This has been done on the basis that such information, if disclosed, would likely result in unreasonable
prejudice (for example, because the information is premature, commercially sensitive, confidential or could give a third party
a commercial advantage). The omitted information typically relates to internal budgets, forecasts and estimates, details of
the business strategy and contractual pricing.
33
Santos Annual Report 2023 Directors’ Report
Directors’ Report
continued
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Material Business Risks section (pages 29 to 33) refers to risks that, if materialised, may have a significant effect on the
state of affairs of the Company.
Dividends
On 20 February 2024, the Directors resolved to pay a final dividend of US17.5 cents per fully paid ordinary share on 27
March 2024 to shareholders registered in the books of the Company on 27 February 2024. This final dividend amounts to
approximately US$569 million. The Board also resolved that the Dividend Reinvestment Plan (DRP) will not be in operation
for the 2023 final dividend.
In addition, an interim dividend of US8.7 cents per fully paid ordinary share was paid to members on 28 September 2023.
The DRP was not in operation for the interim dividend.
Environmental regulation
The consolidated entity’s Australian operations are subject to various environmental regulations under Commonwealth,
state and territory legislation. Applicable legislation and requisite environmental licences are specified in the consolidated
entity’s Environmental Compliance Database, which forms part of the consolidated entity’s overall management system.
Environmental compliance performance is monitored regularly and in various forms, including audits conducted by
regulatory authorities and the Company, through internal or external resources.
On 2 June 2023, Santos negotiated a civil penalty of A$70,031.25 with the South Australian Environmental Protection
Authority for the late notification of a release of hydrocarbon and produced water from a flowline in the Cooper Basin that
occurred in July 2021.
On 2 November 2023, Santos received a penalty infringement notice and a A$3,870 fine from the Queensland Department
of Environment and Science for the late submission of an Estimated Rehabilitation Cost (ERC) application.
In both instances, the consolidated entity undertook corrective measures to prevent re-occurrence.
POST BALANCE DATE EVENTS
On 20 February 2024, the Directors of Santos Limited resolved to pay a final dividend on ordinary shares in respect of the
2023 financial year. The financial effect of these dividends has not been brought to account in the full-year Financial Report
for the year ended 31 December 2023.
Subsequent to 31 December 2023, the Group announced the partial completion of the sale of 2.6 per cent of PNG LNG
to Kumul Petroleum Holdings Limited (Kumul). Santos and Kumul have agreed an amendment to the Sale Agreement
where Kumul has taken an effective interest in the Santos entity that holds the 2.6 per cent sale interest. Kumul has paid
US$352 million to Santos (equivalent to a 1.6 per cent interest) on 31 January 2024 to allow partial completion of the
transaction. The amendment provides additional time for Kumul to pay the remaining purchase price of US$241 million.
Until final completion, Santos retains control of the entity holding the 2.6 per cent and in order to assist with purchase of
the remaining interest, future project distributions associated with the interest sold to Kumul will be applied to acquiring
the remaining interest.
34
Santos Annual Report 2023 SHARES UNDER OPTION AND UNVESTED SHARE ACQUISITION RIGHTS (SARS)
Options
There are no unissued ordinary shares of Santos Limited under options at the date of this report.
Unvested SARs
Unissued ordinary shares of Santos Limited under unvested SARs at 31 December 2023 are as follows:
Date SARs granted
19 March 2020
9 April 2020
31 August 2020
11 April 2021
15 April 2021
12 May 2021
27 August 2021
17 December 2021
15 July 2022
5 September 2022
7 September 2022
20 September 2022
5 October 2022
21 October 2022
16 December 2022
24 March 2023
19 April 2023
25 April 2023
28 April 2023
5 May 2023
22 May 2023
14 June 2023
19 June 2023
30 June 2023
14 July 2023
31 July 2023
18 September 2023
1 December 2023
Number of shares
under unvested SARs
1,734,684
442,298
389,641
847,458
577,033
2,138,865
236,034
110,957
3,667,940
18,070
761,750
641,873
1,335,058
159,000
351,013
780,992
4,874
1,421
125,974
46,009
2,802,196
1,000
523,806
868,116
471,982
681,696
322,337
276,104
20,318,181
Since 31 December 2023, no SARs have been granted over unissued ordinary shares of Santos Limited.
No amount is payable on the vesting of SARs. SARs do not confer an entitlement to participate in a bonus or rights issue,
prior to the vesting of the SAR. Further details regarding the SARs (including when they will lapse) are contained in Note 7.2
of the Financial Report.
35
Santos Annual Report 2023 Directors’ Report
continued
SHARES ALLOCATED ON THE EXERCISE OF OPTIONS AND ON THE VESTING OF SARS
Options
No options were exercised during the year ended 31 December 2023, or up to the date of this report.
Vested SARs
The following ordinary shares of Santos Limited were allocated during the year ended 31 December 2023, on the vesting
of SARs granted under the Santos Employee Equity Incentive Plan (SEEIP) (formerly known as the Santos Employee Share
Purchase Plan (SESPP)) and ShareMatch Plan (ShareMatch). No amount is payable on the vesting of SARs and accordingly
no amounts are unpaid on any of the shares.
Date SARs granted
15 March 2019
18 April 2019
9 May 2019
30 August 2019
4 October 2019
11 June 2020
31 August 2020
27 August 2021
5 September 2022
7 September 2022
20 September 2022
21 October 2022
16 December 2022
28 April 2023
14 July 2023
Number of shares
allocated
1,422,039
186,251
357,406
489,642
142,569
349,664
930,754
2,801
10,148
5,000
4,948
500
421
500
440
3,903,083
Since 31 December 2023, 566,051 ordinary shares of Santos Limited have been allocated on the vesting of SARs granted
under the SEEIP and ShareMatch.
DIRECTORS’ AND SENIOR EXECUTIVES’ REMUNERATION
Details of the Company’s remuneration policies and the nature and amount of the remuneration of the Directors and senior
management (including shares, options and SARs granted during the financial year) are set out in the Remuneration Report
commencing on page 37 of this report and in Notes 7.2 and 7.3 of the Financial Report.
36
Directors’ ReportSantos Annual Report 2023 Remuneration Report
MESSAGE FROM YASMIN ALLEN AM, PEOPLE, REMUNERATION AND CULTURE COMMITTEE CHAIR
Dear fellow shareholders,
On behalf of the Board, I am pleased to introduce Santos’ Remuneration Report for 2023 and to summarise key elements of
Santos’ performance and the impact on remuneration outcomes.
I would also like to thank shareholders and other stakeholders for their feedback on our remuneration framework as part of
our commitment to ongoing improvement of transparency and readability. We believe the report clearly demonstrates the
alignment of total remuneration outcomes with company performance and shareholder value creation.
Company performance and remuneration outcomes
The 2023 performance year has been defined by a challenging external regulatory environment; however, the organisation
has focused on delivering on its strategy and continued commitment to the disciplined low-cost operating model.
Highlights for 2023 include:
•
•
•
strong base business performance delivering annual production of 91.7 mmboe (92.2mmboe pre PSC adjustments)
annual revenue of US$5.9 billion and underlying profit for the period of US$1.4 billion
low unit production costs of $7.61/boe (excluding Bayu-Undan late life production)
• Moomba carbon capture and storage (CCS) project is 80 per cent complete with first injection expected mid 2024
•
•
•
the Barossa project is now 66.4 per cent complete with drilling and pipelaying activity underway
the Pikka project is 37.4 per cent complete, progressing on time and on budget
net debt of US$4.3 billion and gearing of 21.8 per cent at 31 December 2023 (18.4 per cent excluding leases).
Overall, our business performance was strong. While annual production was just short of target, the portfolio delivered
strong annual Free Cash Flow from operations in what has been a challenging year.
Santos’ remuneration structure and its alignment to corporate strategy
Santos’ strategy is designed to be robust and resilient to external volatility and aims to deliver shareholder value across three
horizons: backfill and sustain, decarbonisation and low-carbon fuels.
Santos’ remuneration structure incentivises the delivery of the strategy and our goal to be a global leader in the energy
evolution to low carbon fuels by helping the world decarbonise and continuing to provide the reliable, affordable energy the
world needs.
For over a decade the Short-Term Incentive (STI) has included sustainability metrics and, from 2019, it has included specific
metrics related to emissions reduction as well as advancement of CCS projects.
Santos has been proactive in continually strengthening the links between sustainability and climate, and performance pay.
Sustainability accounts for 25 per cent of the company scorecard and includes safety, environment, cultural Heritage,
community and people related measures. In addition, the production and backfill, sustain and decarbonisation quadrants
include climate-related measures that account for 15 per cent weighting. These metrics continue to reinforce the link
between sustainability and climate, and executive remuneration.
Short-Term Incentive outcomes
The overall Company Scorecard outcome, which determines the Short-Term Incentive (STI) pool for 2023, was 110.6 per
cent of target (66% of maximum). The STI is subject to a positive Free Cash Flow gateway and awards are subject to a
cap of 5 per cent of the Company’s Free Cash Flow, which applies to the STI pool in any year. The STI pool for 2023 was
accommodated well within the 5 per cent of Free Cash Flow cap.
A description of outcomes against each measure on the Company Scorecard is set out in Table 3 on pages 45-49.
Long-Term Incentive outcomes
Long-Term Incentive (LTI) awards granted in 2020 were tested following the end of their four-year performance period on
31 December 2023. Over this four-year performance period, the Santos share price decreased 7 per cent from A$8.18 to
A$7.60.
The 2020 LTI award was tested against relative Total Shareholder Return (TSR) compared to the ASX100 (25%) and S&P
Global 1200 Energy Index (25%), Free Cash Flow Breakeven Point (FCFBP) (25%), and Return on Average Capital Employed
(ROACE) (25%). The TSR thresholds, being the 51st percentile, were not achieved and accordingly, no performance rights
vested in respect to the TSR measures. The Company’s average hedged Free Cash Flow breakeven point over the four-year
37
Santos Annual Report 2023 period to 2023 was US$16.16/boe resulting in full vesting for this measure and return on average capital employed over 2020
to 2023 was 133.0 per cent resulting in partial vesting of 22.1 per cent.
These performance outcomes contributed to an overall 47.1 per cent vesting outcome for the 2020 LTI awards.
Realised remuneration strongly correlated with Company performance
Realised remuneration outcomes for 2023 are shown in Table 6 on page 54. Realised remuneration includes fixed pay
received during the year and the cash component of STI paid in respect of the year. Realised remuneration also includes the
value of deferred STI awards from 2021 and LTI awards granted in 2020 that vested during 2023, including the value of share
price movements between award and vesting.
The CEO’s realised remuneration for 2023 was lower than in 2022. This is driven primarily by the lower vesting outcome of
the 2020 LTI compared with the prior year.
Long-term equity compensation is a significant component of remuneration for the Company’s CEO and other Executive
Key Management Personnel (KMP). In 2023, over half of the CEO’s realised remuneration was in the form of performance-
based equity awards reflecting our priority to ensure the CEO is focused on the longer-term interest of the company and its
stakeholders.
2022 withheld Environmental KPI
As disclosed in the 2022 Remuneration Report, the Board exercised its discretion to withhold a portion of the 2022 STI
payment relating to the Environmental KPI (5%), in response to the Varanus Island (VI) loading line leak. The Board takes our
responsibility over environmental and safety issues extremely seriously, and we determined to withhold the Environmental
KPI for all Executive KMP and other senior leaders pending the completion of the independent investigation into the VI
loading line leak.
The investigation did not find any evidence to substantiate the allegations raised, but identified gaps in our internal control
and communication processes which have been addressed.
The People Remuneration and Culture Committee, with input from the Audit and Risk Committee, determined that full
or partial forfeiture of the withheld portion of the 2022 STI was warranted for some participants to ensure executive
accountability. While there was no direct fault attributed to the CEO, Mr Gallagher volunteered to forfeit 50 per cent of the
withheld portion of his STI to demonstrate ultimate accountability with the remaining 50 per cent paid in cash.
Please refer to page 54 of the 2023 Remuneration Report for further detail on the remuneration impacts to Executive KMP
in relation to the VI incident.
CEO Growth Incentive
Progress and achievements have continued in 2023 with the regulatory approval for Dorado Offshore Project Proposal and
extended Reserves coverage for GLNG achieved in 2023.
2024 Remuneration Changes
Fixed Remuneration
In December 2023, as part of the annual remuneration review cycle, the Board considered the fixed remuneration for the
CEO against updated benchmark data provided by PwC. The Board approved a 3 per cent increase to the CEO’s fixed
remuneration to $2,070,300 effective from 1 January 2024.
Additionally, in February 2024, the Board approved an increase to TFR for Mr Darley, EVP Eastern Australia & PNG, of
7 per cent following a substantive increase to his portfolio and an increase to TFR for Ms Anthea McKinnell, Chief Financial
Officer of 6.7 per cent whose fixed remuneration was below market median. These increases are effective from 1 April 2024.
Non-executive Director fees
During 2023, the Board reviewed Directors’ fees including consideration of market position and benchmark data provided
by PwC. The review determined that an increase of 4 per cent to both Board and Committee fees was appropriate, effective
from 1 January 2024. The increase in fees does not exceed the shareholder approved cap of A$3.5m.
Short-Term Incentive enhancement
The Board is committed to an executive remuneration framework that supports and reinforces the ongoing successful
execution of Santos’ strategy and vision, and delivers long-term shareholder value. In 2023, the Board reviewed the short-
term incentive design in light of the Company’s shift to a regional operating model incorporating three regional business
units, two functional divisions and a corporate centre. The regional operating model was implemented to enable stronger
regional leadership with greater local ownership and clearer accountability, empowering the regional teams to better
manage 'above ground' risks and execute on their business plans, goals and objectives.
38
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued While the 2024 Scorecard retains the pre-requisite requirement that Santos must achieve a positive Free Cash Flow
gateway for the STI to apply to all Executive KMP, the plan has been enhanced to reflect the regional operating model and
reinforce the importance of our one team, One Santos, approach.
As such, an additional regional-specific gateway has been applied to the total individual STI outcome to ensure bonus
outcomes reflect the level of contribution each region makes to the total Company Free Cash Flow. Those regions with a
regional-specific gateway include Eastern Australia & PNG, Western & Northern Australia & Timor-Leste, and Alaska. The
regional-specific gateway, if not achieved, will result in a reduction of 50 per cent of the total individual STI award outcome.
For Santos Energy Solutions (SES), Upstream Gas & Liquids, and Corporate Centre division which includes Finance,
Commercial, P&C, Legal, Environment & Governance and Operations & Technical Services and the CEO’s office, including
the CEO, a corporate centre moderator will be applied to the total individual STI outcomes to recognise the impact of
Free Cash Flow across all the regional business units by moderating the outcome dependent on whether each of the three
regions noted above met their regional-specific gateway. The corporate centre moderator applies a 16.67 per cent weighting
to each region, equating to 50 per cent for all regions. Therefore, if one or more regions do not meet their regional-specific
gateway, the corporate centre moderator applies to reduce the individual STI outcome by 16.67 per cent up to 50 per cent.
The Board believes the enhanced STI design better aligns to the refreshed regional operating structure while delivering the
Company’s vision and strategy, and value for shareholders.
Thank you for taking the time to review our Remuneration Report.
Yasmin Allen AM
Chair, People, Remuneration and Culture Committee
The Directors of Santos present this Remuneration Report for the consolidated entity for the year ended 31 December 2023.
The information provided in this report has been audited as required in section 308(3C) of the Corporations Act 2001 (Cth)
(Corporations Act) and forms part of the Directors’ Report.
The Remuneration Report outlines the Company’s key remuneration activities in 2023 and remuneration information for
KMP of the consolidated entity for the purposes of the Corporations Act and Accounting Standards, as set out below.
Remuneration is disclosed in US$ (unless otherwise indicated) with all remuneration components having been converted
from A$ to US$ using an average rate of $0.6644 for 2023 and $0.6949 for 2022. This means year-on-year changes in
remuneration amounts when stated in US$ are partly attributable to exchange rate variations and not necessarily a change
in the amount paid in A$.
Report structure
The Remuneration Report is set out in the following sections:
1. KMP covered by the Remuneration Report and summary of five-year Company performance
2. Remuneration governance
3. Executive Remuneration Framework
4. 2023 Company Performance Outcomes and Realised Remuneration
5. Incentive plan operation
6. Key terms of employment contracts for Executive KMP
7. Non-executive Director remuneration
8. Statutory Disclosures
39
Santos Annual Report 2023 1. KMP COVERED BY THE REMUNERATION REPORT AND SUMMARY OF FIVE-YEAR COMPANY PERFORMANCE
KMP are the personnel who had authority and responsibility for planning, directing and controlling the activities of the
Company’s major financial, commercial and operating divisions during 2023. The KMP during 2023 are set out in Table 1.
Unless otherwise indicated in Table 1, all individuals were KMP for the full term in 2023.
Table 1: 2023 Key Management Personnel
Executive KMP
Non-executive Directors
Kevin Gallagher, Managing Director and Chief Executive Officer
Keith Spence, independent non-executive Chair
David Banks, Executive Vice President Upstream Gas & Liquids
Yasmin Allen, independent non-executive Director
Brett Darley, Executive Vice President Eastern Australia & PNG
Guy Cowan, independent non-executive Director
Anthea McKinnell, Chief Financial Officer
Eileen Doyle, independent non-executive Director
Anthony Neilson, Chief Commercial Officer
Vanessa Guthrie, independent non-executive Director
Brett Woods, Executive Vice President Western & Northern
Australia & Timor-Leste1
Peter Hearl, independent non-executive Director
Janine McArdle, independent non-executive Director
Michael Utsler, independent non-executive Director
Musje Werror, independent non-executive Director
1 Ceased as a KMP on 1 September 2023
Table 2 sets out the Company’s performance over the past five financial years in respect of key financial and non-financial
indicators and the STI and LTI award metrics during this period.
Table 2: Five-Year Company Performance
Injury frequency4:
Total recordable case frequency
Lost time injury rate1
Moderate harm rate2
Production (mmboe)
Reserve replacement rate – 2P organic (one-year average %)
Net (loss)/profit after tax (US$m)
Dividends per ordinary share (US cents)
Share buy-back executed (US$m)
Share price – closing price on last trading day of year (A$)3
Company Scorecard result expressed as % of maximum
LTI performance (% vesting) – shown against final year of
performance period
1 Annual performance reporting.
2023
2022
2021
2020
2019
2.71
0.14
0.07
91.7
9
1,416
26.2
316
7.60
66%
2.12
0.24
0.19
103.2
166
2,112
22.7
384
7.14
64%
4.21
0.8
0.33
92.1
464
658
14.0
0
6.31
81%
3.54
0.24
0.08
89.0
11
(357)
7.1
0
6.27
67%
4.63
0.57
0.21
75.5
56
674
11.0
0
8.18
72%
47.1%
66.8%
89.5%
90.7%
100%
2 Moderate harm rate was introduced in 2018 as the Company adopted a harm-based approach, in addition to lost time reporting for injury classification.
3 The closing share price on the last trading day of 2018 was $5.48.
4 Santos is ongoingly working to improve the quality of its data and processes for capturing and reporting information. Due to the lag nature of incident reporting
and subsequent verification, final rates may vary after the date of initial reporting. The 2022 and 2020 year TRIR results were adjusted due to subsequent
verification and amendment of injuries. The 2019 TRIR results were adjusted due to an improvement in the granularity of hours worked information.
40 Santos Annual Report 2023
Directors’ ReportRemuneration Reportcontinued 2. REMUNERATION GOVERNANCE
The following diagram illustrates Santos’ remuneration governance framework.
Shareholders
Board
The Board reviews, challenges and approves the recommendations of the Committee around policy, performance,
the remuneration arrangements for the Managing Director and Chief Executive Officer, all Executive KMP and
non-executive Directors and the remuneration policies and processes for the wider Group.
People, Remuneration and Culture Committee
External advisers
Members
• Yasmin Allen (Chair)
• Vanessa Guthrie
• Peter Hearl
• Musje Werror
Role
The People, Remuneration and Culture Committee
oversees and formulates recommendations to the
Board on the remuneration policies and practices of
the Company generally (including the remuneration
of non-executive Directors, the CEO and Senior
Executives) and reviewing whether they are aligned
to the Company’s values, strategic direction and risk
appetite.
Charter
The Committee operates under a Charter approved
by the Board and regularly conducts a review of its
performance, structure, objectives and purpose. The
Committee Charter is available on the Company’s
website at www.santos.com.
The Board and the Committee may seek advice from
independent experts and advisers.
The Board has adopted a protocol for engaging
and seeking advice from independent remuneration
consultants from time to time. In 2023, no
remuneration recommendations were provided by
remuneration consultants as per section 9B of the
Corporations Act.
Managing Director & Chief Executive Officer
(MD/CEO) and management
The MD/CEO makes recommendations to the
Committee regarding Executives’ remuneration.
These recommendations take into account
performance, culture and values.
The Managing Director’s remuneration is considered
separately to manage conflicts of interest.
41
Santos Annual Report 2023 3. EXECUTIVE REMUNERATION FRAMEWORK
The fundamental purpose of Santos’ Remuneration Policy is to develop and maintain an effective remuneration framework
that supports and reinforces the ongoing successful execution of Santos’ strategy and vision.
Remuneration Policy objectives
Attract, motivate and retain talented
and qualified Executives
Focus Executives to deliver superior
performance
Align Executive and shareholder
interests
Enabled through the Company’s Executive remuneration framework
Total Fixed Remuneration (TFR)
(base salary plus superannuation)
• Remuneration levels are
market-aligned against similar
roles in comparable companies
within the ASX50, as well as the
ASX100 energy and resources
sectors.
Individual remuneration is set
with regard to the Executive’s
role and responsibilities, and
also the individual’s experience
and competencies.
The target market position for
fixed remuneration for
Executives is below market
median, in line with the
Company’s cost focus.
•
•
Short-term incentive (STI)
Long-term incentive (LTI)
•
•
• A significant component of
remuneration is at-risk. The
value to the Executive is
dependent on the Company
and the individual meeting
challenging targets.
STI levels are set to ensure total
compensation appropriately
rewards the delivery of Santos’
operating model and the
increasingly demanding STI
scorecard metrics.
STI outcomes are based on a
balanced scorecard of annual
performance measures aimed at
delivering challenging outcomes
for the Company across a range
of financial, safety, environment,
growth and culture KPIs.
• Half (50%) of Executives’ STI
award is delivered as cash
following the end of the
performance year.
The other 50 per cent is
delivered in equity, subject
to a two-year restriction period.
A service condition applies
during the restriction period.
•
•
LTIs are delivered as Share
Acquisition Rights (SARs)
following a four-year
performance period.
• Vesting of LTIs is contingent on
achieving performance hurdles
that are aligned with creation
of long-term shareholder value.
These are:
•
•
•
•
•
relative total shareholder
return against the ASX100
relative total shareholder
return against the S&P
Global 1200 Energy Index
return on average capital
employed versus weighted
average cost of capital
Free Cash Flow breakeven
point.
•
The share plan rules give the
Company the discretion to
lapse or forfeit unvested equity
awards and claw back any
vested shares or cash paid in
certain circumstances.
Minimum Shareholding Policy
The Company has a policy that mandates a significant shareholding requirement for the CEO and other Senior
Executives. The Company’s Minimum Shareholding Requirement requires the CEO and Senior Executives to build, over
a five-year period and then maintain, a minimum shareholding of Santos shares. For the CEO, this is approximately three
times annual Total Fixed Remuneration (TFR) and for Senior Executives it is approximately one and a half times the
average TFR. These levels of minimum shareholdings are significant compared to typical market practice. They ensure
ongoing alignment with shareholders by requiring the CEO and members of the Company’s Executive Committee to
hold shares beyond vesting until the minimum holding is achieved.
The Minimum Shareholding Policy does allow the CEO and Senior Executives to sell shares to manage arising tax
liabilities that occur on the vesting of awards. Disposals to manage tax liabilities are encouraged to occur as closely as
possible to the end of the deferred taxing point for the relevant award.
42 Santos Annual Report 2023
Directors’ ReportRemuneration Reportcontinued 3.1 Remuneration mix
A significant portion of Executive remuneration is at-risk. The following charts show the remuneration mix for the CEO and
Senior Executives at the following performance levels:
Performance level
Components of remuneration
Minimum
Target
Maximum
TFR for the year only.
TFR for the year, STI at target level (awarded half in cash and half in deferred equity vesting
two years after the end of the performance year, subject to continued service) and target LTI.
LTI awards are allocated on a face value basis that is by dividing award values by the Santos
share price to arrive at the number of SARs to be awarded. Vesting of LTI awards is subject to
the achievement of the relevant performance and service conditions. The target LTI values in
the following charts are shown at a 40 per cent discount to estimate a long-term probabilistic
vesting outcome.
TFR for the year, STI at the maximum level (provided half in cash and half in deferred equity
vesting two years after the end of the performance year) and the maximum LTI (being the face
value of the award). Vesting of awards is subject to the achievement of performance and service
conditions.
The value of the STI deferred equity award and LTI does not include the impact of future share price movements or dividend
payments.
The actual remuneration mix in any year varies with actual performance and incentive outcomes.
CEO remuneration quantum and mix
The remuneration quantum and mix for the CEO at minimum, target and maximum performance is shown in Chart 1.
Chart 1: CEO remuneration quantum and mix
Minimum
100%
2,010
Target
32%
16%
16%
36%
6,191
Maximum
22%
19%
19%
40%
8,985
0
2,000
4,000
6,000
8,000
10,000
TFR
STI cash
STI deferred equity
LTI
• Minimum: TFR of A$2,010,000.
A$000
•
Target: TFR, target STI at 100 per cent of TFR (a cash award of 50% of TFR and a deferred equity award of 50% of
TFR) and target LTI of 108 per cent of TFR.
• Maximum: TFR, the maximum STI of 167 per cent of TFR (a cash award of 83.5% of TFR and a deferred equity award
of 83.5% of TFR) and the maximum LTI award of 180 per cent of TFR.
In addition, the CEO participates in a one-off Growth Projects Incentive. This is described in more detail in sections 4 and 5.
The Growth Projects Incentive was provided as a one-off grant of performance rights subject to achieving key milestones
and is not reflected in Chart 1.
43
Santos Annual Report 2023 Senior Executive remuneration mix and quantum
The remuneration quantum (as a multiple of TFR) and mix for Senior Executives at minimum, target and maximum
performance is shown in Chart 2.
Chart 2: Senior Executive remuneration quantum and mix
Minimum
Target
Maximum
100%
1.00
43%
15%
15%
27%
2.30
32%
18%
18%
32%
3.17
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
TFR
STI cash
STI deferred equity
LTI
Quantum is expressed as a multiple of TFR as Senior Executives have different TFRs.
• Minimum: TFR only.
Multiple of TFR
•
Target: TFR, target STI at 70 per cent of TFR (a cash award of 35% of TFR and a deferred equity award of 35% of
TFR) and target LTI of 60 per cent of TFR.
• Maximum: TFR, the maximum STI of 117 per cent of TFR (a cash award of 58.5% of TFR and a deferred equity award
of 58.5% of TFR) and the maximum LTI award of 100 per cent of TFR.
44
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued 4. 2023 COMPANY PEFORMANCE OUTCOMES AND REALISED REMUNERATION
2023 Business performance
The 2023 performance year has been defined by a challenging external regulatory environment; however, the organisation
has focused on delivering on its strategy and continued commitment to the disciplined low-cost operating model.
Overall, our business performance was strong. The portfolio delivered strong base business performance annual production
of 91.7 mmboe (92.2mmboe pre PSC adjustments), annual revenue of US$5.9 billion and underlying profit for the period of
US$1.4 billion.
Santos is well positioned to continue to provide reliable, affordable and sustainable energy both domestically and
internationally.
4.1 2023 Company Scorecard performance outcomes
Performance of the 2023 Company Scorecard as assessed by the Board resulted in an outcome of 110.6 per cent of target
(66% of maximum).
Table 3 provides further details of Scorecard KPIs and the Company’s performance against them. Performance targets on
achievements on each measure are cumulative. For example, achievement of a target level of performance requires the
threshold metrics to also have been achieved, and achievement of a stretch outcome requires both the threshold and target
metrics to have been achieved.
Table 3: 2023 Company Scorecard-KPI performance
Key performance indicators, measures and rationale Performance requirements
Achievement
Sustainability (25%)
Workplace and
Process Safety
(10%)
The targets for personal safety
reflect the Company’s commitment
to providing a workplace without
injury or illness.
The targets for Process Safety
represent the Company’s
commitment to reducing the
number of process safety-related
incidents with potential for high-
impact consequences.
Threshold on the workplace safety
component required there to be no
severe harm incidents.
Target performance required 2021
International Oil and Gas Producers
Lost Time Injury Rate (IOGP LTIR) at
the top quartile.
Stretch performance required zero
moderate harm incidents.
Threshold required there be
no process safety incident with
consequence equal to or greater
than moderate harm.
Target required LOCI Tier 1 and 2
Frequency Rate per 100 mmboe
available capacity less than 2.29
(average last 3 years).
Stretch performance required zero
process safety LOCI Tier 1 and 2
events.
Threshold
Target
Max
There were no severe
harm injuries during 2023.
The Lost Time Injury Rate
was below top quartile
performance.
The overall achievement
of this metric was between
Threshold and Target
Performance.
During 2023 there were no
Process Safety incidents
with a consequence equal
to moderate harm or
greater. The LOCI Tier 1 and
Tier 2 Frequency Rate was
not met.
The overall achievement of
this metric was Threshold
Performance.
45
Santos Annual Report 2023 Key performance indicators, measures and rationale Performance requirements
Achievement
Environment
and Cultural
Heritage
(5%)
The targets for Environment and
Cultural Heritage represent the
Company’s commitment to negating
the occurrence of environmental and
cultural heritage incidents.
Landholder,
Community
& Aboriginal
& Torres
Strait Islander
Relationships
(5%)
Strong Landholder, Community and
Aboriginal & Torres Strait Islander
relationships are key as we aspire
to partner with, and be trusted by,
Aboriginal & Torres Strait Islander
people and the communities in
which we operate.
Threshold required no incident with
environmental or cultural heritage
consequence equal to or greater
than moderate.
Target required establishing industry
leading environmental and cultural
heritage processes and governance
framework.
Stretch performance required the
achievement of Barossa pipeline
and drilling approvals to commence
activities.
Threshold required establishing
an Indigenous Advisory Group,
Representation of Aboriginal
and Torres Strait Island people
in the Australian workforce
>1.4 per cent and no prosecutions
as a consequence of unauthorised
impacts to cultural heritage or
landholder properties.
Target required establishing a
Local Communities and Indigenous
Participation (LCIP) business data
base and standard reporting across
operational areas and increasing
Aboriginal & Torres Strait Islander
employment to 1.6 per cent of the
Australian workforce.
Stretch required establishing
approved trajectories for LCIP to
2030 and increasing Aboriginal &
Torres Strait Islander employment
to 1.8 per cent of the Australian
workforce.
During 2023 there were
no incidents with an
Environmental or Cultural
Heritage consequence
equal to moderate or
greater. Industry leading
Environmental spills
performance and Cultural
Heritage processes and
governance framework
established.
The overall achievement
of this metric was Target
Performance.
All measures and initiatives
on this indictor were
achieved:
•
Indigenous Advisory
Panel members
appointed with three
meetings completed in
2023.
• No prosecutions
year-to-date as a
consequence of
unauthorised impacts
to cultural heritage or
landholder properties.
•
•
2030 LCIP
Procurement Spend
trajectory approved
by the Board in
November.
Local and Indigenous
expenditure increased
across all regions.
• Aboriginal & Torres
Strait Islander
employment increased
to 2.1 per cent.
The overall achievement
of this metric was Stretch
Performance.
46
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Key performance indicators, measures and rationale Performance requirements
Achievement
People &
Culture
(5%)
Included to reinforce the importance
of cultural improvement and
employee engagement as well as
the development of capability to
support future business growth.
This component relates to the
implementation of engagement and
capability programs fundamental to
the Santos culture, leadership and
operating model.
All measures and initiatives
on this indictor were
achieved:
• Diversity and Inclusion
Strategy approved by
the Board.
• Core technical training
•
programs
implemented with a
demonstrated increase
in employee technical
competence.
Implementation of
range of culture and
engagement initiatives
resulting in an increase
in employee
sentiment.
The overall achievement
of this metric was Stretch
Performance.
The overall outcome for Sustainability was between target and stretch performance, contributing 28.9 per cent to the total
Scorecard outcome.
Production (25%)
Group
Production
(20%)
Production is the primary driver of
revenue and therefore critical to
the Company’s profitability, which
is a key measure of the Company’s
overall performance, underpinning
annual earnings and cash flow.
Threshold
Target
Max
Threshold achievement on this
measure required annual production
of equal to or greater than
87 mmboe.
Target achievement on this measure
required annual production of
93 mmboe.
Group Production for 2023
was 92.2 mmboe pre PSC
adjustments.
The overall achievement of
this metric was between
Threshold and Target
Performance.
Emissions
Intensity
Reduction
(5%)
The Company is held to account
on emissions to air, land and water
within targets and transparent
reporting, in line with the
recommendations of the Task
Force on Climate-related Financial
Disclosures.
Stretch achievement on this measure
required annual production of
96 mmboe.
Threshold achievement on this
measure required Santos equity
Scope 1 and 2 emissions intensity
<53.4ktCO2e/mmboe.
Target achievement on this measure
required Santos equity Scope 1 and
2 emissions intensity <48.4ktCO2e/
mmboe.
Stretch achievement on this measure
required Santos equity Scope 1 and
2 emissions intensity <46.0ktCO2e/
mmboe.
Santos’ equity scope 1 and
scope 2 emissions intensity
for 2023 calendar year
was 52.5 ktCO2e/mmboe
further progressing the
reduction of scope 1 and
scope 2 emissions in line
with our Climate Transition
Action Plan.
The overall achievement of
this metric was between
Threshold and Target
Performance.
The overall outcome for Production was between threshold and target performance, contributing 22.7 per cent to the
total Scorecard outcome.
47
Santos Annual Report 2023 Key performance indicators, measures and rationale Performance requirements
Achievement
Financial (25%)
Unit Production
Costs
(10%)
Included to ensure the Company
maintains its cost and efficiency
focus for every unit of production.
Sustaining
Capex
(5%)
All-in Free Cash
Flow Break
Even (FCFBE)
(5%)
Gearing
(5%)
Sustaining Capex represents
capital expenditure incurred in
the operation of the underlying
business. This measure is included
to ensure the focused and cost-
effective delivery of necessary
capital programs to sustain the base
business.
The all-in free cash flow break-even
is the average annual oil price at
which cash flows from operating
activities equal investing cash flows,
including major growth capital
expenditure incurred on growth
projects.
This measure is included to ensure
the cost of growth projects is
subject to the same disciplined
low-cost operating model that the
operating business applies.
Santos is well positioned to fund
growth out of operating cash
flow and debt while maintaining
gearing levels within a range that
is consistent with an investment-
grade credit rating. This measure
rewards the delivery of strong
Free Cash Flow generation from
the base business and through the
optimisation of the broader asset
portfolio through strategically
aligned farm outs and disposals.
Threshold: US$7.90/boe.
Target: US$7.60/boe.
Stretch: equal to or less than
US$7.45/boe.
Threshold: US$1,267m.
Target: US$1,200m.
Stretch: equal to or less than
US$1,140m.
Threshold: US$85.93/bbl.
Target: US$80/bbl.
Stretch: US$75/bbl.
Threshold
Target
Max
Unit production costs
excluding Bayu-Undan for
2023 were $7.61/bbl.
The overall achievement
of this metric was between
Threshold and Target.
Sustaining Capex over
2023 was US$1,084 million.
The overall achievement
of this metric was Stretch
Performance.
All-in FCFBE over 2023
was US$73.30/bbl.
The overall achievement
of this metric was Stretch
Performance.
Threshold: less than 25 per cent.
Target: less than 20 per cent.
Stretch: less than 15 per cent
Gearing for 2023 was
21.8 per cent
The overall achievement
of this metric was between
Threshold and Target
Performance.
The overall outcome for Financial measures was between Target and Stretch performance, contributing 31.0 per cent to
the total Scorecard outcome.
Backfill, Sustain and Decarbonisation (25%)
Gas and Liquids
backfill and
sustain project
delivery/
activities
(15%)
The Gas and Liquids Growth Projects
scorecard measures our success on
delivering a suite of initiatives across
our Gas and Liquids assets.
A scorecard of key Gas and Liquids
Project initiatives and project
milestones has been set. Delivery
of the initiatives contributes to the
overall score on this metric.
Threshold
Target
Max
Santos achieved significant
milestones on projects
to backfill and sustain
core assets. The overall
achievement of this metric
was between Target and
Stretch Performance.
48
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Key performance indicators, measures and rationale Performance requirements
Achievement
Decarbonisation,
Lower Carbon
Fuels, Nature
Based Projects
(10%)
This measure incentivises
the delivery of a suite of
Decarbonisation, Lower Carbon
Fuels and Nature Based Projects.
A scorecard of key Lower Carbon
Fuels initiatives that are critical to
the Company’s significant ambitions
to drive sustainable returns in a
lower carbon future has been set.
Delivery of the initiatives contributes
to the overall score on this metric.
Key achievements in
respect to this metric
include:
•
FEED entry on GLNG
upstream solar.
• Achieved compliance
coverage for all assets
to 2030.
• Building a portfolio
of projects (with 3
registered in 2023)
to meet 10 per cent
of Australia’s ACCU
demand by 2030.
• Approvals gained
for DPD.
The overall achievement
of this metric was between
Threshold and Target
Performance.
The overall outcome for Backfill, Sustain and Decarbonisation was between target and stretch performance, contributing
28.0 per cent to the total Scorecard outcome.
Total The total Company Scorecard outcome for 2023 as a percentage of target was 110.6 per cent (66% of maximum).
2023 Scorecard Link to Sustainability and Climate
Sustainability and Climate are key elements of our performance-based remuneration. In 2023, Sustainability accounted for
25 per cent of the Company Scorecard and included Safety, Environment, Cultural Heritage, Community and People related
measures. In addition, the production and backfill, sustain and decarbonisation quadrant included climate-related measures
that account for 15 per cent weighting. The strong focus on sustainability and climate metrics ensures that the management
team are rewarded for delivering outcomes which lead to sustainable returns in the long term and ensure delivery of our
climate commitments.
Further details about our sustainability and climate change initiatives can be found in our Sustainability and Climate Report.
Capping STI outcomes to ensure alignment with shareholder experience
To ensure alignment with the shareholder experience and to make sure awards under the STI Plan are reasonable relative to
Free Cash Flow generated, a cap of 5 per cent of the Company’s Free Cash Flow applies to the STI pool in any year. The STI
pool for 2023 was accommodated well within the 5 per cent of Free Cash Flow cap.
49
Santos Annual Report 2023 Table 4: Senior Executive role specific-KPIs
Note, some KPIs contain commercially sensitive information that cannot be detailed here.
Senior Executive Role-specific KPIs
Key achievements in 2023
D Banks
•
Technical and operations
governance across the
business
•
•
• Provide capability to deliver
Santos’ growth program
• Reserves replacement
Led development and implementation of LCIP across Santos
in-bound supply chain.
Improved operations governance across the Company
delivering historical best reliability performance across
several assets.
• Development and implementation of Santos’ first integrated
data platform across operations, technical functions and
supply chain.
•
Implemented rig move optimisation in Cooper Basin.
• Portfolio rationalisation and optimisation through capital
allocation for 2024 budget.
B Darley
• Production, volume and cost
• Region achieved Top Quartile IOGP LTIR.
• Health, safety and
• Drove improvement focus on facility reliability and availability
environment outcomes
to exceed Region Production Target.
• Emissions reduction
• Drove focus on unit cost and delivering better than Target for
the Region.
• Papua FEED entry, including signed integration agreements,
achieved.
•
•
•
•
Successfully implemented process safety and assurance
initiatives across EA & PNG delivering strongest metrics on
record.
Successful execution of hedging program.
Successful completion of the US$850 million bond
transaction in the US dollar 144A/RegS market.
Successful execution of on-market share buyback program.
A McKinnell
• Corporate and operational
cost control
• Balance sheet gearing and
capital management
outcomes
•
Investor Relation outcomes
A Neilson
• Commercial management
• Established carbon credit strategy to support registrations
• Marketing and trading
and opportunities in Alaska, Australia and PNG.
•
•
Implemented effective compliance monitoring framework
and systems across all marketing and trading locations.
Implemented strategy for the domestic gas business for the
introduction of the East Coast Gas Code of Conduct.
50
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued 4.2 2023 STI outcomes
KMP
CEO
Senior Executives
Company Scorecard
2023 STI performance
The CEO’s performance is primarily assessed
using the Company Scorecard. In determining
the CEO’s final STI payment for 2023, the
Board also considered outcomes outside the
Scorecard and the impact of the CEO’s personal
performance and leadership on five dimensions:
corporate activity, growing shareholder value,
futureproofing the business, leadership and
culture, and stakeholder engagement.
The Company performance result based on the
Company Scorecard outcomes outlined above
sets the size of the pool. Individual allocations of
the pool are then modified to reflect individual
performance and demonstration of the Santos
Values.
The STI amount for 2023 represents an outcome
that is 110.6 per cent of the target amount (66.0%
of maximum STI opportunity), which is in line with
the Company Scorecard outcome.
The 2023 STI outcomes for ongoing Senior
Executives ranged from 60 per cent to 73 per
cent of their maximum opportunity, depending
on their individual performance contribution.
Further detail of each individual Senior
Executive’s outcome is provided in Table 5 below.
All Senior Executives had individual KPIs
relating to environment, health, safety, culture
and leadership. Role-specific KPIs by Senior
Executives are set out in Table 4 above.
Table 5 sets out the individual STI outcomes for Senior Executives in 2023, as a percentage of their STI target and maximum
STI opportunity.
Table 5: Senior Executive 2023 STI outcomes
Target
2023 STI
(% of TFR)
Actual
2023 STI
(% of TFR)
2023 STI
as a % of
maximum
% of
maximum
STI
forfeited
Total STI
value
A$
STI cash
A$
STI
deferred
A$
100%
111%
66%
34%
2,223,060
1,111,530
1,111,530
70%
70%
70%
70%
70%
70%
85%
77%
71%
-
60%
73%
66%
61%
-
40%
27%
34%
39%
100%
570,400
285,200
285,200
715,300
357,700
357,600
570,900
285,500
285,400
657,000
328,500
328,500
-
-
-
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods1
1 Ceased as a KMP from 1 September 2023.
51
Santos Annual Report 2023 4.3 2020 LTI Performance outcomes
The 2020 LTI award was tested at the end of the four-year performance period from 1 January 2020 to 31 December 2023.
As a result, 47.1 per cent of the 2020 LTI awards has vested.
The 2020 LTI grant was allocated at a base share price of A$8.18.
Performance measures
Relative TSR measured against
constituent members of the ASX100 at the
commencement of the performance period
Relative TSR measured against constituent
members of the S&P Global 1200 Energy
Index (GEI) at the commencement of the
performance period
Free Cash Flow Breakeven Point (FCFBP)
Return on Average Capital Employed
(ROACE) compared with weighted average
cost of capital (WACC)
Total
25%
25%
100%
Weighting
Threshold
vesting
Full vesting
Result
Vesting
outcome
25%
51st percentile
76th percentile
25%
51st percentile
76th percentile
36th
percentile
7th
percentile
0%
0%
=US$40/boe
<=US$30/boe
US$16.16
25%
>110% of WACC >=140% of WACC 133.0%
22.1%
47.1%
S&P Global Energy Index
S&P ASX100 Index
Santos $7.60
TSR 2.4%
Chart 3: TSR performance against S&P ASX100 Index and S&P Global 1200 Energy Index
150
120
90
60
30
0
Dec 19
Jun 20 Dec 20
Jun 21
Dec 21
Jun 22
Dec 22
Jun 23
Dec 23
4.4 CEO Growth Incentive
Achievement in 2023
Following Board review, the following milestone initiatives were noted as having been achieved during 2023:
Major growth projects
• Regulatory approval for Dorado Offshore Project Proposal (OPP).
• Extended Reserves coverage for GLNG.
52
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Achievements in 2022
Following Board review, the following milestone initiatives were noted as having been achieved during 2022:
Major growth projects
•
The Board approved the Final Investment Decision for the Pikka Project in August 2022.
Emissions reduction net zero plan and energy transition
• Achieved 2025 target to reduce operational emissions by 5 per cent in the Cooper Basin and Queensland.
Achievements in 2021
Following Board review, the following milestone initiatives were noted as having been achieved during 2021.
Major growth projects
•
•
The Board approved the Final Investment Decision for the Barossa Project on 30 March 2021.
Santos completed the sell-down of 25 per cent interests in both Bayu-Undan and Darwin LNG to SK E&S on 30 April
2021. This sell-down further aligned partner interests in the Barossa Project with those in Bayu-Undan and Darwin
LNG.
• On 29 June 2021, Santos announced the launch of front-end engineering and design (FEED) for the Dorado Project in
the Bedout Sub-basin, offshore Western Australia. Entering FEED for the Dorado project is a significant milestone
and has the project on schedule for a final investment decision around mid-2022. Dorado has high-quality reservoirs
making it a very cost-competitive project globally. Dorado is also a very low CO2 reservoir with approximately 1.5 per
cent CO2.
Emissions reduction net zero plan and energy transition
• On 1 November 2021, Santos and joint venture partner Beach Energy announced the final investment decision to
proceed with Santos’ A$210 million Moomba CCS project. Moomba CCS will be one of the biggest CCS projects in the
world and will safely and permanently store 1.7 million tonnes of carbon dioxide per year in the same reservoirs that
held oil and gas in place for tens of millions of years. The decision followed Santos’ successful registration of the
Moomba CCS project with the Clean Energy Regulator. The Clean Energy Regulator’s CCS method provides a
crediting period of 25 years, over which period the project will qualify for Australian Carbon Credit Units for emissions
reduction from Moomba CCS.
Achievement of these milestones are key enablers on the critical path to delivery of the overall performance goals in the
Growth Projects Incentive.
All awards remain subject to forfeiture if the CEO resigns from his employment prior to 31 December 2025, unless otherwise
agreed by the Board.
4.5 Realised remuneration
Table 6 shows realised remuneration for the CEO and Senior Executives in 2023 and 2022.
Realised remuneration differs from statutory remuneration, reported in Table 9, and other statutory tables that are prepared
in accordance with the Corporations Act and Accounting Standards. This requires a value to be placed on share-based
payments at the time of grant, and to be reported as remuneration, even though the CEO and Senior Executives may
ultimately not realise any actual value from the share-based payments.
The Realised remuneration table is shown in Australian dollars (the currency in which remuneration is paid), whereas, the
statutory tables are shown in US dollars, which is the Company’s reporting currency. Showing remuneration in Australian
dollars removes the impact of exchange rate movements.
Realised remuneration has been calculated as:
•
•
TFR paid in the year
cash STI awards earned in respect of performance for the year (albeit paid after the end of the year)
• deferred STI awards from prior years that vested in the year
•
LTI SARs that were tested at 31 December in the year.
Vesting deferred STI awards and SARs are valued at the closing share price on 31 December of the respective year.
Termination payments and leave movements are not included in Table 6.
53
Santos Annual Report 2023 Table 6: Realised remuneration (non-IFRS and non-audited)
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods7
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Deferred
STI that
vested in
the year3
A$
TFR1
A$
Cash STI2
A$
Other
vested
grants5
A$
LTI4
A$
Other6
A$
Total
A$
2,010,000
1,161,780
1,641,380
1,583,240
7,736
10,190
6,414,326
2,010,000
1,068,315
1,413,884
2,551,879
–
12,377
7,056,455
818,750
285,200
434,317
328,198
7,736
5,341
1,879,542
800,000
267,900
352,780
499,200
–
6,188
1,926,068
840,000
357,700
432,030
367,582
7,736
34,837
2,039,885
840,000
296,900
399,133
584,430
737,500
310,000
284,004
226,457
700,000
260,400
218,641
–
–
–
–
3,164
2,123,627
5,228
1,563,189
5,120
1,184,161
922,500
357,500
553,675
403,682
7,736
24,460
2,269,553
922,500
308,900
504,127
591,913
–
–
2,327,440
547,785
25,900
–
–
7,736
3,463
584,884
815,625
276,200
365,311
534,857
–
6,188
1,998,181
1 TFR comprises base salary and superannuation. The amounts shown here are actual received TFR. These amounts are pro-rated amounts for the period that
Executives were in KMP roles.
2 The ‘Cash STI’ column reflects the 50 per cent of the STI award for 2023 performance for continuing Executives that will be paid in cash. The remaining 50 per
cent will be awarded as equity restricted for two years. This also includes full or partial payment made to K Gallagher, A McKinnell, A Neilson and B Woods in
relation to the 2022 withheld Environmental KPI. D Banks and B Darley forfeited 100% of their payment.
3 The deferred restricted equity from the 2021 STI award that vested on 31 December 2023, at a closing share price of A$7.60.
4 The 2020 LTI was tested at the end of its performance period on 31 December 2023 and 47.1 per cent of awards vested. The value shown in the table is based on
the closing share price on 29 December 2023 of A$7.60. For the value of share-based payments calculated in accordance with the Accounting Standards, see
Table 9 Statutory Executive KMP remuneration details on page 62.
5
6
‘Other vested grants’ includes vested ShareMatch 2020 SARs and Dividend Equivalent Shares.
’Other’ is made up of ad hoc payments treated as remuneration, such as assignment and mobilisation allowances and other non-monetary benefits.
7 Ceased as a KMP from 1 September 2023.
Notes on Mr Gallagher’s realised remuneration for 2023
Mr Gallagher’s realised remuneration for 2023 included the following at-risk performance related elements:
•
•
•
The cash component of Mr Gallagher’s STI award based on 2023 performance.
The value of Mr Gallagher’s deferred STI award from 2021, which vested on 31 December 2023.
The value of Mr Gallagher’s Long-Term Incentive award from 2020, which was tested at 31 December 2023.
As noted above, the CEO was awarded a cash STI for 2023 of A$1,111,530, plus A$50,250 for the 2022 withheld Environmental
KPI. The basis for the 2023 cash STI is described in section 4.1.
Chart 4: Realised value of Mr Gallagher’s Deferred
2021 STI
2.0
1.53
0.11
1.64
m
$
A
1.5
1.0
0.5
0.0
Chart 5: Realised value of Mr Gallagher’s
2020 LTI
5.0
3.62
(0.26)
(1.78)
1.58
m
$
A
4.0
3.0
2.0
1.0
0.0
Value at start of
performance
period
Share price
movement
Value at vesting
Value at start of
performance
period
Share price
movement
Forteited
Value at
vesting
Mr Gallagher’s 2020 LTI allocation had a face value of A$3.62 million at the start of the performance period. The Santos
share price depreciated 7.09 per cent between the start of the performance period and vesting. The value based on the
closing share price on the last trading day of the year ending 2023 of A$7.60 was A$3.36 million. The vesting outcome
of the 2020 LTI was 47.1 per cent and the value of the final vesting award at 31 December 2023 was A$1.58 million.
54
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued
5. INCENTIVE PLAN OPERATION
5.1 Short-Term Incentive
The STI framework aligns Executive interests with the delivery of the operating model and the Company’s challenging short-term
operational and financial goals for the year. Goals are chosen to drive outcomes and behaviours that support safe operations
and the achievement of the business outcomes that contribute to the delivery of long-term growth in shareholder value.
Element
Performance
period
Performance
measures
STI pool
Gateway
and cap
Description
1 year (1 January to 31 December)
The Company’s annual performance is assessed using the Company Scorecard. The Scorecard contains
a balance of challenging financial and operational KPIs that support the execution of the business
strategy and drive business performance. In 2023, Scorecard KPIs covered a range of areas including
production, operating efficiency, safety, backfill and sustain, decarbonisation and culture.
The measures include lagging indicators to assess the Company’s past performance, as well as forward-
looking indicators to ensure the Company is positioning itself effectively for future growth. The Board
believes this Scorecard is balanced and focuses the CEO and Senior Executives on achieving the key
outcomes necessary to deliver stronger returns to shareholders.
The STI pool for each performance year is set by reference to the Company Scorecard result. The
Scorecard result is generally applied as a percentage of the target pool size (subject to the application of
any Board discretion).
The STI award is subject to a Free Cash Flow gate that requires the Company to be Free Cash Flow
positive for an STI award to be made, regardless of performance against all other KPIs. This is aligned
with the Company’s position to its shareholders under the Dividend Policy, which is to deliver strong
cash flows through the oil price cycle.
Performance
and vesting
To provide further alignment with the shareholder experience and to ensure awards under the STI Plan
are reasonable relative to Free Cash Flow generated, a cap of 5 per cent of the Company’s Free Cash
Flow (excluding growth capex) is applied to the STI pool in any year.
The Company Scorecard is composed of a range of KPIs with set threshold, target and stretch goals
agreed with the Board at the start of the performance year. The relative importance of each KPI is
determined and assigned a proportionate weighting of the total Scorecard result.
Each KPI receives a percentage score relative to target performance, as follows:
• 0 per cent for performance below Threshold
•
•
•
67–100 per cent for performance between Threshold and Target
100–167 per cent for performance between Target and Stretch
167 per cent for performance at or above Stretch
The KPI weightings are then applied to these scores to derive a rating for each KPI. The overall Scorecard
result is a weighted average of KPI scores.
The Scorecard has a maximum result of 167 per cent of target. This maximum result can only be achieved
for exceptional Company performance. The Board believes the above method of assessment is rigorous
and provides a balanced assessment of the Company’s performance.
The People, Remuneration and Culture Committee formally assesses the Company’s performance
against the overall Scorecard at the end of each financial year, and this forms the basis of a
recommendation to the Board.
The Board assesses the CEO’s performance and determines his STI award. The CEO assesses Senior
Executive performance and determines STI award proposals that are then formally endorsed by the
Board and the People, Remuneration and Culture Committee.
Award and
deferral
Half (50 per cent) of STIs provided to Senior Executives are delivered in cash in March following the end of the
performance year. The remaining half (50 per cent) is provided as deferred equity (in the form of Restricted
Shares), restricted for two years and subject to a service condition during this time. Deferral provides
increased alignment with shareholders and encourages longer-term thinking given the equity exposure.
Forfeiture and
clawback
Deferred STI is forfeited if the Executive leaves the Company during the restriction period due to
resignation or summary dismissal (including for fraud or misconduct). STI awards are also subject to
clawback (see section 5.4 for further information).
Dividends
Dividends are payable during the restriction period on Restricted Shares awarded under the STI.
55
Santos Annual Report 2023 5.2 Long-Term Incentive
The LTI aligns the interests of Senior Executives with the creation of long-term shareholder value.
The relative TSR performance criteria provide for vesting when there are strong shareholder returns against relevant peer
groups. The Free Cash Flow Breakeven Point (FCFBP) and Return on Average Capital Employed (ROACE) measures are
achieved when the Company demonstrates underlying operational efficiency that generates Free Cash Flow throughout the
oil price cycle and disciplined use of capital to generate shareholder returns over a four-year period.
Element
LTI grant
Description
LTI grants are based on a set percentage of the Executive’s TFR allocated on a face value basis
(based on the closing share price on 31 December of the prior year) and provided in the form of Share
Acquisition Rights (SARs). SARs are a conditional entitlement to a fully paid ordinary share at zero price,
subject to satisfaction of the relevant performance conditions.
If SARs vest, shares are automatically allocated to the Executive. Nothing is payable by Executives if
SARs vest. Trading in these shares is subject to compliance with the Company’s Securities Dealing Policy
and the Minimum Shareholding Requirement.
The Board has discretion to settle the value of vesting SARs in cash.
Performance
period
SARs have a four-year performance period. This period represents an appropriate balance between
providing a genuine and foreseeable incentive to Senior Executives and fostering a long-term view of
shareholder interests.
Performance
measures
The Long-Term Incentive Plan is measured against four equally weighted performance measures:
Weighting Performance measures
Description and rationale
25%
25%
25%
25%
Relative TSR measured against
constituent members of the
ASX100 at the commencement of
the performance period
Relative TSR measured against
constituent members of the S&P
Global 1200 Energy Index (GEI)
at the commencement of the
performance period
Free Cash Flow Breakeven Point
(FCFBP)
The calculation of TSR takes into consideration share
price growth and dividend yield and is, therefore, a
robust and objective measure of shareholder returns.
TSR continues to effectively align the interests
of individual Senior Executives with that of the
Company’s shareholders by motivating Senior
Executives to achieve superior shareholder outcomes
relative to Santos’ competitors for investor capital and
its energy sector peers.
FCFBP is the US$ oil price at which cash flows from
operating activities equal cash flows from investing
activities. As the aim of this performance hurdle is to
measure the performance of the underlying business,
the Board has discretion to adjust FCFBP for
individual material items including asset acquisitions
and disposals that may otherwise distort the measure.
Return on Average Capital
Employed (ROACE) compared with
weighted average cost of capital
(WACC)
ROACE is measured as the underlying earnings before
interest and tax (EBIT) divided by the average capital
employed, being shareholders’ equity plus net debt,
as published in the Company’s financial statements.
The use of ROACE as a performance measure aligns
Senior Executives with shareholder interest by
focusing on the efficient and disciplined use of capital
to generate shareholder returns.
56
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Element
Vesting
conditions
Description
The vesting scales set out in the following tables apply to both the CEO’s and Senior Executives’ LTI
performance grants. SARs that do not vest upon testing of the performance condition lapse.
Relative TSR against the ASX100 and S&P GEI
TSR percentile ranking
Below 51st percentile
51st percentile
Straight line pro-rata vesting in between
76th percentile and above
Free Cash Flow Breakeven Point (FCFBP)
FCFBP
Above US$40/bbl
Equal to US$40/bbl
Equal to or below US$30/bbl
Straight line pro-rata vesting in between
% of component vesting
0%
50%
100%
% of component vesting
0%
50%
100%
Core to Santos‘ strategy has been the establishment of a disciplined low-cost operating model that
delivers strong cash flows through the oil price cycle. Free Cash Flow breakeven is the average annual oil
price at which cash flows from operating activities equal investing cash flows (net of costs of acquisitions
and disposals and major growth capital expenditure less lease liability payments). FCFBP is a key
metric for Santos and it is, therefore, critical for it to form part of the Long-Term Incentive performance
assessment.
When the FCFBP hurdle was introduced in 2016, Santos’ FCFBP was approximately US$50/bbl. Over
time, targets have progressively been set at more challenging levels.
In 2020, the stretch target was made harder to achieve by lowering it from US$35/bbl to US$30/bbl,
and in 2021 it was lowered again to US$25/bbl. In 2022, the threshold was made harder to achieve by
lowering it from US$40/bbl to US$35/bbl despite increasing cost pressures across the business.
Return On Average Capital Employed (ROACE)
ROACE percentile ranking
Santos ROACE <= 110% of WACC
Santos ROACE > 110% of WACC then:
Santos ROACE >= 140% of WACC
Straight line pro-rata vesting in between
% of component vesting
0%
50%
100%
Performance on all measures are externally verified. The Board has discretion to adjust the result on non-
market measures based on the agreed methodology.
Re-testing
There is no re-testing of the performance condition.
Forfeiture and
clawback
The LTI is forfeited if the Executive leaves the Company during the vesting period due to resignation or
summary dismissal (including for fraud or misconduct). LTI awards are also subject to clawback (see
section 5.4 for further information).
Dividends
and Dividend
Equivalent
Payment (DEP)
Dividends are not payable on SARs during the LTI performance period.
The DEP is not payable until the end of the performance period and is only payable on SARs that vest in
accordance with performance outcomes.
The provision of a notional dividend entitlement on awards is entirely consistent with using the face value
of Santos shares in the calculation of individual Long-Term Incentive awards. No dividends are provided
in relation to SARs that do not vest, as is common practice among ASX companies.
The DEP is not payable on SARs that lapse or are forfeited (see section 5.4 for further information).
57
Santos Annual Report 2023 5.3 CEO Growth Incentive
In April 2021, the Board agreed to provide the CEO a one-off Growth Projects Incentive to reward Mr Gallagher for the
successful delivery of Santos’ major growth projects and energy transition strategy to 31 December 2025. Mr Gallagher is
well-recognised as one of Australia’s leading chief executives with a proven track record of delivering for shareholders.
Santos is moving into a growth phase with significant major growth projects including Barossa, Dorado, Moomba CCS,
Narrabri and Pikka Phase 1 underway. Santos is leading the energy transition to lower carbon fuels and has a clear plan
targeting net-zero scope 1 and scope 2 equity emissions by 2040, and our vision is strongly supported by investors and
other stakeholders. Mr Gallagher is uniquely placed to lead Santos through this transition.
This offer recognises the unique value that Mr Gallagher brings to Santos and the significant role he will play in leading and
driving delivery of the major growth projects through to the end of 2025. The projects are a critical part of Santos’ strategy
and vision, which Mr Gallagher has designed and led since joining Santos. Achievement of these goals will accelerate and
strengthen the transition to a lower-carbon future enabling more effective realisation of sustainable growth and shareholder
returns with longer-term profitability.
Element
Description
CEO Growth
Incentive Grant
The Growth Projects Incentive was provided wholly in the form of 847,458 SARs granted under
the Santos Employee Equity Incentive Plan. This was calculated by dividing the maximum award
quantum of A$6 million by the volume weighed average price of Santos shares for the five trading
days up to, and including, 9 April 2021 of A$7.08.
Performance period 5-year performance period (1 January 2021 to 31 December 2025)
Performance
measures
The underlying performance conditions of the Growth Projects Incentive are commercially sensitive,
and therefore, only a high-level overview of the deliverables and milestones has been provided
below. A more detailed description of achievements will be provided each year in the Remuneration
Report on a retrospective basis, as seen in section 4.4.
Deliverables
Major growth
projects
Emissions reduction,
net-zero plan and
energy transition
Allocation (% of
total award)
Targets
60%
Initiatives related to the delivery of:
•
•
the Barossa Project
the Dorado and/or Pikka Project
• developing backfill resources to maximise ongoing
utilisation and future expansion of existing facilities.
40%
Initiatives related to the delivery of:
• CCS Operational targets
• progress towards net-zero Scope 1 and 2 operations
emissions
•
•
new energy business development which supports
energy transition
achieve significant progress on a commercial scale
hydrogen or downstream lower carbon fuels project.
The Board considers that the 40 per cent weighting to emissions, net-zero and energy transition
significantly increases the exposure of the CEO’s remuneration to climate change measures.
Progressive
assessment
The CEO growth incentive comprises milestones and initiatives to be achieved over the five years to
31 December 2025.
The Board reviews performance annually as part of the CEO’s performance assessment.
Achievement of initiatives over the five calendar year performance period (2021–2025) allows
success to be ‘locked in’ along the way, noting that any award is subject to the final performance
assessment. There is no re-testing of this award.
Final performance
assessment
The SARs are at-risk and vesting will be determined following an assessment of delivery against strict
performance conditions related to growth projects and emissions reduction and energy transition
deliverables, as detailed in the Performance measures section of this table.
58
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Element
Vesting
Description
Following this assessment, if the SARs vest, shares are automatically allocated to Mr Gallagher.
Nothing is payable by Mr Gallagher to the Company if SARs vest.
While any vesting awards will not be subject to a further restriction period post vesting, Mr Gallagher
is required to retain a minimum shareholding of approximately three times his annual Total Fixed
Remuneration. Trading in shares is subject to compliance with the Company’s Securities Dealing
Policy. Mr Gallagher also participates in deferred STI and LTI, which are provided in equity and that
provide ongoing alignment with shareholders.
Termination and
forfeiture
All awards remain subject to forfeiture if the CEO resigns from his employment prior to
31 December 2025, unless agreed by the Board.
Dividends and
Dividend Equivalent
Payment (DEP)
Dividends are not payable on SARs during the Growth Incentive performance period.
The DEP is not payable until the end of the performance period and is only payable on SARs that
vest in accordance with performance outcomes. The DEP is not payable on SARs that lapse or are
forfeited (see Section 5.4 for further information).
5.4 General terms applying to equity awards
Element
Award allocation
Description
Awards are allocated using a face value approach – that is using the full Santos share price. No
discount is applied to reflect the probability of vesting or to reflect dividends forgone over the
vesting period. As noted below, a Dividend Equivalent Payment is payable on Share Acquisition
Rights that satisfy their vesting conditions.
Treatment on
termination and
change of control
Generally, if an Executive resigns or is summarily dismissed, their unvested SARs will lapse and Restricted
Shares are forfeited. In all other circumstances (including death, total and permanent disability,
redundancy and termination by mutual agreement), unvested SARs and Restricted Shares remain on
foot and will vest or lapse in accordance with their original terms, unless the Board determines otherwise.
Where there is a change in control, the Board may determine whether, and the extent to which, SARs
may vest and Restricted Shares released.
Mallus/clawback
The share plan rules give the Company the discretion to lapse or forfeit unvested equity awards under
the STI or LTI programs, and claw back any vested shares or cash paid in certain circumstances.
Securities hedging
Minimum
Shareholding
Requirement
Dividend Equivalent
Payment (DEP)
These circumstances include dishonest or fraudulent conduct, breach of material obligations,
miscalculation or error, a material misstatement or omission in the accounts of a Group company
or events that require re-statement of the Group’s financial accounts in circumstances where an LTI
or deferred STI award would not otherwise have been granted or would not have vested. This is in
addition to any rights the Company has under the plan rules and general legal principles to seek to
recover payments made in error.
Under the Company’s Securities Dealing Policy, Directors, Executives and employees cannot enter
into hedging or other financial arrangements that operate to limit the economic risk associated
with holding Santos securities prior to the vesting of those securities, or while they are subject to a
holding lock or restriction on dealing.
The Company’s Minimum Shareholding Requirement requires the CEO and Senior Executives to build,
over a five-year period and then maintain, a minimum shareholding of Santos shares. For the CEO this
is approximately three times annual Total Fixed Remuneration (TFR) and for Senior Executives it is
approximately one and a half times the average TFR. These levels of minimum shareholdings are significant
compared to typical market practice. They ensure ongoing alignment with shareholders by requiring the
CEO and Senior Executives to hold shares beyond vesting until the minimum holding is achieved.
The Minimum Shareholding Policy does allow the CEO and Senior Executives to sell shares to manage
arising tax liabilities that occur on the vesting of awards. Disposals to manage tax liabilities are
encouraged to occur as closely as possible to the end of the deferred taxing point for the relevant award.
Share Acquisition Rights (SARs) are eligible for a cash payment, or the equivalent value in shares,
equal to the dividend amount that would have been earned on the underlying shares that ultimately
vest to the participant. The provision of a notional dividend entitlement on equity awards is entirely
consistent with using the face value of Santos shares in the calculation of individual awards. The DEP
is made to participants once the SARs vest into restricted or ordinary shares. No DEP is made in
respect to SARs that lapse or are forfeited.
59
Santos Annual Report 2023 6. KEY TERMS OF EMPLOYMENT CONTRACTS FOR EXECUTIVE KMP
The main terms of employment contracts for Executive KMP are set out in Table 7.
Table 7: Executive KMP contract terms
K Gallagher
Ongoing
12 months
12 months
Contract duration
Notice period–Company
Notice period–Individual
Termination provision
Employment may be ended immediately in certain circumstances including misconduct,
incapacity and mutual agreement, or in the event of a fundamental change in the CEO’s role
or responsibility.
The Company may elect to pay the CEO in lieu of any unserved notice period. If termination
is by mutual agreement the CEO will receive a payment of A$1.5m.
In the case of death, incapacity or fundamental change the CEO is entitled to a payment
equivalent to 12 months’ base salary.
Other KMP
Ongoing
6 months
6 months
Termination provision
In a company-initiated termination, the Company may make a payment in lieu of notice
equivalent to the TFR that the Senior Executive would have received over the notice period. All
Senior Executives’ service agreements may be terminated immediately for cause whereupon
no payments in lieu of notice of other termination payments are payable under the agreement.
7. NON-EXECUTIVE DIRECTOR REMUNERATION
Remuneration Policy
The key objectives of Santos’ non-executive Director Remuneration Policy and how these are implemented through the
Company’s remuneration framework are as follows:
Remuneration Policy objectives
Securing and retaining talented,
qualified Directors
Promoting independence and
impartiality
Aligning Director and shareholder
interest
Enabled through the non-executive Director remuneration framework
Fee levels are set with regard to:
•
•
•
time commitment and
workload
the risk and responsibility
attached to the role
experience and expertise
• market benchmarking.
Fee levels do not vary according to
the performance of the Company
or individual Director performance
from year to year.
Non-executive Director’s
performance is assessed at the
time of re-election.
Santos encourages its non-
executive Directors to build a long-
term stake in the Company.
Non-executive Directors are
required to acquire and maintain
a shareholding in the Company
equivalent in value to one year’s
remuneration.
Under the Minimum Shareholding Requirement, non-executive Directors must acquire (over a four-year period) and maintain
a shareholding in the Company equal in value to at least one year’s remuneration (base fee and committee fees).
60
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Maximum aggregate amount
Total fees paid to all non-executive Directors in a year, including Board Committee fees, must not exceed A$3,500,000,
being the amount approved by shareholders at the 2022 AGM.
Remuneration
Fees paid to non-executive Directors are reviewed periodically and are fixed by the Board. Non-executive Director fees were
last increased effective 1 January 2022. During 2023, the Board reviewed Directors’ fees including consideration of updated
market data provided by PwC. Having regard to market position and benchmark data, the Board approved a 4 per cent
increase to both Director and Committee fees effective from 1 January 2024. The increase in fees does not exceed the
shareholder approved cap of A$3.5m.
Table 8 summarises the fee structure for main Board and committees for 2023.
Table 8: Non-executive Directors’ annual fee structure1
Board
Audit and Risk Committee
From 1 January 2022
From 1 January 2024
Chair
A$
2 Member
A$
Chair
A$
2 Member
A$
561,325
200,000
583,778
208,000
50,000
25,000
52,000
26,000
Environment, Health, Safety and Sustainability Committee
50,000
25,000
52,000
26,000
Nomination Committee3
N/A
N/A
N/A
N/A
People, Remuneration and Culture Committee
50,000
25,000
52,000
26,000
1 Fees are shown inclusive of superannuation.
2 The Chair of the Board does not receive any additional fees for serving on or chairing any Board committee.
3 The Chair of the Board is the Chair of the Nomination Committee, in accordance with its Charter, so does not receive any additional fees for this role (see
footnote 2 above).
Directors may also be paid additional fees for special duties or exertions and are entitled to be reimbursed for all business-
related expenses. The total remuneration provided to each non-executive Director in 2023 and 2022 is shown in Section 8,
Table 10.
Superannuation and retirement benefits
Superannuation contributions are made on behalf of non-executive Directors in accordance with the requirements of the
Company’s statutory superannuation obligations. Non-executive Directors are not entitled to retirement benefits (other than
mandatory statutory entitlements).
61
Santos Annual Report 2023 e
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7
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued
8.2 Non-executive Director remuneration
Details of the fees and other benefits paid to non-executive Directors in 2023 are set out in Table 10. Differences in fees
received between 2023 and 2022 reflect currency movements as fees are paid in Australian dollars but disclosed in US
dollars.
No share-based payments were made to any non-executive Director.
Table 10: 2023 and 2022 non-executive Director remuneration
Short-term benefits
Directors’
fees (incl.
committee
fees)
US$
Fees for
special
duties or
exertions
US$
Retirement
benefits
Other long-
term benefits
US$
Superannuation1
US$
Share-based
payments
US$
165,255
174,121
149,978
157,575
134,980
140,831
149,979
157,575
165,255
174,121
166,100
173,726
355,440
373,088
149,490
103,348
149,490
155,268
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52,267
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,455
16,977
16,122
16,151
14,510
14,437
16,122
16,151
17,455
16,977
–
–
17,504
16,977
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Director
Y Allen
G Cowan
E Doyle
V Guthrie
P Hearl
J McArdle
K Spence
M Utsler
M Werror
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
1
Includes superannuation guarantee payments.
Total
US$
182,710
191,098
166,100
173,726
149,490
155,268
166,101
173,726
182,710
191,098
166,100
173,726
372,944
390,065
149,490
155,615
149,490
155,268
63
Santos Annual Report 2023 8.3 Movement in SARs and Restricted Shares for Executive KMP
Tables 11 and 12 contain details of the number and value of SARs and shares granted, vested and lapsed for Executive KMP in
2023.
Table 11: Executive KMP SARs
LTI SARs
Granted1
Vested3
Lapsed
Dividend
equivalent shares4
Maximum
2
value
US$
Number
Number
Value
US$
Number
Number
Value
US$
506,7225
2,105,003
208,3216
1,051,904
233,977
27,462
138,668
115,546
117,647
479,995
43,184
218,055
488,724
48,366
244,221
105,042
436,360
29,797
150,458
129,201
115,546
536,721
53,116
268,206
479,995
–
–
48,503
54,323
33,467
59,659
93,979
5,691
6,372
3,925
6,999
–
28,736
32,175
19,819
35,341
–
1,089,704
4,526,798
382,784
1,932,844
523,908
50,449
254,739
Other SARs
Granted
Vested
Lapsed
Dividend
equivalent shares8
Maximum
value
US$
Number
Number
Value
US$
Number
Number
Value
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
898
4,719
898
898
-
898
898
4,719
4,719
-
4,719
4,719
4,490
23,595
-
-
-
-
-
898
898
80
80
80
-
80
80
420
420
420
-
420
420
400
2,100
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods7
Total
Table 11.1: Other SARs
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods
Total
1 This relates to the 2023 LTI award.
2 The maximum value represents the fair value of LTI grants received in 2023, determined in accordance with AASB 2 Share-based Payment. The weighted
average fair value of each SAR as at the grant date of 4 September 2023 is A$7.91. Details of the assumptions underlying the valuations are set out in Note 7.2 to
the financial statements. The minimum total value of the grant to the Executive KMP, if the applicable vesting conditions are not met, is nil in all cases. All values
have been converted to US$.
3 Vesting of LTI SARs that relates to the 2020 LTI award. The value is determined by the share price of A$7.60 on 29 December 2023, the last trading day of the
vesting period.
4 SAR awards as of 2020 attract additional shares in value of the dividends accrued and reinvested during the vesting period under the terms that apply to such
equity awards. The additional shares are delivered in full following release of the vested SARs. Dividend equivalent shares are not issued for awards that do not
satisfy their performance conditions.
5 The SARs granted to the CEO relate to his 2023 LTI performance grant as approved at the 2023 Annual General Meeting (AGM), under Listing Rule 10.14. This
grant relates to the LTI award for the four-year performance period ending on 31 December 2026.
6 The number of SARs vested for the CEO relates to the CEO’s 2020 LTI performance grants as approved at the 2020 Annual General Meeting. This was tested
based on performance to 31 December 2023 with 47.1 per cent of the award vested as described in section 4.3. There are no retesting provisions under the LTI
and the lapsed amount reflects the 52.9 per cent, which did not satisfy the vesting conditions.
7 Ceased as a KMP from 1 September 2023.
8 Dividend Equivalent Shares allocated on 2 January 2024 (closing share price of $7.91 used), relating to ShareMatch 2020 SARs. Reportable in 2023
Remuneration Report.
64
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Table 12: Executive KMP Restricted Shares
Granted1
Vested3
Lapsed
Maximum
value
US$2
Number
Number
Value
US$
Number
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods4
Total
Table 12.1: Other Shares
Executive Director
K Gallagher
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods
Total
–
–
–
–
–
149,623
670,020
215,971
1,090,533
37,507
41,568
36,470
43,249
38,683
167,958
57,147
288,560
186,144
56,846
287,040
163,315
193,671
173,225
37,369
72,852
–
188,693
367,862
–
102,280
347,100
1,554,333
440,185
2,222,688
102,280
Granted
Vested
Lapsed
Maximum
value
US$
Number
Number
Value
US$
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
898
4,719
898
898
–
898
898
4,719
4,719
–
4,719
4,719
4,490
23,595
–
–
–
–
–
–
–
1 This relates to the 2022 STI award delivered as Restricted Shares.
2 For Restricted Shares, the maximum value represents the fair value of 2022 STI shares received in 2023 determined in accordance with AASB 2 Share-based
Payment. The fair value of the deferred STI grant as at the grant date of 27 March 2023 was A$6.74. The minimum total value of the grant, if the applicable
vesting conditions are not met, is nil. All values have been converted to US$.
3 This relates to the 2021 STI grant that was deferred for two years from 1 January 2022 to 31 December 2023 and vested in full on 31 December 2023.
4 Ceased as a KMP from 1 September 2023.
65
Santos Annual Report 2023 8.4 KMP shareholdings
Table 13 sets out the movements during the reporting period in the number of fully paid ordinary shares of the Company
held directly, indirectly or beneficially, by each KMP, including their related parties.
Full details of all outstanding equity awards can be found in Note 7.2 to the financial statements and in prior Remuneration
Reports.
Table 13: 2023 movements in ordinary shareholding for KMP
Opening
balance
Received
upon vesting
of SARs1 Purchased
Sold
Deferred 2021 STI
that vested on
31 December 2023
Other
changes
Closing
balance
Non-executive Directors
Y Allen
G Cowan
E Doyle
V Guthrie
P Hearl
J McArdle
K Spence
M Utsler
M Werror
48,883
45,487
47,367
39,188
48,808
50,000
105,688
–
620
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,257
20,000
1,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,883
45,487
47,367
39,188
48,808
50,000
119,945
20,000
1,620
Executive Director
K Gallagher
1,993,991
357,406
Senior Executives
D Banks
B Darley
A McKinnell
A Neilson
B Woods2
Total
223,840
176,701
41,807
445,336
316,728
69,916
81,853
–
82,901
74,910
–
–
–
–
–
(84,922)
(108,554)
(10,000)
–
–
(137,487)
(901,397)
215,971
1,876
1,667,847
57,147
56,846
37,369
72,852
–
1,876
1,876
1,286
1,876
1,876
267,857
208,722
70,462
602,965
256,027
3,584,444
666,986
35,257 (1,242,360)
440,185
10,666
3,495,178
1 This reflects SARs that vested and converted to ordinary shares in 2023. This includes the 2019 LTI. The 2020 LTI was tested at the end of its performance
period on 31 December 2023 and 47.1 per cent vested, and the vested SARs converted to ordinary shares after 31 December 2023.
2 Ceased as a KMP from 1 September 2023.
66
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued 8.5 Executive KMP SARs and Restricted Shares
Tables 14 and 15 set out the movement during the reporting period in the number of SARs and Restricted Shares of the
Company held directly, indirectly or beneficially, by each KMP, including their related parties. There are no options held by KMPs.
Table 14: Movements in Executive KMP SARs
SARs
granted
SARs
vested1
SARs
lapsed
Balance
at 31 Dec
2023
% vested in
the year
% forfeited
in the year
Financial
year of
vesting
Balance
at 1 Jan
2023
442,298
898
898
847,4582
577,033
573,375
-
-
-
-
-
-
(208,321)
(233,977)
(898)
-
-
-
-
-
-
-
-
-
-
-
-
-
47.1%
100.0%
52.9%
0.0%
898
847,458
577,033
573,375
506,722
Total
2,441,960
506,722
(209,219) (233,977) 2,505,486
-
506,722
-
-
47.1%
100.0%
52.9%
0.0%
47.1%
100.0%
52.9%
0.0%
47.1%
52.9%
91,687
898
127,591
126,782
-
-
-
-
-
115,546
(43,184)
(48,503)
(898)
-
-
-
-
-
-
-
346,958
102,689
115,546
-
(44,082)
(48,366)
(48,503)
(54,323)
898
898
133,971
133,122
-
371,578
63,264
45,853
110,935
-
-
-
-
117,647
117,647
-
-
-
-
105,042
(898)
-
-
-
-
-
-
-
-
-
(49,264)
(29,797)
(54,323)
(33,467)
-
-
-
-
-
-
220,052
112,775
105,042
-
(29,797)
(53,116)
(33,467)
(59,659)
898
147,129
146,196
-
-
-
-
129,201
(898)
-
-
-
-
-
-
-
127,591
126,782
115,546
369,919
-
-
898
133,971
133,122
117,647
385,638
-
45,853
110,935
105,042
261,830
-
47.1%
52.9%
0.0%
-
100.0%
147,129
146,196
129,201
406,998
93,979
129,201
-
(54,014)
-
(59,659)
(93,979)
422,526
-
898
898
122,607
130,744
-
-
-
-
-
115,546
(898)
-
-
-
-
-
(898)
(122,607)
(130,744)
(115,546)
0.0%
100.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
100.0%
100.0%
100.0%
-
-
-
-
-
-
Total
349,126
115,546
(898)
(463,774)
1 Rights vested represents SARs that had satisfied their vesting performance conditions in 2023. Vested LTI SARs do not convert to ordinary shares until 2024.
2 This relates to the special one-off Growth Projects Incentive SARs granted in 2021. The award will vest on 31 December 2025 contingent on the achievement of
the relevant performance and employment conditions outlined in more detail in section 5.
67
Grant
date
Executive Director
K Gallagher
9/4/20
31/8/20
31/8/20
11/4/21
15/4/21
15/7/22
22/5/23
Senior Executives
D Banks
19/3/20
B Darley
A McKinnell
A Neilson
B Woods
31/8/20
12/5/21
15/7/22
22/5/23
Total
19/3/20
31/8/20
31/8/20
12/5/21
15/7/22
22/5/23
Total
19/3/20
12/5/21
15/7/22
22/8/23
Total
19/3/20
31/8/20
12/5/21
15/7/22
22/8/23
Total
19/3/20
31/8/20
31/8/20
12/5/21
15/7/22
22/5/23
2023
2023
2024
2025
2024
2025
2026
2023
2023
2024
2025
2026
2023
2023
2024
2024
2025
2026
2023
2024
2025
2026
2023
2023
2024
2025
2026
2023
2023
2024
2024
2025
2026
Santos Annual Report 2023 Table 15: Movements in Executive KMP Restricted Shares
Grant
date
Balance
at 1 Jan
2023
Restricted
Shares
granted
Restricted
Shares
vested
Restricted
Shares
forfeited
Balance
at 31 Dec
2023
% vested in
the year
% forfeited
in the year
Financial
year of
vesting
Executive Director
K Gallagher 31/8/20
31/8/20
898
898
15/7/22
215,971
–
–
–
(898)
–
(215,971)
24/3/23
–
149,623
–
Total
217,767
149,623
(216,869)
Senior Executives
D Banks
31/08/20
15/7/22
24/3/23
898
57,147
–
–
–
37,507
(898)
(57,147)
–
Total
58,045
37,507
(58,045)
B Darley
31/8/20
31/8/20
898
898
15/7/22
56,846
–
–
–
(898)
–
(56,846)
24/3/23
Total
A McKinnell
15/7/22
–
41,568
–
58,642
37,369
41,568
(57,744)
–
(37,369)
24/3/23
–
36,470
–
Total
37,369
36,470
(37,369)
A Neilson
31/8/20
898
15/7/22
72,852
–
–
(898)
(72,852)
24/3/23
–
43,249
-
Total
73,750
43,249
(73,750)
B Woods
31/8/20
31/8/20
898
898
15/7/22
63,597
24/3/23
–
Total
65,393
–
–
–
38,683
38,683
Loans to Key Management Personnel
(898)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(63,597)
(38,683)
100.0%
0.0%
100.0%
0.0%
–
898
–
149,623
150,521
–
–
100.0%
100.0%
0.0%
0.0%
37,507
37,507
–
898
–
41,568
42,466
100.0%
0.0%
100.0%
0.0%
–
100.0%
0.00%
36,470
36,470
–
–
100.0%
100.0%
0.0%
0.0%
43,249
43,249
–
898
–
–
100.0%
0.0%
0.0%
0.0%
100.0%
100.0%
2023
2024
2023
2024
2023
2023
2024
2023
2024
2023
2024
2023
2024
2023
2023
2024
2023
2024
2023
2024
(898)
(102,280)
898
No loans have been made, guaranteed or secured, directly or indirectly, by the Company or any of its subsidiaries at any time
throughout the year to any KMP, including their related parties.
68
Directors’ ReportSantos Annual Report 2023Remuneration Reportcontinued Directors’ Report
continued
INDEMNIFICATION
Rule 61 of the Company’s Constitution provides that the Company indemnifies, on a full indemnity basis and to the full extent
permitted by law, officers of the Company for all losses or liabilities incurred by the person as an officer of the Company, a
related body corporate or trustee of a company-sponsored superannuation fund. Rule 61 does not permit the Company to
indemnify an officer for any liability involving a lack of good faith.
Rule 61 also permits the Company to purchase and maintain a Directors’ and Officers’ insurance policy.
In conformity with Rule 61, the Company is party to Deeds of Indemnity in favour of each of the Directors referred to in this
report who held office during the year, and certain Senior Executives of the consolidated entity. The indemnities operate to
the full extent permitted by law and are not subject to a monetary limit. Santos is not aware of any liability having arisen, and
no claims have been made during or since the financial year ended 31 December 2023 under the Deeds of Indemnity.
During the year, the Company paid premiums in respect of Directors’ and Officers’ liability and legal expenses insurance
contracts for the year ended 31 December 2023, and since the end of the year the Company has paid, or agreed to pay,
premiums in respect of such contracts for the year ending 31 December 2024. The insurance contracts insure against certain
liability (subject to exclusions) persons who are, or have been, Directors or Officers of the Company and its controlled
entities. A condition of the contracts is that the nature of the liability indemnified, and the premium payable is not disclosed.
NON-AUDIT SERVICES
Amounts paid or payable to the Company’s auditor, Ernst & Young, for non-audit services provided during the year were:
Taxation and other services
Assurance services, not required to be performed by the Company’s auditor
Other assurance services required by legislation to be performed by the Company’s auditor
$662,000
$759,000
$279,000
The Directors are satisfied, based on the advice of the Audit and Risk Committee, that the provision of the non-audit services
detailed above by Ernst & Young is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001 (Cth).
The reason for forming this opinion is that all non-audit services have been reviewed by the Audit and Risk Committee to
ensure they do not impact the impartiality and objectivity of the auditor.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 (Cth) is set
out on page 150.
ROUNDING
Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 applies to the Company. Accordingly, amounts have been rounded off in accordance with that Instrument, unless
otherwise indicated.
This report is made out on 20 February 2024 in accordance with a resolution of the Directors.
Signature to come
Director
69
Santos Annual Report 2023 Financial Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
SECTION 1
BASIS OF PREPARATION
1.1 Statement of compliance
1.2 Key events in the current period
1.3 Significant accounting judgements,
estimates and assumptions
1.4 Foreign currency
SECTION 2
FINANCIAL PERFORMANCE
2.1 Segment information
2.2 Revenue from contracts with customers
2.3 Expenses
2.4 Taxation
2.5 Earnings per share
2.6 Dividends
2.7 Other income
SECTION 3
CAPITAL EXPENDITURE, OPERATING ASSETS
AND RESTORATION OBLIGATIONS
3.1 Exploration and evaluation assets
3.2 Oil and gas assets
3.3 Intangible assets
3.4 Impairment of non-current assets
3.5 Restoration obligations and other provisions
3.6 Leases
3.7 Commitments for expenditure
SECTION 4
WORKING CAPITAL MANAGEMENT
4.1 Cash and cash equivalents
4.2 Trade and other receivables
4.3 Inventories
4.4 Trade and other payables
70
PAGE
108
111
111
112
113
PAGE
122
125
126
129
130
PAGE
132
133
139
PAGE
140
140
140
141
142
143
150
71
72
73
74
75
76
PAGE
76
76
77
78
PAGE
79
82
85
86
89
90
90
SECTION 5
FUNDING AND RISK MANAGEMENT
5.1 Interest-bearing loans and borrowings
5.2 Net finance costs
5.3 Issued capital
5.4 Reserves and accumulated profit/(losses)
5.5 Financial risk management
SECTION 6
GROUP STRUCTURE
6.1 Consolidated entities
6.2 Assets held for sale
6.3 Joint arrangements
6.4 Parent entity disclosures
6.5 Deed of Cross Guarantee
SECTION 7
PEOPLE
7.1 Employee benefits
7.2 Share-based payment plans
7.3 Key management personnel disclosures
SECTION 8
OTHER
8.1 Contingent liabilities
8.2 Events after the end of the reporting period
PAGE
8.3 Remuneration of auditors
8.4 Accounting policies
Directors’ Declaration
Independent Auditor’s Report
Auditor’s Independence Declaration
91
92
95
95
99
101
104
PAGE
105
106
107
107
Financial ReportSantos Annual Report 2023
Consolidated Income Statement
for the year ended 31 December 2023
Revenue from contracts with customers – Product sales
Cost of sales
Gross profit
Revenue from contracts with customers – Other
Other income
Impairment of non-current assets
Other expenses
Finance income
Finance costs
Share of net profit/(loss) of associates and joint ventures
Profit before tax
Income tax expense
Royalty-related tax benefit/(expense)
Total tax expense
Note
2.2
2.3
2.2
2.7
3.4
2.3
5.2
5.2
6.3(b)
2.4(a)
2.4(b)
Net profit for the period attributable to owners of Santos Limited
Earnings per share attributable to the equity holders of Santos Limited (¢)
Basic profit per share
Diluted profit per share
Dividends per share (¢)
Paid during the period
Declared in respect of the period
2.5
2.5
2.6
2.6
2023
US$million
2022
US$million
5,889
(3,667)
2,222
145
123
(75)
(374)
106
(333)
5
1,819
(485)
82
(403)
1,416
43.4
43.2
23.8
26.2
7,790
(3,900)
3,890
197
294
(328)
(835)
54
(308)
(16)
2,948
(745)
(91)
(836)
2,112
63.0
62.8
16.1
22.7
The Consolidated Income Statement is to be read in conjunction with the Notes to the Consolidated Financial Statements.
71
Santos Annual Report 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Net profit for the period
Other comprehensive income, net of tax
Items to be reclassified to the income statement in subsequent periods
Exchange gain/(loss) on translation of foreign operations
Movement in cash flow hedge reserve
Tax effect
Net other comprehensive income to be reclassified to the
income statement in subsequent periods
Items not to be reclassified to the income statement
in subsequent periods
Fair value changes on financial liabilities designated at
fair value due to own credit risk
Net other comprehensive loss not to be reclassified to
the income statement in subsequent periods
Other comprehensive income, net of tax
Total comprehensive income attributable to owners of Santos Limited
2023
US$million
2022
US$million
1,416
2,112
13
13
132
(39)
93
106
–
–
–
106
1,522
(7)
(7)
67
(20)
47
40
(1)
(1)
(1)
39
2,151
The Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Consolidated
Financial Statements.
72
Financial ReportSantos Annual Report 2023
Consolidated Statement of Financial Position
as at 31 December 2023
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Contract assets
Inventories
Other financial assets
Assets held for sale
Total current assets
Non-current assets
Contract assets
Investments in associates and joint ventures
Other financial assets
Prepayments
Exploration and evaluation assets
Oil and gas assets
Other land, buildings, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Interest-bearing loans and borrowings
Current tax liabilities
Provisions
Other financial liabilities
Liabilities directly associated with assets held for sale
Total current liabilities
Non-current liabilities
Contract liabilities
Lease liabilities
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated profit/(losses)
Equity classified as held for sale
Equity attributable to owners of Santos Limited
Total equity
Note
4.1
4.2
2.2(b)
4.3
5.5(h)
6.2
2.2(b)
6.3(b)
5.5(h)
3.1
3.2
2.4(d)
3.3
4.4
2.2(b)
3.6
5.1
3.5
5.5(h)
6.2
2.2(b)
3.6
5.1
2.4(d)
3.5
5.5(h)
5.3
5.4
5.4
6.2
2023
US$million
2022
US$million
1,875
829
94
86
442
404
617
4,347
179
406
127
436
2,462
19,101
409
1,038
1,251
2,352
768
70
75
443
109
1,311
5,128
252
379
29
270
2,271
17,810
413
1,114
1,190
25,409
29,756
23,728
28,856
1,080
59
189
646
7
438
257
272
2,948
150
596
4,728
1,893
4,128
38
11,533
14,481
15,275
14,339
489
398
49
15,275
15,275
1,145
135
244
694
72
443
68
671
3,472
160
602
3,979
1,960
3,792
48
10,541
14,013
14,843
14,652
260
(118)
49
14,843
14,843
The Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Consolidated Financial
Statements.
73
Santos Annual Report 2023
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Note
2023
US$million
2022
US$million
Cash flows from operating activities
Receipts from customers
Interest received
Dividends received
Pipeline tariffs and other receipts
Payments to suppliers and employees
Restoration expenditure
Exploration and evaluation seismic and studies
Royalty and excise paid
Payments for commodity hedging
Borrowing costs paid
Income taxes paid
Royalty-related taxes paid
Insurance proceeds
Overriding royalty
Net cash provided by operating activities
4.1(b)
Cash flows from investing activities
Payments for:
Exploration and evaluation assets
Oil and gas assets
Other land, buildings, plant and equipment
Acquisitions of a controlled entity, net of cash acquired
Costs associated with acquisition of subsidiaries
Loans to associate
Net proceeds associated with disposals
Borrowing costs paid
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Drawdown of borrowings
Repayment of borrowings
Repayment of principal portion of lease liabilities
Purchase of shares on-market (Treasury shares)
Purchase of shares on-market (Share buy-back)
Other financing
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on the balances
of cash held in foreign currencies
Amounts transferred from/(to) assets held for sale
Cash and cash equivalents at the end of the period
2.6
5.3
5.3
6.2
4.1
5,992
106
1
216
(2,019)
(108)
(78)
(153)
(6)
(132)
(428)
(158)
17
8
3,258
(174)
(2,154)
(41)
(209)
(3)
(82)
10
(243)
(2,896)
(777)
1,293
(787)
(236)
(22)
(316)
(15)
(860)
(498)
2,352
(21)
42
1,875
8,201
54
5
434
(2,451)
(154)
(103)
(206)
(160)
(191)
(529)
(356)
15
(1)
4,558
(217)
(1,470)
(20)
(17)
(108)
-
302
(139)
(1,669)
(536)
800
(3,003)
(242)
(36)
(384)
–
(3,401)
(512)
2,976
(34)
(78)
2,352
The Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Consolidated Financial
Statements.
74
Financial ReportSantos Annual Report 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Equity attributable to owners of Santos Limited
US$million
Note
Balance at 1 January 2022
Items of comprehensive income
Net profit for the period
Other comprehensive (loss)/income)
for the period
Total comprehensive (loss)/income for the period
Transactions with owners in their capacity
as owners
Dividends paid
On-market share purchase
(Treasury shares)
On-market share purchase
(Share buy-back)
Share-based payment transactions
Balance at 31 December 2022
Balance at 1 January 2023
Transfer retained profits to accumulated
profits reserve
Items of comprehensive income
Net profit for the period
Other comprehensive income
for the period
Total comprehensive income for the period
Transactions with owners in their capacity
as owners
Dividends paid
On-market share purchase
(Treasury shares)
On-market share purchase
(Share buy-back)
Share-based payment transactions
2.6
5.3
5.3
5.3
2.6
5.3
5.3
5.3
Foreign
currency
trans-
lation Hedging
reserve
reserve
Issued
capital
Accum- Accum-
ulated
(losses)
/profit
ulated
profits
reserve
Total
equity
15,030
(940)
(61)
1,807
(2,226)
13,610
–
–
–
–
(36)
(384)
42
–
(7)
(7)
–
–
–
–
–
46
46
–
–
–
–
–
–
–
2,112
2,112
–
2,112
39
2,151
(536)
–
–
–
–
–
–
(4)
(536)
(36)
(384)
38
14,652
14,652
(947)1
(947)1
(15)
(15)
1,271
1,271
(118)
14,843
(118)
14,843
–
–
–
–
–
(22)
(316)
25
–
–
13
13
–
–
–
–
–
–
93
93
–
–
–
–
900
(900)
–
–
–
–
1,416
1,416
–
106
1,416
1,522
(777)
–
–
–
–
–
–
–
(777)
(22)
(316)
25
Balance at 31 December 2023
14,339
(934)1
78
1,394
398
15,275
1
Includes $49 million held for sale.
The Consolidated Statement of Changes in Equity is to be read in conjunction with the Notes to the Consolidated Financial
Statements.
75
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
for the year ended 31 December 2023
Section 1: Basis of Preparation
This section provides information about the basis of preparation of the Financial Report, and certain accounting
policies that are not disclosed elsewhere in the Financial Report. Accounting policies specific to individual elements
of the financial statements are located within the relevant section of the report.
1.1 STATEMENT OF COMPLIANCE
The consolidated financial report (“Financial Report”) of Santos Limited (the Company) for the year ended 31 December
2023 was authorised for issue in accordance with a resolution of the Directors on 20 February 2024.
The Financial Report of the Company for the year ended 31 December 2023 comprises the Company and our controlled
entities (the Group). Santos Limited (the Parent) is a company limited by shares incorporated in Australia, whose shares are
publicly traded on the Australian Securities Exchange (ASX) and on Papua New Guinea’s National Stock Exchange (PNGX),
and is the ultimate parent entity of the Group. The Group is a for-profit entity for the purpose of preparing the Financial
Report. The nature of the operations and principal activities of the Group are described in the Directors’ Report.
This consolidated Financial Report is:
•
•
a general purpose financial report that has been prepared in accordance with the requirements of the
Corporations Act 2001 (Cth), Australian Accounting Standards and other authoritative pronouncements of the
Australian Accounting Standards Board (AASB)
compliant with Australian Accounting Standards as issued by the AASB and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board, including new and amended
accounting standards issued and effective for reporting periods beginning on or after 1 January 2023
• presented in United States dollars (US$)
• prepared on the historical cost basis except for derivative financial instruments, contingent consideration and
other financial instruments measured at fair value
•
rounded to the nearest million dollars, unless otherwise stated, in accordance with ASIC Corporations (Rounding
in Financial/Directors' Reports) Instrument 2016/191.
1.2 KEY EVENTS IN THE CURRENT PERIOD
The financial position and performance of the Group was particularly impacted by the following events and transactions
during the year:
• production of 91.7 mmboe (2022: 103.2 mmboe), and sales of 96.4 mmboe (2022: 112.3 mmboe)
average realised oil price of $87.6 per barrel compared to $110.09 per barrel in 2022
net profit after tax of $1,416 million for 2023 (2022: net profit after tax $2,112 million)
free cash flow generated of $2,128 million for 2023 (2022: $3,641 million)
net debt increased to $4,264 million at 31 December 2023, from $3,450 million at 31 December 2022.
•
•
•
•
76
Financial ReportSantos Annual Report 2023
1.3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The carrying amount of certain assets and liabilities are often determined based on management’s judgement regarding
estimates and assumptions of future events. The key judgements, estimates and assumptions that have significant risk of
causing material adjustment to the carrying amount of certain assets and liabilities within the next annual reporting period
are highlighted throughout the Financial Report.
The full-year Financial Report has been prepared using the going concern basis of preparation and the Group continues to
pay its debts as they fall due.
Financial reporting impacts of climate change and sustainability matters
In preparing the Financial Report, management has considered the impact of climate change and current climate-related
legislation.
Santos seeks to balance the needs of today, supplying affordable and reliable energy and critical fuels, with the need to
transition to a lower carbon future. Our climate strategy, outlined in the Santos Sustainability and Climate Report, details our
annual emissions and targets. Since 2018, we've published an annual Climate Report following the Financial Stability Board’s
Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
Santos has a three-horizon strategy guiding our pathway to target net-zero Scope 1 and 2 emissions (equity share) by 2040.
This strategy involves backfilling existing facilities and sustaining production into the future, decarbonising of own and
others’ emissions through technologies such as CCS, and generating low carbon fuels.
Central to achieving our strategy is Santos Energy Solutions, the principal activities of which relate to operating midstream
assets, progressing technologies that support the decarbonisation of ours' and others' products, including CCS, the
generation of high-quality carbon credits and development of low carbon fuels.
The estimated impacts of climate change may be assessed through a range of economic and climate-related policies and
scenarios, as reported in the Santos Sustainability and Climate Report, which includes the Santos Climate Transition Action
Plan (CTAP). This includes market supply and demand profiles, carbon emissions reduction profiles, legislative impacts and
technological impacts, all of which are affected by the global demand profile of the economy as a whole. A carbon price is
included in Santos’ economic modelling of projects and the portfolio as a whole.
The energy transition is expected to bring volatility in commodity prices. This may result in scenarios of lower prices through
demand destruction and, conversely, structurally higher commodity prices through demand and supply dynamics. In
accordance with IFRS, Santos’ financial statements are based on reasonable and supportable assumptions that represents
Group’s current best estimate of the range of economic conditions that may exist in the foreseeable future. The Group has
considered the Australian Government’s emissions reduction target legislated in September 2022 and the amendments to
the Safeguard Mechanism which have come into force mid-2023.
The potential impacts of climate change and sustainability-related matters have been considered in the significant
judgements and key estimates in a number of areas in the Financial Report, including:
•
•
asset carrying values (exploration and evaluation assets, oil and gas assets) through determination of valuations
considered for impairment – see Note 3.4 and consideration of asset useful lives – see Note 3.2
restoration obligations, including the timing of such activities – see Note 3.5
• deferred taxes, primarily related to asset carrying values and restoration obligations – see Note 2.4.
The Group continues to monitor climate-related policy and its impact on the Financial Report.
77
Santos Annual Report 2023 Notes to the Consolidated Financial Statements
Section 1: Basis of Preparation
1.4 FOREIGN CURRENCY
Functional and presentation currency
The Group’s financial statements are presented in United States dollars (US$), as that presentation currency most reliably
reflects the global business performance of the Group as a whole and is more comparable with our peers.
The functional currency of the Parent and the majority of subsidiaries is US$. The assets, liabilities, income and expenses of
non-US dollar denominated functional currency companies are translated into US$ using the following applicable exchange
rates:
Foreign currency amount
Income and expenses
Assets and liabilities
Equity
Reserves
Applicable exchange rate
Average rate prevailing for the relevant period
Period-end rate
Historical rate
Historical and period-end rates
Statement of cash flows
Average rate prevailing for the relevant period
Foreign exchange differences resulting from translation to presentation currency are initially recognised in the foreign
currency translation reserve and subsequently transferred to the income statement on disposal of the operation.
The period-end exchange rate used was A$/US$0.6812 (2022: 1:0.6813).
Transactions and balances
Transactions in currencies other than an entity’s functional currency are initially recorded in the functional currency by
applying the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in currencies
other than an entity’s functional currency are translated at the foreign exchange rate ruling at the reporting date. Foreign
exchange differences arising on translation are recognised in the income statement with the exception of monetary items
that form part of the net investment in a foreign operation.
Foreign exchange differences that arise on the translation of monetary items that form part of the net investment in a
foreign operation are recognised in the translation reserve in the consolidated financial statements until the net investment is
disposed of, at which time, the cumulative amount is reclassified to the income statement.
Non-monetary assets and liabilities that are measured at historical cost in currencies other than an entity’s functional
currency are translated using the exchange rate at the date of the initial transaction. Non-monetary assets and liabilities
denominated in currencies other than an entity’s functional currency that are stated at fair value are translated to the
functional currency at foreign exchange rates ruling at the dates the fair value was determined.
Group companies
The results of subsidiaries with a functional currency other than US$ (the functional currency of the Parent) are translated to
US$ as at the date of each transaction. The assets and liabilities are translated to US$ at foreign exchange rates ruling at the
reporting date. Foreign exchange differences arising on translation are recognised directly in the translation reserve.
Exchange differences arising from the translation of the net investment in foreign operations and of related hedges are
recognised in the translation reserve. They are released into the income statement upon disposal of the foreign operation.
78
Financial ReportSantos Annual Report 2023 Notes to the Consolidated Financial Statements
Section 2: Financial Performance
This section focuses on the operating results and financial performance of the Group. It includes disclosures of
segmental financial information, taxes, dividends and earnings per share, including the relevant accounting policies
adopted in each area.
2.1 SEGMENT INFORMATION
A new organisational structure was announced in May 2023 to drive delivery of Vision 2040.
The new organisational structure included establishing two functional divisions and a new regional operating model. The
two functional divisions are Upstream Gas and Liquids and Santos Energy Solutions. The upstream gas and liquids business
includes an Asian market-focused LNG business and an Australian domestic gas business on the West and East coasts of
Australia. Santos Energy Solutions is focused on the processing of Santos’ and third-party gas and liquids and development
of decarbonisation and carbon management services.
The three regional Business Units are Eastern Australia and PNG, Western and Northern Australia and Timor-Leste, and
Alaska, which execute both Upstream Gas and Liquids and Santos Energy Solutions activities.
Operating segments within the functional divisions are upstream gas and liquids (Cooper Basin, Queensland & NSW, Papua
New Guinea, Western Australia, Northen Australia and Timor-Leste) and Santos Energy Solutions. Alaska Business Unit is
currently captured in ‘Corporate, exploration, eliminations & other’ in segment information in the Financial Report while the
asset is in the development phase. This is the basis on which internal reports are provided to the Chief Executive Officer
(Chief Operating Decision Maker) for assessing performance and determining the allocation of resources within the Group.
Segment performance is measured based on earnings before interest, tax, depreciation and depletion, exploration and
evaluation expensed, impairment loss, and change in future restoration assumptions (EBITDAX). Corporate and exploration
expenditure and inter-segment eliminations are included in the segment disclosure for reconciliation purposes.
Revenue from external customers by geographical location
Australia
Papua New Guinea
Total
Non-current assets by geographical location
(excluding financial and deferred tax assets)
Australia
Papua New Guinea
Other
Total
2023
US$million
2022
US$million
3,150
2,884
6,034
4,528
3,459
7,987
2023
US$million
2022
US$million
12,265
10,314
1,665
24,244
11,471
10,119
994
22,584
79
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 2: Financial Performance
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Financial ReportSantos Annual Report 2023
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2
81
Santos Annual Report 2023
2.2 REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers is recognised in the income statement when the performance obligations are
considered met, which is when control of the hydrocarbon products or services provided are transferred to the customer.
Revenue is recognised at the transaction price, which is an amount that reflects the consideration the Group expects to be
entitled to, net of goods and services tax or similar taxes.
Revenue from contracts with customers – Product sales
Revenue from contracts with customers – Product sales is recognised based on volumes sold under contracts with
customers at the point in time where performance obligations are considered met. Generally, regarding the sale of
hydrocarbon products, the performance obligation will be met when the product is delivered to the specified measurement
point (gas) or point of loading/unloading (liquids). No adjustments are made to revenue for any differences between
volumes sold to customers and unsold volumes that the Group is entitled to sell based on its working interest.
The Group’s sales of crude oil, liquefied natural gas, ethane, condensate, LPG, and in some contractual arrangements,
natural gas, are generally based on market prices. In contractual arrangements with market-based pricing, at the time of the
delivery, there is only minimal risk of a change in transaction price to be allocated to the product sold. Accordingly, at the
point of sale, where there is no significant risk of revenue reversal relative to the cumulative revenue recognised, there is no
constraining of variable consideration.
The Group applies the allocation exception that allows an entity to allocate the market price to product sales as delivered,
rather than recognising an average price over the term of the contract. For those contractual arrangements based on market
pricing, the aggregate transaction price allocation to unsatisfied performance obligations is fully constrained at the end of
the reporting period. Revenue for existing contracts will be recognised over varying contract tenures.
During the year, the Group earned revenue from two customers that were individually greater than 10 per cent of total
revenue. These amounted to $637 million (2022: $764 million) and $625 million (2022: $558 million), arising from sales from
segments QLD & NSW and PNG respectively.
Contract assets
In a business combination, pre-existing revenue contracts are fair valued and may result in contract assets that represent the
differential in contract pricing and market price, and will be realised as performance obligations are considered met in the
underlying revenue contract. The contract asset will be unwound through other expenses. Where different tranches exist
within a contractual arrangement, individual contracts acquired may contain both a contract liability in respect of deferred
revenue and a contract asset arising from revenue contracts being fair valued on acquisition.
Contract liabilities
In a business combination, pre-existing revenue contracts are fair valued and may result in contract liabilities being
recognised. The contract liabilities represent the differential in contract pricing and market price, and will be realised
as performance obligations are considered met in the underlying revenue contract. To the extent the contract liability
represents the fair value differential between contract pricing and market price, it will be unwound through ‘revenue – other’
upon satisfaction of the performance obligation.
Contract liabilities – Deferred revenue
A contract liability for deferred revenue is recorded for obligations under sales contracts to deliver natural gas in future
periods for which payment has already been received. Where the period between when payment is received and
performance obligations are considered met is more than 12 months, an assessment will be made for whether a significant
financing component is required to be accounted for. Deferred revenue liabilities unwind as revenue from contracts with
customers upon satisfaction of the performance obligation and if a significant financing component associated with
deferred revenue exists, will be recognised as finance costs over the life of the contract.
82
Financial ReportSantos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 2: Financial Performance
2.2 REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED)
(a) Revenue from contracts with customers
Product sales
Gas, ethane and liquefied natural gas
Crude oil
Condensate and naphtha
Liquefied petroleum gas
Total product sales1
Revenue – other
Pipeline tolls and tariffs
Unwind of acquired contract liabilities
Other
Total revenue – other
2023
US$million
2022
US$million
4,798
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390
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197
Total revenue from contracts with customers
6,034
7,987
1 Total product sales include third-party product sales of $805 million (2022: $1,147 million).
(b) Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers:
2023
US$million
2022
US$million
Acquired contract assets
Current
Acquired contract assets
Non-current
Acquired contract assets
Total acquired contract assets
Contract liabilities
Current
Acquired contract liabilities
Deferred revenue
Non-current
Acquired contract liabilities
Deferred revenue
Total contract liabilities
86
86
179
179
265
1
58
59
2
148
150
209
75
75
252
252
327
5
130
135
3
157
160
295
83
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 2: Financial Performance
2.2 REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED)
(b) Assets and liabilities related to contracts with customers (continued)
The following table illustrates the movement in contract asset and contract liability balances for the current reporting period:
Note
2023
US$million
2022
US$million
Acquired contract assets
Opening balance
Transfer from/(to) assets held for sale
Other expenses
Total acquired contract assets
Acquired contract liabilities
Opening balance
Revenue – other
Contract liabilities – Deferred income
Opening balance
Additional receipts in advance
Revenue from contracts with customers – product sales
Interest accretion for financing component
Other
Total contract liabilities
6.2
2.3
2.2(a)
5.2
327
18
(80)
265
8
(5)
3
287
4
(97)
17
(5)
206
209
419
(18)
(74)
327
14
(6)
8
329
10
(79)
16
11
287
295
84
Financial ReportSantos Annual Report 2023
2.3 EXPENSES
Cost of sales
Production costs
Other operating costs:
LNG plant costs
Pipeline tariffs, processing tolls and other
Movements in onerous pipeline contracts
Royalty and excise
Shipping costs
Total other operating costs
Total cash cost of production
Depreciation and depletion:
Depreciation of plant, equipment and buildings
Depletion of subsurface assets
Total depreciation and depletion
Third-party product purchases
Decrease in product stock
Total cost of sales
Other expenses
Selling
General and administration
Costs associated with acquisition and disposals
Change in future restoration assumptions for non-producing assets
Foreign exchange losses
Fair value losses on commodity derivatives (oil hedges)
Exploration and evaluation expensed
Unwind of acquired contract assets
Other
Total other expenses
2023
US$million
2022
US$million
782
110
210
–
157
66
543
1,325
1,048
810
1,858
471
13
3,667
23
132
3
18
15
–
86
80
17
374
807
98
169
(2)
225
66
556
1,363
867
880
1,747
757
33
3,900
19
139
33
221
22
140
148
74
39
835
85
Santos Annual Report 2023
2.4 TAXATION
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income
statement except in relation to items recognised directly in equity.
Current tax is the amount of income tax payable on the taxable profit or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable
income. Where applicable, tax balances include an estimate of any amounts expected to be paid to settle uncertain tax
positions if it is probable that an amount will settle the obligation, and a reliable estimate can be made of the amount of the
obligation. When the Group expects some or all of an amount of tax payable to be reimbursed, the expense relating to the
income tax payable is presented in the income statement net of any reimbursement that is virtually certain. If the effect of
the time value of money is material, current tax payable is discounted.
The Company and all of our eligible wholly-owned Australian resident entities are part of a tax-consolidated group under
Australian taxation law. Santos Limited is the head entity in the tax-consolidated group. The head entity and the controlled
entities in the tax-consolidated group continue to account for their own current and deferred tax amounts. Current tax
liabilities and assets, and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-
consolidated group, are recognised by the Company (as head entity in the tax-consolidated group).
The Company and the other entities in the tax-consolidated group have entered into a tax funding agreement and a tax
sharing agreement.
Royalty-related tax
Petroleum Resource Rent Tax (PRRT), Resource Rent Royalty, and Timor-Leste and PNG’s Additional Profits Tax are
accounted for as income tax or royalty tax.
International Tax Reform – Pillar Two Model Rules
The Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and
Profit Shifting (BEPS) published the Pillar Two model rules to address the tax challenges arising from the digitalisation of the
global economy in December 2021. Specifically, the BEPS Pillar Two model rules are designed to ensure large multinational
enterprises pay a minimum level of tax on the income arising in each of the jurisdictions in which they operate, imposing an
additional tax on profits where the effective tax rate in that jurisdiction falls below the minimum rate of 15 per cent.
As a large multinational enterprise, the Group is subject to the BEPS Pillar Two rules in both the United Kingdom and Japan,
being the only jurisdictions in which the Group operates that have substantially enacted legislation to give effect to the
model rules as of 31 December 2023. The rules will apply to the Group from 1 January 2024 in the United Kingdom, and from
1 January 2025 in Japan. Based on current information available, the Group does not expect the application of the rules to
have a material current tax impact on the Group’s financial position.
The Group also expects to be subject to the BEPS Pillar Two rules that are likely to be effective in Australia from 1 January
2024. However, enacting legislation has not been introduced and there is not sufficient information available for the Group
to assess the impact, if any, of the application of the rules.
The Group has applied the temporary mandatory relief under AASB 2023-2 from deferred tax accounting for the impacts of
the additional tax at 31 December 2023.
86
Financial ReportSantos Annual Report 2023 Notes to the Consolidated Financial Statements
Section 2: Financial Performance
2.4 TAXATION (CONTINUED)
Income tax and royalty-related tax recognised in the income statement for the Group are as follows:
2023
US$million
2022
US$million
(a) Income tax expense/(benefit)
Current tax expense/(benefit)
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustments for prior years
Total income tax expense
(b) Royalty-related tax (benefit)/expense
Current tax expense
Current year
Deferred tax benefit
Origination and reversal of temporary differences
Total royalty-related tax (benefit)/expense, net of income tax benefit
(c) Numerical reconciliation between pre-tax net profit and tax expense
Profit before tax
Prima facie income tax expense at 30% (2022: 30%)
Increase/(decrease) in income tax expense/(benefit) due to:
Profits subject to different tax rate
Movements in losses and deferred tax assets not recognised
Deferred tax assets not previously recognised
Other deductible expenses
Non-deductible expenses
Tax adjustments relating to prior years
Other
Income tax expense
Royalty-related tax (benefit)/expense, net of income tax benefit
Total tax expense
480
(19)
461
13
11
24
485
113
113
(195)
(195)
(82)
1,819
546
(3)
3
(28)
(20)
10
(8)
(15)
485
(82)
403
412
(33)
379
315
51
366
745
365
365
(274)
(274)
91
2,948
884
–
(62)
(106)
(37)
44
18
4
745
91
836
87
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 2: Financial Performance
2.4 TAXATION (CONTINUED)
(d) Deferred tax assets and liabilities
Deferred tax is determined using the statement of financial position approach, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the appropriate tax bases.
The following temporary differences are not provided for:
•
the initial recognition of assets or liabilities that affect neither accounting or taxable profit; nor
• differences relating to investments in subsidiaries to the extent it is probable that they will not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
Significant judgement – Uncertain tax positions
The calculation of the Group’s tax charge involves a degree of estimation and judgement in respect of certain items for
which the ultimate tax determination is uncertain.
The Group recognises deferred tax assets only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Future taxable profits are estimated by internal budgets and forecasts.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Assets
Liabilities
Net
Recognised deferred tax
assets and liabilities
2022
2023
Note US$million US$million US$million US$million US$million US$million
2023
2023
2022
2022
Exploration and
evaluation assets
Oil and gas assets
Other assets
Derivative financial
instruments
Interest-bearing loans
and borrowings
Provisions
Royalty-related tax
Other items
Tax value of carry-forward
losses recognised
343
1,001
1
3
268
138
–
18
625
458
970
7
24
296
173
–
31
596
–
(3,008)
(17)
(65)
(3,060)
(25)
343
(2,007)
(16)
393
(2,090)
(18)
(135)
(1)
–
(141)
(61)
–
(129)
(2)
–
(293)
(76)
(6)
(132)
267
138
(141)
(43)
625
(966)
–
(105)
294
173
(293)
(45)
590
(1,101)
–
Tax assets/(liabilities)
Set-off of tax
2,397
(1,359)
2,555
(1,441)
(3,363)
1,359
(3,656)
1,441
Net deferred tax
assets/(liabilities)
Amounts classified
as held for sale
Adjusted deferred tax
assets/(liabilities)
1,038
1,114
(2,004)
(2,215)
(966)
(1,101)
6.2
–
–
111
255
111
255
1,038
1,114
(1,893)
(1,960)
(855)
(846)
Accounting judgement and estimate – Deferred taxes unrecognised
Deferred tax assets have not been recognised in respect of the following items set out below, because it is not probable
that the temporary differences will reverse in the future and that there will be sufficient future taxable profits against
which the benefits can be utilised. There are no tax losses which are expected to expire. The remaining deductible
temporary differences and tax losses do not expire under current tax legislation.
88
Financial ReportSantos Annual Report 2023
2.4 TAXATION (CONTINUED)
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Temporary differences in relation to investments in subsidiaries
Deductible temporary differences in respect of provisions
Deductible temporary differences relating to royalty-related tax
(net of income tax)
Tax losses
Total unrecognised deferred tax assets
1 Comparative disclosure has been restated.
2.5 EARNINGS PER SHARE
2023
US$million
2022
US$million
2,185
128
3,800
221
6,334
2,1881
171
3,362
363
6,084
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity
holders of Santos Limited by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by adjusting basic earnings per share by the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
Earnings used in the calculation of basic and diluted earnings per share reconcile to the net profit or loss after tax in the
income statement as follows:
2023
US$million
2022
US$million
Earnings used in the calculation of basic and diluted earnings per share
1,416
2,112
The weighted average number of shares used for the purpose of calculating diluted earnings per share reconciles to the
number used to calculate basic earnings per share as follows:
Basic earnings per share
Dilutive potential ordinary shares
Diluted earnings per share
Earnings per share attributable to the equity holders of Santos Limited
Basic earnings per share
Diluted earnings per share
2023
Number of
shares
2022
Number of
shares
3,261,616,703
14,317,724
3,350,618,460
13,497,452
3,275,934,427
3,364,115,912
2023
¢
43.4
43.2
2022
¢
63.0
62.8
89
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 2: Financial Performance
2.6 DIVIDENDS
Dividends are recognised as a liability at the time the Directors resolve to pay or declare the dividend.
Dividends recognised during the year
2023
2022 Final ordinary dividend – paid on 29 March 2023
2023 Interim ordinary dividend – paid on 28 September 2023
Franked/
unfranked
Unfranked
Unfranked
2022
2021 Final ordinary dividend – paid on 24 March 2022
2022 Interim ordinary dividend – paid on 22 September 2022
Partially Franked
Unfranked
Franked/
unfranked
Unfranked
Unfranked
Unfranked
Unfranked
Dividends declared in respect of the year
2023
Final ordinary dividend
Interim ordinary dividend
2022
Final ordinary dividend
Interim ordinary dividend
Dividend franking account
30% franking credits available to the shareholders of Santos Limited
for future distribution
2.7 OTHER INCOME
Dividend
per share
US¢
Total
US$million
15.1
8.7
23.8
8.5
7.6
16.1
498
279
777
288
248
536
Dividend
per share
US¢
Total
US$million
17.5
8.7
26.2
15.1
7.6
22.7
569
283
852
500
255
755
2023
US$million
2022
US$million
20
20
Other income
Gain on sale of non-current assets
Other income associated with lease arrangements
Insurance recoveries
Overriding royalties
Other
Fair value gain on embedded derivatives
Fair value (loss)/gain on electricity derivatives
Total other income
90
Note
3.6
2023
US$million
2022
US$million
5
58
17
9
50
–
(16)
123
15
72
15
13
16
146
17
294
Financial ReportSantos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
This section includes information about the assets used by the Group to generate profits and revenue, specifically
information relating to exploration and evaluation assets, oil and gas assets, associated restoration obligations, and
commitments for capital expenditure not yet recognised as a liability.
The life cycle of the Group’s assets is summarised as follows:
Exploration
and evaluation
Appraisal
drilling
Development
Production
Decommissioning
Abandonment
and restoration
3.1 EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for hydrocarbon resources, the determination of technical feasibility
and the assessment of commercial viability of an identified resource. Expenditure in respect of each area of interest is
accounted for using the successful efforts method of accounting.
The successful efforts method requires all exploration and evaluation expenditure to be expensed in the period it is incurred,
except the costs of acquiring interests in new exploration and evaluation assets, the cost of successful wells, and appraisal
costs relating to determining development feasibility, which are capitalised as intangible exploration and evaluation assets.
Exploration and evaluation expenditure is recognised in relation to an area of interest when the rights to tenure of the area of
interest are current and either:
•
•
such expenditure is expected to be recovered through successful development and commercial exploitation of
the area of interest or, alternatively, by its sale; or
the exploration activities in the area of interest have not yet reached a stage that permits reasonable assessment
of the existence of economically recoverable reserves, and active and significant operations in, or in relation to,
the area of interest are continuing.
Where an ownership interest in an exploration and evaluation asset is exchanged for another, the transaction is recognised
by reference to the carrying value of the original interest. Any cash consideration paid, including transaction costs, is
accounted for as an acquisition of exploration and evaluation assets. Any cash consideration received, net of transaction
costs, is treated as a recoupment of costs previously capitalised with any excess accounted for as a gain on disposal of non-
current assets.
No amortisation is charged during the exploration and evaluation phase.
Acquisition of assets
All assets acquired are recorded at their cost of acquisition, being the amount of cash or cash equivalents paid, and the fair
value of assets given, shares issued or liabilities incurred. The cost of an asset comprises the purchase price, including any
incidental costs directly attributable to the acquisition, any costs directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating, and the estimate of the costs of dismantling and removing the
asset and restoring the site on which it is located.
Exploration licence and leasehold property acquisition costs are capitalised as intangible assets. Licence costs paid in
connection with a right to explore in an existing exploration area are capitalised.
91
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.1 EXPLORATION AND EVALUATION ASSETS (CONTINUED)
Significant judgement – Exploration and evaluation
The application of this policy requires management to make certain estimates and assumptions as to future events and
circumstances, particularly in relation to the assessment of whether economic quantities of resources have been found. Any
such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration
and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future
exploitation or sale, then the relevant capitalised amount will be impaired through the income statement.
Exploration and evaluation activities give rise to a number of uncertainties with regard to the estimates and assumptions
made as to the existence and economic viability of hydrocarbon recovery within a prospect. The nature and extent of the
energy transition in relation to future climate-related conditions, legislation and policies, can impact the assessment of those
uncertainties with regard to considerations such as project economics, development scenarios and potential time horizons.
2023
US$million
2022
US$million
Cost
Less: Accumulated impairment
Balance at 31 December
Reconciliation of movements
Balance at 1 January
Acquisitions
Additions
Unsuccessful wells expensed
Impairment losses
Disposals
Transfer to oil and gas assets in production
Transfer to oil and gas assets in development
Transfers from/(to) assets held for sale
Exchange differences
Balance at 31 December
Comprising:
Acquisition costs
Successful exploration wells
Pending determination of success
3.2 OIL AND GAS ASSETS
3,952
(1,490)
2,462
2,271
2
235
(5)
(18)
(5)
(46)
(3)
33
(2)
2,462
1,711
418
333
2,462
3,743
(1,472)
2,271
2,862
14
252
(26)
(2)
–
(32)
(774)
(33)
10
2,271
1,673
420
178
2,271
Oil and gas assets are usually single oil or gas fields being developed for future production or are in the production phase.
Where several individual oil or gas fields are to be produced through common facilities, the individual oil or gas field and the
associated production facilities are managed and reported as a single oil and gas asset.
Assets in development
When the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated and approval
of commercial development occurs, the field enters its development phase from the exploration and evaluation phase.
Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines, and the
drilling of development wells, as well as exploration and evaluation costs, are capitalised as tangible assets within oil and gas
assets. Other subsurface expenditures include the costs of dewatering coal seam gas fields to provide access to coal seams
to enable production from coal seam gas reserves. Dewatering expenditures include the costs of extracting, transporting,
treating and disposing of water during the development phase of the coal seam gas fields.
When commercial operation commences, the accumulated costs are transferred to oil and gas producing assets.
92
Financial ReportSantos Annual Report 2023
3.2 OIL AND GAS ASSETS (CONTINUED)
Producing assets
The costs of oil and gas assets in production are separately accounted for as tangible assets and include past exploration
and evaluation costs, pre-production development costs and the ongoing costs of continuing to develop reserves for
production and the expansion or replacement of plant and equipment, and any associated land and buildings.
Ongoing exploration and evaluation activities
Often the initial discovery and development of an oil or gas asset will lead to ongoing exploration for, and evaluation of,
potential new oil or gas fields in the vicinity with the intention of producing any near-field discoveries using the infrastructure
in place.
Exploration and evaluation expenditure associated with oil and gas assets is accounted for in accordance with the policy in
Note 3.1. Exploration and evaluation amounts capitalised in respect of oil and gas assets are separately disclosed in the table
below.
Depreciation and depletion
Depreciation charges are calculated to write off the value of buildings, plant and equipment over their estimated economic
useful lives to the Group. Each component of an item of buildings, plant and equipment with a cost that is significant in
relation to the total cost of the asset is depreciated separately.
Depreciation of onshore buildings, plant and equipment and corporate assets is calculated using the straight-line method of
depreciation from the date the asset is available for use, unless a units of production method represents a more reasonable
allocation of the asset’s depreciable value over its economic useful life.
The estimated useful lives for each class of onshore assets for the current and comparative periods are generally as follows:
• Buildings
• Pipelines
20 – 50 years
10 – 30 years
• Plant and facilities
10 – 50 years
Depreciation of offshore plant and equipment is calculated using the units of production method from the date of
commencement of production.
Depletion charges are calculated to amortise the depreciable value of carried-forward exploration, evaluation and
subsurface development expenditure over its useful life. Useful life is generally determined based on the life of the estimated
Proved plus Probable (2P) reserves for a hydrocarbon reserve, together with future subsurface costs necessary to develop
the respective hydrocarbon reserve, unless an alternative method is considered a better representation of useful life.
Significant judgement – Estimates of reserve quantities
The estimated quantities of 2P hydrocarbon reserves reported by the Group are integral to the calculation of depletion and
depreciation expense. The 2P hydrocarbon reserves are incorporated into the assessment of impairment of assets, along
with contingent resources (2C) as appropriate. Estimated reserve quantities are based upon interpretations of geological
and geophysical models and assessments of the technical feasibility and commercial viability of producing the reserves.
These assessments require assumptions to be made regarding future development and production costs, commodity
prices, exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic
assumptions used to estimate the reserves can change from period to period, and as additional geological data is generated
during the course of operations. Reserves estimates are prepared in accordance with the Group’s policies and procedures
for reserves estimation which conform to guidelines prepared by the Society of Petroleum Engineers.
Accounting judgement and estimate – Depletion charges
Depletion and certain depreciation charges are calculated using the units of production method. This is based on barrels
of oil equivalent which will amortise the cost of carried-forward exploration, evaluation and subsurface development
expenditure (subsurface assets) generally over the life of the estimated 2P hydrocarbon reserves for an asset or group of
assets, together with future subsurface costs necessary to develop the hydrocarbon reserves in the respective asset or
group of assets, unless an alternative method is considered a better representation of useful life. The estimated useful lives
of our assets align with long-term planning and impairment modelling. The impact of climate change is considered in these
processes. Future climate-related conditions, legislation and policies may have an impact on these estimates and continue to
be monitored.
93
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.2 OIL AND GAS ASSETS (CONTINUED)
2023
2022
Subsurface
assets
Plant and
Total
equipment
US$million US$million US$million
Subsurface
assets
US$million
Plant and
equipment
US$million
Total
US$million
16,300
24,421
40,721
14,561
22,956
37,517
Cost
Less: Accumulated depreciation,
depletion and impairment
(9,442)
(12,178)
(21,620)
(8,572)
(11,135)
(19,707)
Balance at 31 December
6,858
12,243
19,101
5,989
11,821
17,810
Reconciliation of movements
Assets in development
Balance at 1 January
Additions1
Transfer from exploration
and evaluation assets
Transfer to producing assets
Transfer from/(to) assets held for sale
Disposals
Exchange differences
2,006
1,006
3
(114)
–
–
–
917
401
–
(96)
–
–
–
2,923
1,407
3
(210)
–
–
–
1,065
211
774
–
(34)
(3)
(7)
Balance at 31 December
2,901
1,222
4,123
2,006
Producing assets
Balance at 1 January
Additions1
Acquisitions
Transfer from exploration
and evaluation assets
Transfer from assets in development
Disposals
Depreciation and depletion
Transfer from/(to) assets held for sale
Net impairment losses
Exchange differences
3,983
682
–
46
114
(14)
(813)
–
(57)
16
10,904
547
–
–
96
–
(1,043)
525
–
(8)
14,887
1,229
–
46
210
(14)
(1,856)
525
(57)
8
4,686
241
4
32
–
(1)
(892)
–
(50)
(37)
363
582
–
–
–
(27)
(1)
917
12,283
636
–
–
–
(1)
(897)
(988)
(129)
–
1,428
793
774
–
(34)
(30)
(8)
2,923
16,969
877
4
32
–
(2)
(1,789)
(988)
(179)
(37)
Balance at 31 December
3,957
11,021
14,978
3,983
10,904
14,887
Total oil and gas assets
6,858
12,243
19,101
5,989
11,821
17,810
Comprising:
Other capitalised expenditure
6,858
12,243
6,858
12,243
19,101
19,101
5,989
5,989
11,821
11,821
17,810
17,810
1
Includes impact on capitalised restoration costs following changes in future restoration provision assumptions (refer Note 3.5).
94
Financial ReportSantos Annual Report 2023
3.3 INTANGIBLE ASSETS
Goodwill
Goodwill arises as a result of a business combination and has an indefinite useful life which is not subject to amortisation.
Goodwill is initially measured at cost and is subsequently measured at cost less any accumulated impairment losses.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining
the gain or loss on disposal.
Other intangibles
Intangible assets, other than goodwill, includes expenditure on Australian Carbon Credit Units (ACCUs). These intangible
assets are initially measured at cost and subsequently measured at cost less accumulated impairment losses. During 2023,
the Group acquired 50,000 ACCUs. In addition the Group entered into forward purchase contracts for a further 2.45 million
ACCUs at fixed prices, designated for own use, to be delivered between 2024 and 2027. The carrying value of acquired
ACCUs is shown below as other intangibles.
2023
US$million
Goodwill
Other
Intangibles
1,495
(245)
1,250
1
–
1
2022
US$million
Other
Intangibles
–
–
–
Total
1,435
(245)
1,190
Total
Goodwill
1,496
(245)
1,251
1,435
(245)
1,190
Cost
Less: Accumulated impairment
Balance at 31 December
Goodwill allocated as follows:
CGU
WA Gas
PNG
Segment
Western Australia
PNG
Reconciliation of movements
Balance at 1 January
Impairment
Transfer from/(to) assets held for sale
Balance at 31 December
3.4 IMPAIRMENT OF NON-CURRENT ASSETS
Impairment of goodwill
Note
2023
US$million
2022
US$million
3.4
236
1,014
1,190
–
60
1,250
236
954
1,463
(147)
(126)
1,190
For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated
to each of the Group’s CGUs that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units. Goodwill that is created on acquisition as a consequence of deferred
tax balances is tested for impairment net of those associated deferred tax balances. Goodwill is tested at least annually for
impairment and more frequently if events or changes in circumstances indicate that it might be impaired.
Impairment of oil and gas assets
The carrying amounts of the Group’s oil and gas assets are reviewed at each reporting date to determine whether there
is any indication of impairment or impairment reversal. Where an indicator of impairment or impairment reversal exists, a
formal estimate of the recoverable amount is made.
a)
Indicators of impairment – Exploration and evaluation assets
The carrying amounts of the Group’s exploration and evaluation assets are reviewed at each reporting date, to determine
whether any of the following indicators of impairment exist:
95
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.4 IMPAIRMENT OF NON-CURRENT ASSETS (CONTINUED)
a)
Indicators of impairment – Exploration and evaluation assets (continued)
•
•
Tenure over the licence area has expired during the period or will expire in the near future, and is not expected to
be renewed
Substantive expenditure on further exploration for, and evaluation of, mineral resources in the specific area is not
budgeted or planned
• Exploration for, and evaluation of, resources in the specific area have not led to the discovery of commercially
viable quantities of resources, and the Group has decided to discontinue activities in the specific area
•
Sufficient data exists to indicate that, although a development is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development or from sale.
b) Cash-generating units – Oil and gas assets
Oil and gas assets, land, buildings, plant and equipment are assessed for impairment on a CGU basis. A CGU is the
smallest grouping of assets that generates largely independent cash inflows, and generally represents oil or gas fields
that are being produced through a common facility.
Individual assets within a CGU may become impaired if their ongoing use changes or if the benefits to be obtained from
ongoing use are likely to be less than the carrying value of the individual asset.
Impairment losses or reversal of impairment losses
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its CGU (including
any amount of allocated goodwill) exceeds its recoverable amount. Impairment losses recognised in respect of CGUs are
allocated to reduce goodwill first (if goodwill is included within the carrying amount of the CGU) and then allocated to
reduce the carrying amount of the assets in the CGU on a pro-rata basis.
A reversal of impairment losses is recognised in the income statement when the recoverable amount of an asset or CGU
exceeds its carrying amount. An impairment loss is reversed only to the extent that the asset carrying amount does not
exceed the carrying amount that would have been determined if no impairment loss had been recognised.
Recoverable amount
The recoverable amount of an asset or CGU is the greater of its fair value less costs of disposal (FVLCD) (classified as level
3 in the fair value hierarchy) and its value-in-use (VIU), using an asset's estimated future cash flows (as described below)
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
Significant judgement – Impairment of oil and gas assets
For oil and gas assets, the expected future cash flow estimation is based on a number of factors, variables and assumptions.
For VIU calculations, the most important variables for future cash flows are estimates of hydrocarbon reserves and
resources, future production profiles, commodity prices, operating costs, foreign exchange rates, and carbon price and
abatement cost assumptions. Operating costs include third-party gas purchases and any future development costs
necessary to produce the reserves and resources.
Under a FVLCD calculation, future cash flows are based on the variables noted above for VIU calculations plus other relevant
factors such as value attributable to additional resource and exploration opportunities beyond reserves based on production
plans.
In most cases, the present value of future cash flows is most sensitive to estimates of hydrocarbon reserves and resources,
future oil prices and discount rates.
Estimates of future commodity prices are based on the Group’s best estimate of future market prices with reference to
external market analysts’ forecasts, current spot prices and forward curves. Future commodity prices are reviewed at least
annually. Where volumes are contracted, future prices are based on the contracted price.
The nominal future Brent prices (US$/bbl) used in impairment calculations were:
31 December 2023
1 Based on US$67.50/bbl (2023 real).
2024
70.20
2025
71.961
2026
73.681
2027
75.451
2028
77.261
96
Financial ReportSantos Annual Report 2023
3.4 IMPAIRMENT OF NON-CURRENT ASSETS (CONTINUED)
Forecasts of the exchange rate for foreign currencies, where relevant, are estimated with reference to observable external
market data and forward values, including analysis of broker and consensus estimates.
The future estimated long-term exchange rate applied in impairment calculations was A$/US$ 1:0.73.
The discount rates applied to the future forecast cash flows are based on the weighted average cost of capital, adjusted
for risks where appropriate, including functional currency of the asset and risk profile of the countries in which the asset
operates. The range of pre-tax discount rates that have been applied to non-current assets is typically between 12 per cent
and 19 per cent.
The Group has a net-zero emissions (Scope 1 and 2 equity share) target by 2040. The Group’s CTAP includes current and
proposed investments to give effect to the plan and deliver the Group’s emissions targets. Where relevant, the cost of the
CTAP is taken into account in the carrying value of assets held. In addition, the Group includes a cost of carbon assumption
in determining the carrying values of assets held as noted below.
The nominal future carbon prices (US$/tonne CO2e) used in impairment calculations were:
31 December 2023
2024
44.26
2025
60.361
2026
63.081
2027
65.921
2028
68.881
1
Long-term price (2025+) based on A$75/t (2023 real) increasing by CPI +2% annually.
Risks associated with climate change are factored into the recoverable amount calculation and will continue to be
monitored. This includes the assessment of discount rates and the potential impact to future prices of commodities such as
oil and natural gas. This may, in turn, affect the recoverable amount of oil and gas assets and goodwill in the future as may
future demand and supply profiles. Management continue to review cost of capital, price assumptions and demand profile
assumptions as the energy transition progresses.
In the event that future circumstances vary from these assumptions, the recoverable amount of the Group’s oil and gas
assets could change materially and result in impairment losses or the reversal of previous impairment losses.
Due to the interrelated nature of the assumptions, movements in any one variable can have an indirect impact on others and
individual variables rarely change in isolation. Additionally, management can be expected to respond to some movements
to mitigate downsides and take advantage of upsides, as circumstances allow. Consequently, it is impracticable to estimate
the indirect impact that a change in one assumption has on other variables and hence, on the likelihood, or extent, of
impairments, or reversals of impairments, under different sets of assumptions in subsequent reporting periods.
During the period, there were no changes to asset useful lives nor depletion or depreciation rates as a result of climate-
related risks. If changes are required in the future, these changes will be accounted for on a prospective basis in accordance
with IFRS.
Recoverable amount and resulting impairment write-downs recognised in the year ended 31 December 2023:
Impairment expense
Exploration and evaluation assets
Oil and gas assets
Goodwill – WA Gas
Total impairment
2023
US$million
2022
US$million
18
57
–
75
2
179
147
328
97
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.4 IMPAIRMENT OF NON-CURRENT ASSETS (CONTINUED)
Recoverable amounts and resulting impairment write-downs recognised in the year ended 31 December 2023:
2023
Segment
Oil and gas assets – producing
Barrow
Western Australia
Total impairment of oil and gas assets
Exploration and evaluation assets
Beanbush
Exploration
Total impairment of exploration and evaluation
Total impairment
Subsurface
assets
US$million
Plant and
equipment
US$million
Goodwill
US$million
Total
US$million
Recoverable
amount
US$million
–
–
18
18
18
57
57
–
–
57
–
–
–
–
–
57
57
18
18
75
Nil1
Nil2
2022
Goodwill
Segment
Goodwill – WA Gas
Western Australia
Total impairment of goodwill
Oil and gas assets – producing
Barrow
Western Australia
Total impairment of oil and gas assets
Exploration and evaluation assets
Rouge Rock
Northern Australia
Total impairment of exploration and evaluation
Total impairment
1 Recoverable amount calculated using the VIU method.
Subsurface
assets
US$million
Plant and
equipment
US$million
Goodwill
US$million
Total
US$million
Recoverable
amount
US$million
–
–
–
–
2
2
2
–
–
179
179
–
–
179
147
147
–
–
–
–
147
147
147
179
179
2
2
328
4833
Nil1
Nil2
2 All exploration and evaluation asset amounts use the FVLCD method. Impairment of exploration and evaluation assets relates to certain individual licenses/
areas of interest that have been impaired to nil.
3 Recoverable amount calculated on the FVLCD method.
Oil and gas assets
The impairment of the Barrow CGU has arisen due to an increase in oil and gas asset carrying values, following
remeasurement of restoration obligations. The recoverable amount of the asset is nil due to the late-life phase of the asset.
Exploration and evaluation assets
The impairment of exploration and evaluation assets has arisen as further work on this license concluded it was not
commercially viable.
98
Financial ReportSantos Annual Report 2023 3.5 RESTORATION OBLIGATIONS AND OTHER PROVISIONS
Provisions recognised for the period are as follows:
Current
Restoration obligations
Other provisions
Non-current
Restoration obligations
Other provisions
Restoration obligations
2023
US$million
2022
US$million
324
114
438
4,014
114
4,128
313
130
443
3,618
174
3,792
Provisions for future removal and environmental restoration costs are recognised where there is a present obligation as
a result of exploration, development, production, transportation or storage activities having been undertaken, and it is
probable that future outflow of economic benefits will be required to settle the obligation. The estimated future obligations
include the costs of removing facilities, abandoning wells and restoring the affected areas, and is the best estimate of the
present value of the future expenditure required to settle the restoration obligation at the reporting date, based on current
legal requirements or observed industry analogs.
Restoration provisions are updated regularly, with changes in the estimate reflected in the present value of the restoration
provision at the reporting date, with a corresponding change in the cost of the associated asset. In the event the restoration
provision is reduced, the cost of the related oil and gas asset is reduced by an amount not exceeding its carrying value. If
the decrease in restoration provision exceeds the carrying amount of the asset, the excess is recognised immediately in
the income statement. The amount of the provision for future restoration costs relating to exploration, development and
production facilities is capitalised and depleted as a component of the cost of those activities.
The timing of restoration activities and the requirements to decommission assets may change, thereby impacting the
present value of associated decommissioning provisions. In addition, cost estimates may change in the future, including as a
result of the energy transition.
Risks associated with climate change are factored into forecast timing of restoration activities and will continue to be
monitored.
Significant judgement – Provision for restoration
The Group estimates the future removal and restoration costs of oil and gas production facilities, wells, pipelines and related
assets at the time of installation of the assets, and reviews these assessments periodically. In most instances, the removal
of these assets will occur many years in the future. The estimate of future removal costs therefore requires management to
make judgements utilising current knowledge and information regarding the removal date, future environmental legislation
and regulations, the extent of restoration activities required, the engineering methodology for estimating costs, and discount
rates to determine the present value of future cash flows.
The Group’s restoration estimates are based on compliance with regulations in the respective jurisdictions in which it
operates.
The Group's provision includes the following costs:
•
•
For onshore assets, provision has been made for the permanent decommissioning of all wells and the full removal
of production facilities and pipelines;
For offshore assets, provision has been made for:
–
–
–
permanent decommissioning of all wells
removal of infrastructure, including but not limited to, platforms and vessels
removal of subsea infrastructure, except some major trunklines as set out below.
99
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.5 RESTORATION OBLIGATIONS AND OTHER PROVISIONS (CONTINUED)
The Group’s estimated future removal and restoration costs may include certain major trunklines remaining in-situ, where
the Group believes it will result in better environmental and safety outcomes than full removal, and that will be satisfactory
to the relevant regulator and the regulator’s compliance obligations. In the event that all major trunklines currently assumed
to be restored in-situ are required to be removed, the Group estimates the additional cost would result in an increase to the
provision of approximately $400-$600 million.
The Group’s restoration provisions reflect estimates based on current knowledge and information, with further assessment
and analysis of restoration activities to be performed towards the end of an asset’s operational life and/or when
decommissioning plans are required by the relevant regulator. The basis of future restoration decommissioning plans or
directions issued by the regulator can differ from the restoration assumptions disclosed above. Actual costs and cash
outflows can materially differ from the current estimates included in the provision recognised as at 31 December 2023 as a
result of changes in regulations and their application, prices, analysis of site conditions, future studies, timing of restoration,
and changes in removal technology.
In addition, the Group is progressing its three hub CCS strategy. This strategy incorporates the utilisation of some elements
of existing infrastructure, potentially extending the life of these assets. Extending the life of these assets will likely defer
certain decommissioning activities and could reduce the decommissioning provision accordingly.
The Group has recorded provisions for restoration obligations as follows:
Current provision
Non-current provision
Movements in the provision during the financial year are set out below:
Balance at 1 January
Provisions made and changes to assumptions during the year
Provisions used during the year
Liabilities transferred from held for sale
Unwind of discount
Change in discount rate
Inflation change
Balance at 31 December
Other provisions
2023
US$million
2022
US$million
324
4,014
4,338
313
3,618
3,931
Total restoration
US$million
3,931
310
(108)
29
160
7
9
4,338
In addition to the provision for restoration shown above, other items for which a provision has been recorded are:
Current
Employee benefits
Remediation provision
Other provisions
Non-current
Employee benefits
Remediation provision
Other provisions
100
Note
7.1
7.1
2023
US$million
2022
US$million
105
2
7
114
14
5
95
114
116
1
13
130
18
7
149
174
Financial ReportSantos Annual Report 2023
3.6 LEASES
The Group as a lessee
Recognition of lease liabilities and right-of-use assets
As a lessee, the Group will recognise a right-of-use asset, representing its right to use the underlying asset, and a lease
liability, for all leases with a term of more than 12 months, exempting those leases where the underlying asset is deemed to
be of a low-value.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date, i.e. when the underlying
asset is first available for use. The right-of-use asset is initially measured to be equal to the lease liability and adjusted for
any lease incentives received, initial direct costs, and estimates of costs to dismantle or remove the underlying leased asset.
Subsequently, the right-of-use asset is measured at cost less any accumulated depreciation and impairment losses, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate, adjusted for asset-specific factors.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments
made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change
in the estimate of the amount expected to be payable under a residual value guarantee or, as appropriate, changes in the
assessment of whether purchase, renewal or termination options are reasonably certain to be exercised.
The Group has applied judgement to determine the lease term for some contracts in which Santos is a lessee that include
purchase, renewal or termination options. The assessment of whether the Group is reasonably certain to exercise such
options impacts the lease term, which affects the value of lease liabilities and right-of-use assets recognised.
Modifications to lease arrangements
In the event that there is a modification to a lease arrangement, a determination of whether the modification results in a
separate lease arrangement being recognised needs to be made. Where the modification does result in a separate lease
arrangement needing to be recognised, due to an increase in scope of a lease through additional underlying leased assets
and a commensurate increase in lease payments, the measurement requirements as described above need to be applied.
Where the modification does not result in a separate lease arrangement, from the effective date of the modification, the
Group will remeasure the lease liability using the redetermined lease term, lease payments and applicable discount rate.
A corresponding adjustment will be made to the carrying amount of the associated right-of-use asset. Additionally, where
there has been a partial or full termination of a lease, the Group will recognise any resulting gain or loss in the income
statement.
Lease impact on joint operating arrangements
Where lease arrangements impact the Group’s joint operating arrangements (JOA), the facts and circumstances of
each lease arrangement in a JOA are assessed to determine the Group’s rights and obligations associated with the lease
arrangement.
The Group applies judgement in its determination of which party directs the use of a leased asset. Outlined below are a
number of scenarios that could exist for lease arrangements which impact the Group’s JOAs:
1)
2)
Where it has been determined that the Group directs the use of the leased asset, and is the only party with legal
obligation to pay the lessor, the Group will recognise the full lease liability and right-of-use asset on its statement of
financial position. Depreciation is then recognised on the entire right-of-use asset, however, other income would be
recognised for any amount of the lease payments that are recoverable from other parties, representing other income
associated with lease arrangements; or
If it has been determined that the leased asset is either jointly controlled by all parties in a joint operation, or is utilised
by a single joint operation, and the Group is the only party with a legal obligation to pay the lessor, the Group will
recognise the full lease liability, its net share of the right-of-use asset, and a receivable for the amounts recoverable from
other parties; or
3)
In instances where it has been determined that all parties to the joint arrangement have the right to control the leased
asset jointly and all parties have a legal obligation to make lease payments to the lessor, the Group will recognise only its
net share of the lease liability and right-of-use asset on its consolidated statement of financial position.
101
Santos Annual Report 2023 Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.6 LEASES (CONTINUED)
The Group’s leasing activities
The Group leases a number of different types of assets, including properties and plant and production equipment, such as
production rigs. The lease arrangements have varying renewal and termination options. Lease terms for major categories of
leased assets are shown below:
• Production rigs
1 – 5 years
• Marine vessels, including LNG tankers
1 – 30 years
• Helicopters
• Building office space
1 – 10 years
10 – 20 years
• Other plant and production equipment
2 – 20 years
The Group presents the following in relation to AASB 16, within its Consolidated Statement of Financial Position:
•
•
‘Other land, buildings, plant and equipment’ or ‘Oil and gas assets’ – right-of-use assets are presented in either
depending on the type of leased asset;
‘Lease liabilities’ – lease liabilities.
Set out below are the carrying amounts of right-of-use assets recognised and their movements during the period:
US$million
Balance at 1 January
Additions
Remeasurements of lease arrangements
Depreciation
Transfer of assets from/(to) held for sale
Balance at 31 December
2023
Other land,
buildings,
plant and
equipment
Oil and gas
assets
600
107
–
(197)
44
554
170
–
–
(20)
–
150
2022
Other land,
buildings,
plant and
equipment
Oil and gas
assets
621
256
(5)
(205)
(67)
600
218
6
(28)
(26)
–
170
Total
770
107
–
(217)
44
704
Total
839
262
(33)
(231)
(67)
770
During the period, $85 million of depreciation on right-of-use assets has been capitalised and forms a component of
additions to oil and gas assets. This capitalisation results in a difference between the amount of depreciation expense
recorded during the period and the movement in accumulated depreciation.
Set out below are the carrying amounts of lease liabilities and the movements during the period:
Lease liabilities
Balance at 1 January
Additions
Remeasurements of lease arrangements
Accretion of interest
Payments
Foreign exchange gain on lease liabilities
Transfer of liabilities from/(to) held for sale
Balance at 31 December
2023
US$million
2022
US$million
846
151
(5)
42
(278)
–
29
785
873
332
(44)
36
(278)
(20)
(53)
846
102
Financial ReportSantos Annual Report 2023
3.6 LEASES (CONTINUED)
Current lease liabilities
Non-current lease liabilities
2023
US$million
2022
US$million
189
596
785
244
602
846
Short-term and low-value lease asset exemptions
The Group had total cash outflows for leases of $563 million in 2023 (2022: $435 million), including outflows for short-term
leases, leases of low-value assets, and variable lease payments.
For the 12-month period ended 31 December, the following payments have been made for lease arrangements that have
been classified as short-term or for low-value assets:
Short-term leases
Leases for low-value assets
Total payments made
Variable lease payments
2023
US$million
2022
US$million
48
38
86
22
39
61
The Group holds lease contracts which contain variable payments based on the usage profile of the leased asset. The type
and quantum of activities undertaken utilising these assets (primarily rigs) is entirely at the Group’s discretion in response to
operational requirements.
The lease liability and corresponding right-of-use asset for these lease contracts is calculated based on the fixed rental
payment components of the contracts. The table below indicates the relative magnitude of variable payments to
fixed payments made during the year ended 31 December, for those lease contracts which contain a variable payment
component.
Fixed payments (included in calculation of lease liability)
Variable payments
Total payments made for leases with a variable payment component
2023
US$million
2022
US$million
278
199
477
279
96
375
Other income associated with lease arrangements
Where it has been determined that the Group directs the use of the leased asset and is the only party with legal obligation
to pay the lessor, the Group recognises other income for any amount of the lease payments that are recoverable from other
parties, representing ‘other income associated with lease arrangements’ in the income statement. For the year ending
31 December 2023, the amount recognised was $58 million (2022: $72 million).
103
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 3: Capital Expenditure, Operating Assets
and Restoration Obligations
3.7 COMMITMENTS FOR EXPENDITURE
The Group has certain obligations to perform minimum exploration work and expend minimum amounts of money pursuant
to the terms of the granting of petroleum exploration permits in order to maintain rights of tenure.
These commitments may be varied as a result of renegotiations of the terms of the exploration permits, licences or
contracts, or alternatively upon their relinquishment. The minimum exploration commitments are less than the normal level
of exploration expenditures expected to be undertaken by the Group.
The Group has the following commitments for expenditure for which no liabilities have been recorded in the financial
statements as the goods or services have not been received, including commitments for non-cancellable lease
arrangements where the lease term has not commenced:
Capital
Minimum exploration
Leases
Commitments
2023
US$million
2022
2023
US$million US$million
2022
2023
US$million US$million
2022
US$million
Not later than one year
Later than one year but not later
than five years
Later than five years
1,012
512
–
1,127
882
–
1,524
2,009
128
644
11
783
121
701
4
826
200
439
1,336
1,975
192
432
1,390
2,014
104
Financial ReportSantos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 4: Working Capital Management
This section provides information about the Group’s working capital balances and management, including cash
flow information. Cash flow management is a significant consideration in running our business in an efficient and
resourceful manner. We also consider inventories which contribute to the business platform for generating profits
and revenues.
4.1 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and short-term deposits that are readily convertible to cash, are subject
to an insignificant risk of changes in value, and generally have an original maturity of three months or less. The carrying
amounts of cash and cash equivalents represent fair value. Bank balances and short-term deposits earn interest at floating
rates based upon market rates.
Cash at bank and in hand
Short-term deposits
(a) Restricted cash balances
2023
US$million
2022
US$million
1,875
–
1,875
1,502
850
2,352
As at 31 December 2023, total Group restricted cash was $596 million (2022: $668 million), including $36 million
disclosed as held for sale (refer Note 6.2). Cash relating to cash flows from the PNG LNG project is required to be held in
restricted bank accounts. As at 31 December 2023, $596 million (2022: $668 million) was held in these accounts.
(b) Reconciliation of cash flows from operating activities
2023
US$million
2022
US$million
Net profit after income tax
Add/(deduct) non-cash items:
Depreciation and depletion
Exploration and evaluation expensed – unsuccessful wells/seismic
Costs associated with acquisitions/disposals
Impairment loss
Net (gain)/loss on fair value derivatives
Share-based payment expense
Restoration expense
Unwind of the effect of discounting on provisions
Foreign exchange losses
Gain on sale of non-current assets and subsidiaries
Share of net (loss)/profit of associates
1,416
1,858
8
(41)
75
16
25
18
175
–
(5)
(5)
2,112
1,747
45
–
328
(17)
42
221
106
22
(15)
16
Net cash provided by operating activities before changes in assets or liabilities
3,540
4,607
Add/(deduct) change in operating assets or liabilities,
net of acquisitions or disposals of businesses:
(Increase)/decrease in trade and other receivables
Decrease/(increase) in inventories
Decrease in other assets
(Increase)/decrease in net deferred tax assets
Decrease in net current tax liabilities
(Decrease)/increase in trade and other payables
Decrease in provisions
(61)
1
17
9
(65)
(38)
(145)
92
(47)
89
50
(144)
49
(138)
Net cash provided by operating activities
3,258
4,558
105
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 4: Working Capital Management
4.1 CASH AND CASH EQUIVALENTS (CONTINUED)
(c) Reconciliation of liabilities arising from financing activities to financing cash flows
US$million
Balance at 1 January 2022
Financing cash flows1
Operating cash flows
Non-cash changes:
Changes in fair values
Reclassification to current liability
Additions to lease liabilities
Other
Transfer of liabilities to held for sale
Balance at 31 December 2022
Balance at 1 January 2023
Financing cash flows1
Operating cash flows
Non-cash changes:
Reclassification to current liability
Additions to lease liabilities
Other
Transfer of liabilities from held for sale
Balance at 31 December 2023
Short-term
Long-term
borrowings borrowings
Assets held
to hedge
liabilities borrowings
Lease
889
(883)
–
(8)
787
–
–
(91)
694
694
(787)
–
689
–
1
49
646
6,287
(1,320)
–
(3)
(787)
–
13
(211)
3,979
3,979
1,292
–
(689)
–
3
143
4,728
873
(242)
(36)
–
–
332
(28)
(53)
846
846
(236)
(42)
–
151
37
29
785
(11)
–
–
11
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
8,038
(2,445)
(36)
–
–
332
(15)
(355)
5,519
5,519
269
(42)
–
151
41
221
6,159
1 Financing cash flows consist of the net amount of proceeds from borrowings, repayments of borrowings and repayment of lease liabilities in the statement of
cash flows.
4.2 TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at the transaction price, as described in Note 2.2, and other receivables are initially
recognised at fair value, which in practice is the equivalent of the transaction price, and subsequently measured at cost, less
any impairment losses.
Long-term receivables are initially recognised at fair value and are subsequently stated at amortised cost, less any
impairment losses.
Trade receivables are non-interest bearing and settlement terms are generally within 30 days.
Trade receivables
Other receivables
2023
US$million
2022
US$million
473
356
829
523
245
768
Due to the nature of the Group’s receivables, their carrying amount is considered to approximate their fair value.
The Group applies the simplified approach to providing for expected credit losses for all trade receivables as set out in
Note 5.5(e).
106
Financial ReportSantos Annual Report 2023
4.3 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling expenses. Cost is determined as follows:
• Drilling and maintenance stocks, which include plant spares, consumables and maintenance and drilling tools
used for ongoing operations, are valued at weighted average cost; and
• Petroleum products, which comprise extracted crude oil, liquefied natural gas, liquefied petroleum gas,
condensate and naphtha stored in tanks and pipeline systems and processed sales gas and ethane stored in
subsurface reservoirs, are valued using the absorption cost method.
Petroleum products
Drilling and maintenance stocks
Inventories included above that are stated at net realisable value
4.4 TRADE AND OTHER PAYABLES
2023
US$million
2022
US$million
165
277
442
19
192
251
443
24
Trade and other payables are recognised when the related goods or services are received at the amount of cash or cash
equivalents that will be required to discharge the obligation, gross of any settlement discount offered. Trade payables are
non-interest bearing and are settled on normal terms and conditions.
Trade payables
Non-trade payables
2023
US$million
2022
US$million
567
513
1,080
805
340
1,145
The carrying amounts of trade and other payables are considered to approximate their fair values, due to their short-term
nature.
107
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
Our business has exposure to capital, credit, liquidity and market risks. This section provides information relating to
our management of, as well as our policies for measuring and managing these risks.
Capital risk management objectives
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, allowing returns
to shareholders and benefits for other stakeholders to be maintained, and to retain an efficient capital structure. In order to
optimise the capital structure, the Group may adjust its dividend distribution policy, return capital to shareholders, issue new
shares, draw or repay debt, or undertake other corporate initiatives consistent with its strategic objectives.
In applying these objectives, the Group aims to:
• minimise the weighted average cost of capital while retaining appropriate financial flexibility
•
ensure ongoing access to a range of debt and equity markets
• maintain an investment-grade credit rating.
A range of financial metrics are used to monitor the capital structure including ratios measuring gearing, funds from
operations to debt (FFO to Net Debt), interest coverage (EBITDA/net interest expense) and Net Debt to earnings before
interest, tax, depreciation and amortisation (Net Debt to EBITDA). The Group monitors these capital structure metrics on
both an actual and forecast basis.
At 31 December 2023, Santos Limited’s corporate credit rating was BBB- (stable outlook) from Standard & Poor’s, BBB
(stable outlook) from Fitch, and Baa3 (stable outlook) from Moody’s.
5.1 INTEREST-BEARING LOANS AND BORROWINGS
Interest-bearing loans and borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to
initial recognition, interest-bearing loans and borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
The carrying values of the Group’s interest-bearing loans and borrowings are shown below.
Fixed-rate notes that are hedged by interest rate swaps are recognised at fair value.
All borrowings are unsecured, with the exception of the secured bank loans and lease liabilities.
All interest-bearing loans and borrowings, with the exception of secured bank loans and lease liabilities, are borrowed
through Santos Finance Ltd, which is a wholly-owned subsidiary of Santos Limited. All interest-bearing loans and borrowings
by Santos Finance Ltd are guaranteed by Santos Limited. Refer to Note 3.6 for disclosures related to leases.
Ref
(a)
(a)
(b)
(c)
2023
US$million
2022
US$million
646
646
1,050
450
3,228
4,728
694
694
1,596
–
2,383
3,979
Current
Bank loans – secured
Non-current
Bank loans – secured
Bank loans – unsecured
Long-term notes
108
Financial ReportSantos Annual Report 2023
5.1 INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED)
The Group’s weighted average interest rate on interest-bearing liabilities was 6.66% for the year ended 31 December 2023
(2022: 4.88%).
(a) Bank loans – secured
Facility
Currency
Limit
Drawn principal
Accounting balance
Effective interest rate
Maturity
Other
PNG LNG
US dollars
$1,806 million (2022: $2,593 million)
$1,806 million (2022: $2,593 million)
$1,696 million (2022: $2,290 million) including prepaid amounts
Accounting balances do not include liabilities reclassified to held for sale; 2023 $110 million (2022:
$302 million) (refer Note 6.2).
9.15% (2022: 7.42%)
2024 and 2026
Loan facilities for the PNG LNG project, in which Santos entities hold an
equity interest of 42.5% (2022: 42.5%), were entered into by the joint venture
participants, through the entity Papua New Guinea Liquified Natural Gas
Global Company LDC (the Borrower) and are provided by commercial banks
and export credit agencies, bear fixed and floating rates of interest, and have
final maturity dates of June 2024 and June 2026 respectively.
Assets pledged as security and restricted cash
The PNG LNG facilities include security over assets and entitlements of the
participants in respect of the project. The total carrying value of the Group’s
assets pledged as security is $8,992 million at 31 December 2023 (2022:
$9,351 million).
As referred to in Note 4.1(a), under the terms of the project financing, cash
relating to the Group’s interest in undistributed project cash flows is required
to be held in restricted bank accounts.
The liquids and LNG sales proceeds from the PNG LNG project are received
into a sales escrow account from which agreed expenditure obligations and
debt servicing are first made and, subject to meeting certain debt service
cover ratio tests, surpluses are distributed to the project participants.
Each borrower granted to the security trustee for the PNG LNG facilities has:
–
–
a first-ranking security interest in all of its assets, with a few limited
exceptions
a fixed and floating charge over existing and future funds in the offshore
accounts; a deed of charge (and assignment) over the sales contracts,
LNG charter party agreements, rights under insurance policies, LNG
supply and sales commitment agreements, on-loan agreements and
the sales, shipping and finance administration agreements, collectively
known as Borrower Material Agreements
–
a mortgage of contractual rights over Borrower Material Agreements.
The Santos participants have granted the security trustee for the Project
Finance Debt Facility a security interest in all their rights, titles, interests in
and to all of their assets, excluding any non-PNG LNG project assets. The
Company, as the shareholder in the Santos Participants, has provided the
security trustee for the PNG LNG facilities a share mortgage over its shares in
the Santos Participants.
The PNG LNG facilities are subject to various covenants and a negative
pledge restricting further secured borrowings, subject to a number of
permitted lien exceptions. Neither the covenants nor negative pledge have
been breached at any time during the reporting period.
109
Santos Annual Report 2023 Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.1 INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED)
Syndicated and bilateral bank loans
US dollars
$3,065 million (2022: $3,115 million)
$450 million (2022: Nil)
$450 million (2022: Nil)
6.99% (2022: 0%)
Various - 2024 to 2029
The syndicated and bilateral bank loans bear a floating interest rate.
Regulation-S bonds
US dollars
$1,400 million (2022: $1,400 million)
$1,400 million (2022: $1,400 million)
$1,389 million (2022: $1,387 million) including prepaid amounts
4.74% (2022: 4.76%)
2027 and 2029
Both bonds bear fixed interest rates.
Rule 144A/Regulation-S bonds
US dollars
$1,850 million (2022: $1,000 million)
$1,850 million (2022: $1,000 million)
$1,839 million (2022: $996 million)
5.20% (2022: 3.69%)
2031 and 2033
During the year, the Group completed a US$850 million Rule 144A/
Regulation-S bond issuance maturing in 2033 at a fixed coupon of 6.875%.
The bonds are unsecured and bear a fixed interest rate.
(b) Bank loans – unsecured
Facility
Currency
Limit
Drawn principal
Accounting balance
Effective interest rate
Maturity
Other
(c) Long-term notes
Facility
Currency
Limit
Drawn principal
Accounting balance
Effective interest rate
Maturity
Other
Facility
Currency
Limit
Drawn principal
Accounting balance
Effective interest rate
Maturity
Other
110
Financial ReportSantos Annual Report 2023 5.2 NET FINANCE COSTS
Borrowing costs
Borrowing costs relating to major oil and gas assets under development are capitalised as a component of the cost of
development. Where funds are borrowed specifically for qualifying projects, the actual borrowing costs incurred are
capitalised. Where the projects are funded through general borrowings, the borrowing costs are capitalised based on
the weighted average cost of borrowing. Borrowing costs incurred after commencement of commercial operations are
expensed to the income statement.
All other borrowing costs are recognised in the income statement using the effective interest method.
Interest income
Interest income is recognised in the income statement as it accrues using the effective interest method.
Finance income
Interest income
Total finance income
Finance costs
Interest expense
Interest on lease liabilities
Deduct borrowing costs capitalised
Unwind of the effect of discounting on contract liabilities – deferred revenue
Unwind of the effect of discounting on provisions
Total finance costs
Net finance costs
5.3 ISSUED CAPITAL
Ordinary share capital
2023
US$million
2022
US$million
106
106
359
42
(243)
158
17
158
333
227
54
54
305
36
(139)
202
16
90
308
254
Ordinary share capital is classified as equity. The issued shares do not have a par value and there is no limit on the authorised
share capital of the Company.
Fully paid ordinary shares carry one vote per share, which entitles the holder to participate in dividends and the proceeds on
winding up of the Company in proportion to the number of, and amounts paid on, the shares held. The market price of the
Company’s ordinary shares on 31 December 2023 was A$7.60 (2022: A$7.14).
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax
benefit. During 2023, no transaction costs in respect of capital raisings were deducted from equity (2022: $Nil).
Movement in ordinary shares
Balance at 1 January
On-market share purchase (Treasury shares)
On-market share purchase (Share buy-back)
Utilisation of Treasury shares on vesting
of employee share schemes
Treasury shares cancelled pursuant to on-market buy-backs
2023
Number of
shares
2022
Number of
2023
shares US$million
2022
US$million
3,313,298,877 3,386,921,635
–
–
–
–
–
(65,525,916)
–
(73,622,758)
14,652
(22)
(316)
25
–
15,030
(36)
(384)
42
–
Balance at 31 December
3,247,772,961 3,313,298,877
14,339
14,652
Included within the Group’s ordinary shares at 31 December 2023 are 10,000 (2022: 10,000) ordinary shares paid to one
cent with a value of Nil (2022: Nil).
111
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.3 ISSUED CAPITAL (CONTINUED)
Treasury shares
Treasury shares are purchased as part of the capital management framework and for use on vesting of employee share
schemes. Shares are accounted for at weighted average cost. During 2023, 65,525,916 (2022: 73,622,758) shares were
purchased on-market and cancelled as part of the capital management framework. The total amount of shares acquired for
this purpose was $316 million (2022: $384 million).
In addition, $22 million (2022: $36 million) of Treasury shares were purchased on-market for employee share arrangements.
Movement in Treasury shares
Balance at 1 January
Shares purchased on-market
Treasury shares cancelled pursuant to on-market buy-backs
Treasury shares utilised:
Santos Employee Share1000 Plan
Santos Employee ShareMatch Plan
Utilised on vesting of SARs
Executive STI (deferred shares)
Executive LTI (ordinary shares)
Santos Employee Share1000 Plan (relinquished shares)
Dividend equalisation shares
2022
2023
Note Number of shares Number of shares
7.2
7.2
7.2
9,217,171
70,025,909
(65,525,916)
9,637,233
80,122,752
(73,622,758)
(147,975)
(569,966)
(1,768,849)
(502,979)
(2,108,265)
3,362
(39,939)
(179,760)
(573,038)
(2,663,841)
(689,384)
(2,815,560)
1,527
–
Balance at 31 December
8,582,553
9,217,171
5.4 RESERVES AND ACCUMULATED PROFIT/(LOSSES)
The balance of the Group’s reserves and accumulated profit/(losses), and movements during the period, are disclosed in the
Statement of Changes in Equity.
Foreign currency translation reserve
The foreign currency translation reserve is used to record foreign exchange differences arising from the translation of the
financial statements of foreign entities from their functional currency to the Group’s presentation currency.
Santos Limited and the majority of its wholly-owned subsidiaries within the Group have a functional currency of US$, the
same currency as the presentation currency of the Group. For non-US$ functional currency entities (foreign operations),
foreign exchange differences resulting from translation to presentation currency are recognised in the foreign currency
translation reserve, and subsequently transferred to the income statement on disposal of the operation. The difference in
foreign exchange rates, at 31 December 2022 to 31 December 2023, resulted in the Group recognising a foreign currency
gain in the translation reserve of $13 million for non-US$ functional currency companies.
Hedging reserve
The hedging reserve comprises the cash flow hedge reserve and the own credit risk revaluation reserve. The cash
flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
The own credit risk revaluation reserve comprises the cumulative changes in the fair value of the financial liabilities
designated at fair value through profit or loss attributable to changes in the Group’s own credit risk. Refer to Note 5.5(g) for
a reconciliation and movement of cash flow hedge reserve and own credit risk revaluation reserve.
Accumulated profits reserve
The accumulated profits reserve acts to quarantine profits generated in current and prior periods. The reserve was
established during 2015.
Accumulated losses
Accumulated losses represent the cumulative net profit/(losses) that have been generated across the Group.
112
Financial ReportSantos Annual Report 2023
5.5 FINANCIAL RISK MANAGEMENT
Exposure to foreign currency risk, interest rate risk, commodity price risk, credit risk and liquidity risk arises in the normal
course of the Group’s business. The Group’s overall financial risk management strategy is to ensure that the Group is able
to fund its corporate objectives and meet its obligations to stakeholders. Derivative financial instruments may be used to
hedge exposure to fluctuations in foreign exchange rates, interest rates and commodity prices.
The Group uses various methods to measure the types of financial risk to which it is exposed. These methods include
sensitivity analysis in the case of foreign exchange, interest rate and commodity price risk, and ageing and credit rating
concentration analysis for credit risk.
Financial risk management is carried out by a central treasury department (Treasury) which operates under Board-approved
policies. The policies govern the framework and principles for overall risk management and cover specific financial risks,
such as foreign exchange risk, interest rate risk, commodity risk and credit risk, approved derivative and non-derivative
financial instruments, and liquidity management.
(a) Financial instruments
The Group classifies its financial instruments in the following categories: financial assets at amortised cost, financial
assets at fair value through profit or loss (FVTPL), financial assets at fair value through other comprehensive income
(FVOCI), financial liabilities at amortised cost, financial liabilities at FVTPL, and derivative instruments. The classification
depends on the purpose for which the financial instruments were acquired, which is determined at initial recognition
based upon the business model of the Group.
Financial assets at amortised cost
The Group classifies its financial assets at amortised cost if the asset is held with the objective of collecting contractual
cash flows and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest. These include trade receivables and bank term deposits. They are financial assets at amortised cost and are
included in current assets, except for those with maturities greater than 12 months after the reporting date.
Financial assets at fair value through profit or loss
The Group classifies its financial assets at fair value through profit or loss if they are acquired principally for the purpose
of selling in the short-term, i.e. are held for trading. The Group has not elected to designate any financial assets at fair
value through profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise debt securities where the contractual cash
flows are solely principal and interest and the objective of the Group’s business model is achieved both by collecting
contractual cash flows and selling financial assets. Upon disposal, any balance within the other comprehensive income
(OCI) reserve for these debt investments is reclassified to accumulated losses.
Financial liabilities
On initial recognition, the Group measures a financial liability at its fair value minus, in the case of a financial liability not
at fair value through profit or loss, transaction costs that are directly attributable to the issue of the financial liability.
After initial recognition, trade payables and interest-bearing loans and borrowings are stated at amortised cost. Fixed-
rate notes that are hedged by an interest rate swap are recognised at fair value. For financial liabilities classified as fair
value through profit or loss, the element of gains or losses attributable to changes in the Group’s own credit risk are
recognised in other comprehensive income.
Policies for the recognition and subsequent measure of derivative liabilities are as outlined below.
Derivative instruments
Derivative financial instruments are entered into by the Group for the purpose of managing its exposures to changes
in foreign exchange rates, commodity prices and interest rates arising in the normal course of business and have been
designated as part of cash flow and fair value hedge relationships. The principal derivatives that may be used are
forward foreign exchange contracts and interest rate swaps. Electricity derivatives are also used to manage the Group’s
exposure to changes in electricity prices. The use of derivative financial instruments is subject to a set of policies,
procedures and limits approved by the Board of Directors. The Group does not trade in derivative financial instruments
for speculative purposes.
113
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Financial instruments (continued)
The Group holds the following financial instruments:
Financial assets
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Other
Financial assets at FVTPL
Derivative financial instruments
1 Balances include held for sale assets.
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Borrowings at amortised cost
Lease liabilities
Other
Financial liabilities at FVTPL
Derivative financial instruments
20231
US$million
20221
US$million
1,911
842
398
133
3,284
2,430
791
120
18
3,359
20231
US$million
20221
US$million
1,091
5,484
809
295
–
7,679
1,164
4,975
899
109
6
7,153
1 Balances include held for sale liabilities.
The Group’s financial instruments resulted in the following income, expenses, gains and losses recognised in the income
statement:
Interest on cash investments
Interest on debt held at FVTPL
Interest on debt held at amortised cost
Interest on derivative financial instruments
Interest accretion on lease liabilities
Fair value gains on debt held at FVTPL
Fair value losses on derivative financial instruments
Net foreign exchange losses
2023
US$million
2022
US$million
106
–
(116)
–
(42)
–
–
(15)
(67)
54
(15)
(165)
14
(36)
11
(140)
(22)
(299)
114
Financial ReportSantos Annual Report 2023
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Liquidity
The Group adopts a prudent liquidity risk management strategy and seeks to maintain sufficient liquid assets and
available committed credit facilities to meet short-term to medium-term liquidity requirements. The Group’s objective is
to maintain flexibility in funding to meet ongoing operational requirements, exploration and development expenditure,
and other corporate initiatives.
The following tables analyse the contractual maturities of the Group’s financial assets and liabilities held to manage
liquidity risk. The relevant maturity groupings are based on the remaining period to the contractual maturity date, as at
31 December. The amounts disclosed in the table are the contractual undiscounted cash flows comprising principal and
interest repayments. Estimated variable interest expense is based upon appropriate yield curves as at 31 December.
Financial assets and liabilities held to manage liquidity risk1
2023
Cash and cash equivalents
Derivative financial assets
Other derivatives
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Bank loans
Long-term notes
Financial assets and liabilities held to manage liquidity risk1
2022
Cash and cash equivalents
Derivative financial assets
Other derivatives
Non-derivative financial liabilities
Trade and other payables
Lease liabilities
Bank loans
Long-term notes
Derivative financial liabilities
Commodity derivatives
1 Balances include held for sale assets and liabilities.
(c) Foreign currency risk
Less than
1 year
2 to 5 More than
5 years
years
US$million US$million US$million US$million
1 to 2
years
1,911
133
(1,091)
(187)
(838)
(159)
–
–
–
(131)
(818)
(159)
–
–
–
–
–
(251)
(857)
(1,236)
–
(488)
–
(2,817)
(231)
(1,108)
(2,344)
(3,305)
Less than
1 year
2 to 5 More than
5 years
years
US$million US$million US$million US$million
1 to 2
years
2,430
18
(1,164)
(250)
(899)
(101)
(6)
28
–
–
–
(142)
(764)
(101)
–
–
–
(231)
(1,172)
(1,093)
–
–
–
(557)
–
(1,759)
–
–
–
(1,007)
(2,496)
(2,316)
Foreign exchange risk arises from commercial transactions and valuations of assets and liabilities that are denominated
in a currency that is not the entity’s functional currency.
The Group is exposed to foreign currency risk principally through the sale of products, borrowings and capital and
operating expenditure incurred in currencies (mostly Australian dollar) other than the entity’s functional currency. In
order to hedge foreign currency risk, the Group may enter into forward foreign exchange, foreign currency swap and
foreign currency option contracts.
The Group also has certain investments in domestic and foreign operations whose net assets are exposed to foreign
currency translation risk. All external borrowings of the Group are denominated in US$.
115
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Foreign currency risk (continued)
The Group has lease liabilities and other monetary items, including financial assets and liabilities, denominated in
currencies other than the functional currency of an operation. These items are restated to US$ equivalents at each
period end, and the associated gain or loss is taken to the income statement. The exception is foreign exchange gains or
losses on foreign currency provisions for restoration at operating sites that are capitalised in oil and gas assets.
At 31 December 2023, the Group had open forward foreign exchange contracts to buy A$1.3 billion and sell US$ (2022:
A$207 million). These contracts had been designated in cash flow hedge relationships.
Sensitivity to foreign currency movement
Based on the Group’s net financial assets and liabilities at 31 December 2023, the estimated impact of a ±15 cent
movement in the Australian dollar exchange rate (2022: ±15 cent) against the US dollar, with all other variables held
constant is $1 million, including the impact of hedging, (2022: $19 million) on post-tax profit and $188 million (2022: $12
million) on equity. The impact on equity is mainly attributable to changes in the fair value of foreign exchange forward
contracts designated as cash flow hedges. The impact of the Papua New Guinean Kina has been assessed as immaterial.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk, as the year end exposure does not
reflect the exposure during the year.
(d) Market risk
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The Group’s risk exposure is managed by maintaining an appropriate mix between fixed and floating rate borrowings
and by the use of interest rate swap contracts. Hedging is evaluated regularly to align with the Group’s policy, interest
rate outlook and risk appetite, ensuring the most cost-effective hedging strategies are applied. Interest rate swaps in
place in 2022 were cancelled. No additional interest rate swaps have been executed in 2023.
Sensitivity to interest rate movement
Based on the net debt position as at 31 December 2023, it is estimated that if the US secured overnight financing rate
(SOFR) changed by ±0.50% (2022: ±0.50%) with all other variables held constant, the impact on post-tax profit is $0.07
million (2022: $1 million).
This assumes that the change in interest rates is effective from the beginning of the financial year and the net debt
position and fixed/floating mix is constant over the year. However, interest rates and the debt profile of the Group are
unlikely to remain constant and therefore the above sensitivity analysis will be subject to change.
Price risk exposure
The Group is exposed to commodity price fluctuations through the sale of petroleum products and other oil price-
linked contracts. The Group may enter into Brent crude oil price swap and option contracts to manage its commodity
price risk. Hedging is evaluated regularly to align with the Group’s policy, pricing outlook and risk appetite, ensuring
the most cost-effective hedging strategies are applied. At 31 December 2023, the Group had 18 million barrels of open
Brent crude oil zero-cost collar option contracts (2022: Nil). These contracts had been designated in a cash flow hedge
relationship.
The Group is exposed to electricity price fluctuations on the purchase of electricity for use in the business. The Group
may enter into electricity swap contracts to manage this exposure. At 31 December 2023, the Group had 642,265
megawatt-hours (MWh) of electricity swaps maturing 2024 to 2026 that are designated in a cash flow hedge relationship.
(e) Credit risk
Credit risk represents the potential financial loss if counterparties fail to complete their obligations under financial
instrument or customer contracts. Santos employs credit policies which include monitoring exposure to credit risk on an
ongoing basis through management of concentration risk and ageing analysis.
The majority of Santos’ gas contracts are spread across major energy retailers and industrial users. Contracts exist in
every mainland state, across a wide range of customers.
The Group considers the probability of default upon initial recognition of the asset and whether there has been a
significant depreciation in credit quality on an ongoing basis throughout each reporting period. A significant decrease
in credit quality is defined as a debtor being greater than 30 days past due in making a contractual payment. The Group
applies the simplified approach to providing for expected credit losses prescribed by AASB 9 Financial Instruments,
which permits the use of the lifetime expected loss provision for all trade receivables and contract assets.
116
Financial ReportSantos Annual Report 2023
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(e) Credit risk (continued)
A default on a financial asset is when the counterparty fails to make contractual payments within 60 days of when they
fall due. Financial assets are written off when there is no reasonable expectation of recovery. The Group categorises
a loan or receivable for write-off when a debtor fails to make contractual repayments greater than 120 days past due.
Where loans or receivables have been written off, the Group continues to engage in enforcement activity to attempt to
recover the receivable due. Where recoveries are made, these are recognised in the income statement.
At 31 December 2023, there were no significant concentrations of credit risk within the Group and financial instruments
are spread amongst a number of financial institutions to minimise the risk of counterparty default.
The maximum exposure to financial institution credit risk is represented by the sum of all cash deposits plus accrued
interest, bank account balances and fair value of derivative assets. The Group’s counterparty credit policy limits this
exposure to commercial and investment banks, according to approved credit limits based on the counterparty’s credit
rating. The minimum credit rating is A- from Standard & Poor’s subject to approved exceptions.
Under the simplified approach, determination of the loss allowance provision and expected loss rate incorporates past
experience and forward-looking information, including the outlook for market demand and forward-looking interest
rates. As the expected loss rate at 31 December 2023 is Nil (2022: Nil), no loss allowance provision has been recorded at
31 December 2023 (2022: Nil).
(f) Fair values
Fair value is the price that would be received to sell an asset or the price that would be paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
•
•
in the principal market for the asset or liability; or
in the absence of a principal market, in the most advantageous market for the asset or liability that is
accessible by the Group.
The financial assets and liabilities of the Group are all initially recognised in the statement of financial position at their
fair values. Receivables, payables, interest-bearing liabilities and other financial assets and liabilities, which are not
subsequently measured at fair value, are carried at amortised cost. The following summarises the significant methods
and assumptions used in estimating the fair values of financial instruments:
Derivatives
The fair value of interest rate swaps is calculated by discounting estimated future cash flows based on the terms of
maturity of each contract, using market interest rates for a similar instrument at the reporting date.
The fair value of forward foreign exchange contracts is determined by discounting future cash flows using market
interest rates and translating the amounts into US dollars using the spot rate at the reporting date. The fair value
of Brent crude options is determined using an option pricing model, which takes into consideration the price of the
option, the strike price, the time until expiration, implied volatility and a risk-free rate. The fair value of electricity
derivative contracts is determined by estimating the difference between the relevant market prices and the
contract strike price, for the notional volumes of the derivative contracts.
Financial liabilities
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the
market rate of interest at the reporting date.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities.
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are
observable, either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based
on observable market data.
All of the Group’s financial instruments were valued using the Level 2 valuation technique.
117
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(g) Derivatives and hedging activity
The Group’s accounting policy for fair value and cash flow hedges are as follows:
Types of hedges
Fair value hedges
Cash flow hedges
What is it?
A derivative or financial instrument
designated as hedging the change in fair
value of a recognised asset or liability.
A derivative or financial instrument
designated to hedge the exposure to
variability in cash flows attributable to a
particular risk associated with an asset,
liability or forecast transaction.
Recognition date
At the date the instrument is designated as a
hedging instrument.
At the date the instrument is designated as a
hedging instrument.
Measurement
Measured at fair value (refer to Note 5.5(f)). Measured at fair value (refer to Note 5.5(f)).
Changes in fair
value
The gains or losses on both the derivative
or financial instrument and hedged asset
or liability attributable to the hedged risk
are recognised in the income statement
immediately.
The gain or loss relating to the effective
portion of interest rate swaps hedging fixed-
rate borrowings is recognised in the income
statement within finance costs, together
with the loss or gain in the fair value of the
hedged fixed-rate borrowings attributable to
interest rate risk.
The gain or loss relating to the ineffective
portion is recognised in the income
statement within other income or other
expenses.
If the hedge no longer meets the criteria
for hedge accounting, the adjustment to
the carrying amount of a hedged item, for
which the effective interest method is used,
is amortised to the income statement over
the period to maturity using a recalculated
effective interest rate.
Movements in fair value of liabilities
designated at FVTPL due to changes in the
Group's own credit risk are recorded in the
Own credit risk revaluation reserve through
OCI and do not get recycled to the income
statement.
Changes in the fair value of derivatives
designated as cash flow hedges are
recognised directly in other comprehensive
income and accumulated in equity in the
hedging reserve to the extent that the hedge
is effective.
Ineffectiveness is recognised on a cash
flow hedge where the cumulative change
in the designated component value of the
hedging instrument exceeds on an absolute
basis the change in value of the hedged item
attributable to the hedged risk. In hedges of
foreign currency purchases this may arise if
the timing of the transaction changes from
what was originally estimated.
To the extent that the hedge is ineffective,
changes in fair value are recognised
immediately in the income statement within
other income or other expenses.
Amounts accumulated in equity are
transferred to the income statement or
the statement of financial position, for a
non-financial asset, at the same time as the
hedged item is recognised.
When a hedging instrument expires or
is sold, terminated or exercised, or when
a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or
loss existing in equity at that time remains
in equity and is recognised when the
underlying forecast transaction occurs.
When a forecast transaction is no longer
expected to occur, the cumulative gain
or loss that was reported in equity is
immediately transferred to the income
statement.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging
instrument. The Group enters into hedge relationships where the critical terms of the hedging instrument match
exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes
in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the
critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness.
118
Financial ReportSantos Annual Report 2023
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(g) Derivatives and hedging activity (continued)
Hedge of monetary assets and liabilities
When a derivative financial instrument is used to hedge the foreign exchange exposure of a recognised monetary asset
or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in the income
statement.
Hedge of net investment in a foreign operation
The gain or loss on an instrument used to hedge a net investment in a foreign operation is recognised directly in equity.
On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equity is
transferred to the income statement. There was no such hedging activity during 2023.
The effects of applying hedge accounting on the Group’s financial position and performance are as follows:
Fair value hedge: Derivative financial instruments – Interest rate swap contracts
2023
US$million
2022
US$million
Carrying amount
Notional amount
Maturity date
Hedge ratio1
Change in value of outstanding hedging instruments since 1 January
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate
–
–
–
–
–
–
–
–
–
–
–
3
(3)
–
Cash flow hedge: Derivative financial instruments – Oil derivative contracts
2023
US$million
2022
US$million
Carrying amount
Notional amount (mmbbl)
Maturity date
Hedge ratio1
Change in value of outstanding hedging instruments since 1 January
Change in value of hedged item used to determine hedge effectiveness
Hedged rate range floor/average cap tranche 1 – 13 mmbbl
Hedged rate range floor/average cap tranche 2 – 5 mmbbl
Cash flow hedge: Derivative financial instruments – Foreign exchange contracts
Carrying amount
Notional amount (A$ millions)
Maturity date
Hedge ratio1
Change in value of outstanding hedging instruments since 1 January
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate
89
18
2024
1:1
89
(89)
75/90.94
80/90.15
(6)
–
–
–
(87)
87
–
–
2023
US$million
2022
US$million
44
1,260
2024
1:1
49
(49)
$0.6480
10
207
2023
1:1
10
(10)
$0.6365
1 The Group has established a hedge ratio of 1:1 for the hedging relationships with the underlying risk of the hedging instrument being identical to the hedged risk
component of the hedged item.
119
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 5: Funding and Risk Management
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(g) Derivatives and hedging activity (continued)
Cash flow hedge: Derivative financial instruments –
Electricity derivatives
Carrying amount
Notional amount (MWh)
Maturity date
Hedge ratio1
Change in value of outstanding hedging instruments
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate
Reserves – Cash flow hedge reserve
Balance at 1 January
Add: Change in fair value of hedging instrument recognised in OCI for the year
(effective portion)
Less: Deferred tax
Balance at 31 December
Reserves – Own credit risk revaluation reserve
Balance at 1 January
Add: Fair value changes on financial liabilities designated at fair value due
to own credit risk
Balance at 31 December
2023
US$million
2022
US$million
–
642,265
2024 - 2026
1:1
9
(9)
$90.67
8
226,612
2023 - 2024
1:1
(9)
9
$62.80
2023
US$million
2022
US$million
2
(132)
39
(91)
49
(67)
20
2
2023
US$million
2022
US$million
13
–
13
12
1
13
1 The Group has established a hedge ratio of 1:1 for the hedging relationships with the underlying risk of the hedging instrument being identical to the hedged risk
component of the hedged item.
120
Financial ReportSantos Annual Report 2023
5.5 FINANCIAL RISK MANAGEMENT (CONTINUED)
(h) Other financial assets and liabilities
The table below contains all other financial assets and liabilities as shown in the statement of financial position, including
derivative financial instruments used for hedging:
2023
US$million
2022
US$million
Current assets
Foreign exchange contracts
Electricity derivatives
Commodity derivatives (oil hedges)
Deposit
Sub-lease receivables
Other
Non-current assets
Electricity derivatives
Sub-lease receivables
Loan to equity accounted entity
Other
Current liabilities
Commodity derivatives (oil hedges)
Sundry liability
Other
Non-current liabilities
Other
44
–
89
252
17
2
404
–
32
61
34
127
–
252
5
257
38
38
10
8
–
55
36
–
109
1
10
–
18
29
6
55
7
68
48
48
(i) Interest Rate Benchmark Reform
The London Interbank Offered Rate (LIBOR) and other benchmark interest rates have been replaced by alternative risk-
free rates (ARR) as part of interbank offer rate (IBOR) reform. USD LIBOR ceased to be published from 30 June 2023.
During 2023, the remaining exposure to USD LIBOR, the PNG LNG secured bank loans which had a reference rate of
USD LIBOR (six months) transitioned to Secured Overnight Financing Rate (SOFR).
All other facilities that referenced an IBOR rate transitioned to SOFR during 2022.
121
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 6: Group Structure
This section provides information which will help users understand how the Group structure affects the financial
position and performance of the Group as a whole. Specifically, it contains information about consolidated entities,
acquisitions and disposals of subsidiaries, and joint arrangements, as well as parties to the Deed of Cross Guarantee
under which each company guarantees the debts of others.
6.1 CONSOLIDATED ENTITIES
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has the rights to,
variable returns from its involvement with an entity and has the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases.
Acquisitions of subsidiaries are accounted for using the acquisition method of accounting. The cost of an acquisition is
measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in
the acquiree at the lower of either fair value or the proportionate share of the acquiree’s identifiable net assets.
Entities have a 12-month measurement period from the acquisition date to finalise the fair values of assets and liabilities
acquired. If new information obtained within the 12 months from acquisition date about facts and circumstances that existed
at the acquisition date identifies adjustments to fair values, or any additional provisions that existed at the acquisition date,
then the accounting for the acquisition, including the value of goodwill, is updated retrospectively.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date.
If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair
value and any resulting gain or loss is recognised in the income statement.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be
recognised in accordance with AASB 9 either in the income statement or as a charge to other comprehensive income.
If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled within equity. In
instances where the contingent consideration does not fall within the scope of AASB 9, it is measured in accordance with the
appropriate AASB standard.
A change in ownership interest of a subsidiary that does not result in the loss of control is accounted for as an equity
transaction.
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
All subsidiaries within the Group are wholly-owned.
122
Financial ReportSantos Annual Report 2023
6.1 CONSOLIDATED ENTITIES (CONTINUED)
Name
Country of Incorporation
Name
Country of Incorporation
Santos Limited1 (Parent Company) Controlled entities:
Alliance Petroleum Australia Pty Ltd1
Basin Oil Pty Ltd1
Bridgefield Pty Ltd
Bridge Oil Developments Pty Ltd1
Bronco Energy Pty Ltd1
Doce Pty Ltd
Fairview Pipeline Pty Ltd1
Moonie Pipeline Company Pty Ltd
Papuan Oil Search Ltd5
Oil Search (Uramu) Pty Ltd
Oil Search (USA) Inc
Oil Search (Alaska) LLC
Oil Search Ltd
Oil Search (Middle Eastern) Ltd
Oil Search (Iraq) Ltd
Oil Search (Libya) Ltd
Oil Search (Tunisa) Ltd
Oil Search (Newco) Ltd
Oil Search (Gas Holdings) Ltd
Oil Search (Tumbudu) Ltd
Oil Search Highlands Power Ltd
Oil Search (PNG) Ltd
Oil Search (Drilling) Ltd
Oil Search (Exploration) Inc
Oil Search (LNG) Ltd
Oil Search Finance Ltd
Oil Search Power Holdings Ltd
PNG Biomass Ltd
Markham Valley Renewables Ltd
Santos Foundation Ltd3
Pac LNG Investments Ltd
Pac LNG Assets Ltd
Pac LNG International Ltd
Pac LNG Overseas Ltd
Pac LNG Holdings Ltd
Reef Oil Pty Ltd1
Santos Australian Hydrocarbons Pty Ltd
Santos (BOL) Pty Ltd1
Santos Browse Pty Ltd
Santos CSG Pty Ltd1
Santos Darwin LNG Pty Ltd
Santos Direct Pty Ltd
Santos Finance Ltd
Santos Foundation Pty Ltd2,4
Santos GLNG Pty Ltd
Santos International Holdings Pty Ltd
Santos Americas and Europe LLC
Santos TPY LLC
Santos Queensland LLC
Santos TOG LLC
Santos TPY CSG LLC
Barracuda Ltd
Lavana Ltd
Sanro Insurance Pte Ltd
Santos Bangladesh Ltd
Santos (UK) Ltd
Santos Northwest Natuna B.V.
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
USA
USA
PNG
BVI
BVI
BVI
BVI
BVI
PNG
PNG
PNG
PNG
PNG
CI
PNG
BVI
PNG
PNG
PNG
PNG
PNG
PNG
PNG
PNG
PNG
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
USA
USA
USA
USA
USA
PNG
PNG
SGP
GBR
GBR
NDL
Santos NA (19-12) Pty Ltd
Santos NA (19-13) Pty Ltd
Santos NA Bayu Undan Pty Ltd
Santos NA Emet Pty Ltd
Santos NA Timor Sea Pty Ltd
Santos NA Timor Leste Pty Ltd
Santos Hides Ltd
Santos P’nyang Ltd
Santos Sangu Field Ltd
Santos Singapore Hold Co Pte Ltd2
Santos SG Trading Pte Ltd2
Santos Singapore Shipping Pte Ltd2
Santos Vietnam Pty Ltd
Santos TOGA Pty Ltd
Santos (JPDA 91-12) Pty Ltd
Santos Midstream Holdings Pty Ltd1
Santos Devil Creek Pty Ltd1
Santos Resources Pty Ltd1
Santos Infrastructure Holdings Pty Ltd
Santos Midstream Asset Holdings Pty Ltd
Santos Infrastructure WAQ Holdings Pty Ltd
Santos Infrastructure WAQVIDC Pty Ltd
Santos Infrastructure WAQ Assets Pty Ltd
Santos Infrastructure West Holdings Pty Ltd
Santos Infrastructure WASDCA Pty Ltd
Santos Infrastructure WASVIA Pty Ltd
Santos (NARNL Cooper) Pty Ltd1
Santos NSW Pty Ltd
Santos NSW (Betel) Pty Ltd
Santos NSW (Hillgrove) Pty Ltd
Santos NSW (Holdings) Pty Ltd
Santos NSW (LNGN) Pty Ltd
Santos NSW (Pipeline) Pty Ltd
Santos NSW (Narrabri Energy) Pty Ltd
Santos NSW (Eastern) Pty Ltd
Hunter Gas Pipeline Pty Ltd
Santos NSW (Narrabri Gas) Pty Ltd
Santos NSW (Narrabri Power) Pty Ltd
Santos NSW (Operations) Pty Ltd
Santos (N.T.) Pty Ltd
Bonaparte Gas & Oil Pty Ltd
Santos Offshore Pty Ltd1
Santos Petroleum Pty Ltd1
Santos QLD Upstream Developments Pty Ltd
Santos QNT Pty Ltd1
Outback Energy Hunter Pty Ltd
Santos QNT (No. 1) Pty Ltd
Santos QNT (No. 2) Pty Ltd
Petromin Pty Ltd
Santos Wilga Park Pty Ltd
Santos (TGR) Pty Ltd
Santos Timor Sea Pipeline Pty Ltd
Santos Ventures Pty Ltd
Santos WA Holdings Pty Ltd1
Santos KOTN Holdings Pty Ltd1
Santos KOTN Pty Ltd1
Santos Agency Pty Ltd
Santos NA Barossa Pty Ltd
AUS
AUS
AUS
AUS
AUS
AUS
PNG
PNG
GBR
SGP
SGP
SGP
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
123
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 6: Group Structure
6.1 CONSOLIDATED ENTITIES (CONTINUED)
Name
Country of Incorporation
Name
Country of Incorporation
Santos NA Browse Basin Pty Ltd
Santos Singapore Management Pte Ltd
Santos NA Energy Holdings Pty Ltd1
Santos NA Energy Pty Ltd1
Santos NA Asset Holdings Pty Ltd1
Santos NA Assets Pty Ltd1
Santos NA Darwin Pipeline Pty Ltd
Santos WA AEC Pty Ltd1
Santos WA Energy Holdings Pty Ltd1
Santos WA Asset Holdings Pty Ltd1
Santos WA Lowendal Pty Ltd
Santos WA International Pty Ltd
Harriet (Onyx) Pty Ltd1
Santos WA Energy Ltd1
Ningaloo Vision Holdings Pte Ltd
Northwest Jetty Services Pty Ltd
Santos WA DC Pty Ltd
AUS
SGP
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
SGP
AUS
AUS
Notes
1 Company is party to a Deed of Cross Guarantee (refer Note 6.5).
2 Company incorporated during the 2023 financial year.
Santos WA Finance Holdings Pty Ltd
Santos WA (Exmouth) Pty Ltd
Santos WA East Spar Pty Ltd1
Santos WA Julimar Holdings Pty Ltd
Santos WA Kersail Pty Ltd1
Santos WA LNG Pty Ltd
Santos WA Management Pty Ltd
AUS
AUS
AUS
AUS
AUS
AUS
AUS
Santos WA Finance General Partnership AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
AUS
Santos WA Northwest Pty Ltd1
Santos WA Onshore Holdings Pty Ltd
Santos WA PVG Holdings Pty Ltd1
Santos WA PVG Pty Ltd1
Santos WA Southwest Pty Ltd1
Santos WA Varanus Island Pty Ltd1
SESAP Pty Ltd
Vamgas Pty Ltd1
3 Santos Foundation Ltd is a Trustee of the Santos Foundation Trust (previously Oil Search Foundation Trust), a not-for-profit organisation established for
charitable purposes in Papua New Guinea. This Trust is not controlled and is not consolidated within the Group. Santos Foundation Ltd was previously
registered under the name Oil Search Foundation Ltd until 19 June 2023.
4 Santos Foundation Pty Ltd is a Trustee of the Santos Foundation Trust, a not-for-profit organisation established for charitable purposes in Australia. This Trust is
not controlled and is not consolidated within the Group.
5 Papuan Oil Search Ltd was sold to Santos Ltd from Oil Search Ltd on 15 December 2023.
Country of incorporation
AUS Australia
BVI
British Virgin Islands
CI
Cayman Islands
GBR United Kingdom
NDL Netherlands
PNG Papua New Guinea
SGP
Singapore
USA United States of America
124
Financial ReportSantos Annual Report 2023
6.2 ASSETS HELD FOR SALE
Non-current assets are classified as held for sale and measured at the lower of their carrying amount and fair value less costs
of disposal if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or
amortised. For an asset to be classified as held for sale, it must be available for immediate sale in its present condition and its
sale must be highly probable.
In 2022, Santos received a binding conditional offer from Kumul Petroleum Holdings Limited (Kumul) to acquire a 5 per cent
interest in PNG LNG assets, including a proportionate share of project finance debt. The associated assets and liabilities
of the disposal group were classified as held for sale as at 31 December 2022. In September 2023, the transaction was
restructured to include a binding sales agreement for a 2.6 per cent share of the PNG LNG project and the issuance of a call
option to Kumul for the remaining 2.4 per cent. The sale of the 2.6 per cent remains held for sale as at 31 December 2023.
Refer to Note 8.2 for events relating to this transaction subsequent to 31 December 2023.
The sale of the 2.4 per cent, subject to the option for Kumul to acquire the share at their discretion, was reassessed under
the held for sale criteria in AASB 5 Non-current Assets Held for Sale and Discontinued Operations and was concluded to no
longer meet these criteria. This resulted in a reclassification of the assets and liabilities from held for sale and the recognition
of depreciation in 2023 on the oil and gas assets of $51 million.
The following amounts are included within the financial statements in relation to assets and liabilities classified as held for
sale:
Assets and liabilities classified as held for sale
2023
US$million
2022
US$million
Cash and cash equivalents
Trade and other receivables
Prepayments
Contract assets
Inventories
Exploration and evaluation assets
Oil and gas assets
Goodwill
Assets classified as held for sale
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Lease liabilities
Deferred tax liabilities
Liabilities classified as held for sale
Net assets
Amounts included in equity:
Foreign currency translation reserve
Reserves of the disposal group
36
13
1
–
5
–
496
66
617
11
110
16
24
111
272
345
49
49
78
23
2
18
10
33
1,021
126
1,311
19
302
42
53
255
671
640
49
49
125
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 6: Group Structure
6.3 JOINT ARRANGEMENTS
The Group’s investments in joint arrangements are classified as either joint operations or joint ventures depending on
the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement. Santos’
exploration and production activities are often conducted through joint arrangements governed by joint operating
agreements, production-sharing contracts or similar contractual relationships.
The differences between joint operations and joint ventures are as follows:
Types of arrangement
Joint operation
Joint venture
Characteristics
Rights and obligations
Accounting method
A joint operation involves the joint
control, and often the joint ownership, of
assets contributed to, or acquired for the
purpose of, the joint operation. The assets
are used to obtain benefits for the parties
to the joint operation and are dedicated to
that purpose.
Each party has control over its share of
future economic benefits through its
share of the joint operation, and has rights
to the assets, and obligations for the
liabilities, relating to the arrangement.
The interests of the Group in joint
operations are brought to account by
recognising the Group’s share of jointly
controlled assets, share of expenses and
liabilities incurred, and the income from
its share of the production of the joint
operation.
The Group has interests in joint ventures,
whereby the venturers have contractual
arrangements that establish joint control
over the economic activities of the
entities.
Parties that have joint control of the
arrangement have rights to the net assets
of the arrangement.
The Group recognises its interest in joint
ventures using the equity method of
accounting.
Under the equity method, the investment
in a joint venture is initially recognised
in the Group’s statement of financial
position at cost and adjusted thereafter to
recognise the post-acquisition changes to
the Group’s share of net assets of the joint
venture. After application of the equity
method, the Group determines whether it
is necessary to recognise any impairment
loss with respect to the Group’s net
investment in the joint venture.
The Group’s share of the joint venture’s
post-acquisition profits or losses is
recognised in the income statement and
its share of post-acquisition movements in
reserves is recognised in the statement of
changes in equity and, when applicable, in
the statement of comprehensive income.
Dividends receivable from the joint
venture reduce the carrying amount of the
investment in the consolidated financial
statements of the Group.
126
Financial ReportSantos Annual Report 2023
6.3 JOINT ARRANGEMENTS (CONTINUED)
(a) Joint operations
The following are the material joint operations in which the Group has an interest:
Joint operation
Area of cash
generating unit/
area of interest
Principal activities
2023
% Interest
2022
% Interest
Oil and gas assets – Producing assets
Combabula
Fairview
GLNG Downstream
Macedon/Pyrenees
PNG LNG1
Roma
SA Fixed Factor Area
SWQ Unit
Caldita/Barossa
Pikka Unit (Phase 1)
GLNG
GLNG
GLNG
North Carnarvon
PNG LNG
GLNG
Cooper Basin
Cooper Basin
Bonaparte Basin
Alaska
Gas production
Gas production
LNG facilities
Oil and gas production
Gas and liquids production
Gas production
Oil and gas production
Gas production
Gas production
Oil production
Exploration and evaluation assets
EP161
McArthur Basin
Bedout
WA-435-P, WA-437-P
Bedout
WA-436-P, WA-438-P
Bonaparte Basin
WA-58-R (WA-274-P)
Browse
WA-80-R
WA-281-P
Browse
WA-90-R, WA-91-R, WA-92-R Browse
Muruk 1
Petrel
PRL-9
Horseshoe
Pikka Unit (Phase 2)
PRL-15 (Papua LNG Project)
PRL-3
PNG
Bonaparte Basin
PNG
Alaska
Alaska
PNG
PNG
Contingent gas resource
Contingent oil and gas
Oil and gas exploration
Gas development
Contingent gas resource
Gas and liquids exploration
Gas and liquids exploration
Gas and liquids exploration
Contingent gas resource
Gas and liquids exploration
Oil and gas exploration
Oil and gas exploration
Gas exploration
Gas exploration
7.3
22.8
30.0
28.6
42.5
30.0
66.6
60.1
50.0
51.0
75.0
80.0
70.0
30.0
47.8
70.5
40.0
57.5
40.3
40.0
51.0
51.0
22.8
38.5
7.3
22.8
30.0
28.6
42.5
30.0
66.6
60.1
50.0
51.0
75.0
80.0
70.0
30.0
47.8
70.5
40.0
57.5
40.3
40.0
51.0
51.0
22.8
38.5
1 The Group has classified a 2.6% interest in PNG LNG as held for sale at 31 December 2023. Refer Note 6.2. This sale partially completed on 31 January 2024.
Refer Note 8.2.
127
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 6: Group Structure
6.3 JOINT ARRANGEMENTS (CONTINUED)
(b) Investments in equity accounted associates and joint ventures
The Group’s only material joint venture is Darwin LNG Pty Ltd, which operates the Darwin LNG liquefaction facility
that currently processes gas from the Bayu-Undan gas fields. The Group’s interest in Darwin LNG is 43.4 per cent.
The investment is accounted for as an equity accounted investment in an associate, given the Group is deemed to have
only significant influence over the separately incorporated company, based on the structure of voting and decision-
making rights.
Summarised financial information of the joint venture, based on the amounts presented in its financial statements, and a
reconciliation to the carrying amount of the investment in the consolidated financial statements, are set out below:
Share of investment in Darwin LNG Pty Ltd
Group’s equity interest
Summarised net asset position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Closing net assets
Group’s share of net assets
Summarised income statement
Gross profit
Other income and expenses
Depreciation and amortisation
Profit/(loss) before tax
Income tax benefit/(expense)
Net profit /(loss) after tax for the period
Group’s share of net profit /(loss) of associates
Reconciliation to carrying amount
Opening balance
Add: Group’s share of net profit/(loss)
Shareholder Loan
Dividends received
Carrying amount of investments in associates
2023
US$million
2022
US$million
43.4%
43.4%
221
993
(57)
(222)
935
406
2
(6)
8
4
22
26
11
373
11
384
22
–
406
225
876
(162)
(81)
858
373
60
(48)
(71)
(59)
10
(49)
(21)
399
(21)
378
–
(5)
373
128
Financial ReportSantos Annual Report 2023
6.3 JOINT ARRANGEMENTS (CONTINUED)
(b) Investments in equity accounted associates and joint ventures (continued)
The following are the equity accounted associates and joint ventures in which the Group has an interest, including those
which are immaterial:
Equity accounted associate or joint venture
Darwin LNG Pty Ltd
GLNG Operations Pty Ltd
NiuPower Ltd
NiuEnergy Ltd
Pacific Compass LLC
2023
% Interest
2022
% Interest
43.4
30.0
50.0
50.0
51.0
43.4
30.0
50.0
50.0
–
At 31 December 2023, the Group reassessed the carrying amount of its investments in equity accounted associates and
joint ventures for indicators of impairment. As a result, no impairment was recorded (2022: $nil).
The opening carrying value of equity accounted associates and joint ventures (other than Darwin LNG Pty Ltd)
was $6 million. Share of profits for the period was a $6 million loss, which equates to the closing carrying value at
31 December 2023 of nil.
6.4 PARENT ENTITY DISCLOSURES
Selected financial information of the ultimate parent entity in the Group, Santos Limited, is as follows:
Net profit for the period
Total comprehensive income
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated profits reserve
Other reserves
Accumulated losses
Total equity
Commitments of the parent entity
The parent entity’s commitments are:
Capital expenditure commitments
Minimum exploration commitments
2023
US$million
2022
US$million
1,022
1,022
419
13,713
311
883
14,375
1,396
(1,306)
(1,635)
12,830
2
11
11
11
808
13,728
366
822
14,691
1,271
(1,306)
(1,750)
12,906
27
12
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
All interest-bearing loans and borrowings, as disclosed in Note 5.1, with the exception of the lease liabilities and secured bank
loans, are arranged through Santos Finance Ltd, which is a wholly-owned subsidiary of Santos Limited. All interest-bearing
loans and borrowings of Santos Finance Ltd are guaranteed by Santos Limited.
Contingent liabilities of the parent entity
Contingent liabilities arise in the ordinary course of business through claims against Santos Limited, including contractual,
third-party and contractor claims. In most instances, it is not possible to reasonably predict the outcome of these claims
and, as at reporting date, Santos Limited believes that the aggregate of such claims will not materially impact the Company’s
Financial Report.
129
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 6: Group Structure
6.5 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (the Instrument), the Company and each
of the wholly-owned subsidiaries identified in Note 6.1 (collectively, the Closed Group) are relieved from the Corporations
Act 2001 requirements for preparation, audit and lodgement of their financial reports.
As a condition of the Instrument, the Closed Group has entered into a Deed of Cross Guarantee (the Deed). The effect of the
Deed is that the Company has guaranteed to pay any deficiency in the event of winding up of any of the subsidiaries under
certain provisions of the Corporations Act 2001. The subsidiaries have also given a similar guarantee in the event that the
Company is wound up.
Set out below is a consolidated income statement, consolidated statement of comprehensive income and summary of
movements in consolidated accumulated losses for the year ended 31 December of the Closed Group. No changes to the
Deed group occurred during 2023.
2023
US$million
2022
US$million
Consolidated income statement
Product sales
Cost of sales
Gross (loss)/profit
Other revenue
Other income
Other expenses
Impairment of non-current assets
Interest income
Finance costs
Profit/(loss) before tax
Income tax benefit
Royalty-related tax benefit/(expense)
Total tax benefit
Net profit/(loss) for the period
Total comprehensive profit/(loss)
Summary of movements in the Closed Group’s accumulated losses:
Accumulated losses at 1 January
Transfer to accumulated profits reserve
Net profit/(loss) for the period
Share-based payment transactions
Accumulated losses at 31 December
1,766
(1,779)
(13)
79
1,202
(301)
(63)
187
(962)
129
255
74
329
458
458
(3,858)
(900)
458
–
(4,300)
2,394
(1,828)
566
99
222
(418)
(328)
72
(580)
(367)
68
(29)
39
(328)
(328)
(3,526)
–
(328)
(4)
(3,858)
130
Financial ReportSantos Annual Report 2023
6.5 DEED OF CROSS GUARANTEE (CONTINUED)
Set out below is a consolidated statement of financial position as at 31 December of the Closed Group.
2023
US$million
2022
US$million
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Other financial assets
Exploration and evaluation assets
Oil and gas assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other current liabilities
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
172
4,901
279
5,352
12,278
977
5,593
1,813
20,661
26,013
10,659
496
11,155
12
2,489
328
2,829
13,984
12,029
14,339
1,990
(4,300)
12,029
129
6,268
287
6,684
11,227
959
5,668
1,821
19,675
26,359
9,991
527
10,518
–
2,498
676
3,174
13,692
12,667
14,652
1,873
(3,858)
12,667
131
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 7: People
This section includes information relating to the various programs the Group uses to reward and recognise
our people. It includes details of our employee benefits, share-based payment schemes and key management
personnel.
7.1 EMPLOYEE BENEFITS
Wages, salaries and sick leave
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled within 12 months of the
reporting date, are recognised in respect of employee service up to the reporting date. They are measured at the amounts
expected to be paid when the liabilities are settled. Expenses for non-vesting sick leave are recognised when the leave is
taken and are measured at the rates paid or payable.
Long-term service benefits
Liabilities for long service leave and annual leave that is not expected to be taken within 12 months of the respective service
being provided, are recognised and measured at the present value of the estimated future cash outflows to be made in
respect of employee service up to the reporting date.
Defined contribution plans
The Group makes contributions to several defined contribution superannuation plans. Obligations for contributions are
recognised as an expense in the income statement as incurred. The amount incurred during the year was $19 million (2022:
$19 million).
The following amounts are recognised in the Group’s statement of financial position in relation to employee benefits:
Current provisions
Employee benefits
Non-current provisions
Employee benefits
Total employee benefits provisions
2023
US$million
2022
US$million
105
14
119
116
18
134
132
Financial ReportSantos Annual Report 2023
7.2 SHARE-BASED PAYMENT PLANS
The Group provides benefits to employees of the Group through share-based incentives. Employees are paid for their
services or incentivised for their performance in part through shares or rights over shares.
Santos share-based payment plans are equity-settled. The equity-settled plans consist of the general employee share-based
payment plans, Executive Long-Term Incentive share-based payment plans and Executive Short-Term Incentive share-based
payment plans.
The amounts recognised in the income statement of the Group during the financial year in relation to shares issued under
the share plans are summarised as follows:
2023
US$000
2022
US$000
Employee expenses:
General employee share plans:
Share1000 Plan
ShareMatch Plan (matched Share Appreciation Rights (SARs))
Executive Long-Term Incentive share-based payment plans – equity-settled
Executive Short-Term Incentive share-based payment plans – equity-settled
Other equity grants
(785)
(2,861)
(8,736)
(5,526)
(7,027)
(831)
(2,882)
(11,538)
(6,055)
(5,012)
(24,935)
(26,318)
The net impact from share-based payment plans, net of Treasury shares utilised in the current year, is net nil
(2022: $4 million decrease in accumulated losses).
133
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 7: People
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
(a) Equity-settled share-based payment plans
The cost of equity-settled transactions is determined by the fair value at the grant date using an appropriate valuation
model. The cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period
in which the performance and/or service conditions are met. Currently, the Company has four equity-settled share-based
payment plans in operation, the details of which are as follows:
i. General employee share plans
Santos operates two general employee share plans, the Share1000 Plan and the ShareMatch Plan. Eligible
employees have the option to participate in either the Share1000 Plan or the ShareMatch Plan. Directors of the
Company, key management personnel, Senior Executives, casual employees, employees on fixed-term contracts,
employees on international assignment and employees with an unsatisfactory performance rating in the previous
year are excluded from participating in the Share1000 Plan and the ShareMatch Plan.
Share1000
ShareMatch
What is it?
The Share1000 Plan provides for grants
of fully paid ordinary shares up to a
value determined by the Board, which in
2023 was A$1,000 per employee (2022:
A$1,000).
The ShareMatch Plan allows for the
purchase of shares up to $5,000 on a
pre-tax basis. Shares are provided via an
employee loan, repaid over a maximum
12-month period, and employees receive
matched SARs of between 50% to 200%
of their purchase value subject to their
performance rating.
The employee’s
ownership and right
to deal with them
Subject to restrictions until the earlier of
the expiration of the three-year restriction
period and the time when the employee
ceases to be in employment.
Upon vesting, subject to restrictions until
the earlier of the expiration of the three-
year restriction period and the time when
he or she ceases to be an employee.
How is the fair
value recognised?
The fair value of these shares is
recognised as an employee expense with
a corresponding increase in issued capital,
and the fair value per share is determined
by the Volume Weighted Average Price
(VWAP) of ordinary Santos shares on the
ASX during the week up to and including
the date of issue of the shares.
The fair value of the shares is recognised
as an increase in issued capital and a
corresponding increase in loans receivable.
The fair value per share is determined by
the VWAP of ordinary Santos shares on the
ASX during the week up to and including
the date of issue of the shares.
The fair value of services required in return
for matched SARs granted is measured
by reference to the fair value of matched
SARs granted. The estimate of the fair
value of the services received is measured
by discounting the share price on the grant
date using the assumed dividend yield and
recognised as an employee expense for the
term of the matched SARs.
The following shares were issued pursuant to the employee share plans during the period:
Share1000 Plan
ShareMatch Plan
Issue date
Issued shares
No.
Fair value
per share
A$
Issued shares
No.
Fair value
per share
A$
31 July
4 October
147,975
179,760
7.96
7.11
569,966
573,038
7.96
7.11
Year
2023
2022
134
Financial ReportSantos Annual Report 2023
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
i. General employee share plans (continued)
The number of SARs outstanding and movements throughout the financial year are:
Year
2023 Total
2022 Total
Beginning of
the year
No.
Granted
No.
Lapsed
No.
Vested
No.
End of
the year
No.
2,408,894
690,998
(213,485)
(933,767)
1,952,640
2,402,984
703,437
(176,240)
(521,287)
2,408,894
The inputs used in the valuation of the SARs are as follows:
Matched SARs grant
Share price on grant date (A$)
Exercise price (A$)
Right life (weighted average, years)
Expected dividends (% p.a.)
Fair value at grant date (A$)
31 July 2023
7.96
Nil
3
–
7.96
The loan arrangements relating to the ShareMatch Plan are as follows:
During the year, the Company utilised $3 million of Treasury shares (2022: $3 million) under the ShareMatch
Plan, with $3 million (2022: $2 million) received from employees under loan arrangements. The movements in
loans receivable from employees are:
Employee loans at 1 January
Treasury shares utilised during the year
Cash received during the year
Foreign exchange movement
Employee loans at 31 December
2023
US$000
2022
US$000
2,107
3,023
(3,319)
(16)
1,795
1,515
2,650
(2,136)
78
2,107
ii. Executive Long-Term Incentive share-based payment plans
The Company’s Executive Long-Term Incentive (LTI) Program provides for eligible Executives selected by the
Board to receive SARs upon the satisfaction of set market and non-market performance conditions. Each SAR
is a conditional entitlement to a fully paid ordinary share, subject to the satisfaction of performance or service
conditions, on terms and conditions determined by the Board. The Board has the discretion to cash-settle SARs
granted under the amended Santos Employee Equity Incentive Plan.
The fair value of SARs is recognised as an employee expense with a corresponding increase in equity. The fair value
is measured at grant date and recognised over the period during which the Executive becomes unconditionally
entitled to the SARs. The fair value of the performance-based SARs granted is measured using a Monte Carlo
simulation method, taking into account the terms and market conditions upon which the SARs were granted. The
fair value of the deferred SARs granted is measured by discounting the share price on the grant date using the
assumed dividend yield for the term of the SAR. The amount recognised as an expense is only adjusted when SARs
do not vest due to non-market-related conditions.
The 2023 LTI Program offers consisted only of SARs. Performance Awards were granted to eligible Executives in
2023 who were granted one four-year grant (1 January 2023 – 31 December 2026).
135
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 7: People
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
ii. Executive Long-Term Incentive share-based payment plans (continued)
Vesting of the grants is based on the following performance targets:
•
•
•
•
25 per cent of the SARs are subject to Santos’ Total Shareholder Return (TSR) relative to the performance of
the ASX 100 companies (ASX 100 comparator group);
25 per cent are subject to Santos’ TSR relative to the performance of the Standard & Poor’s Global 1200
Energy Index companies (S&P GEI comparator group);
25 per cent are subject to Santos’ Free Cash Flow Breakeven Point (FCFBP) relative to internal targets; and
25 per cent are subject to Santos’ Return on Average Capital Employed (ROACE) relative to internal targets,
measured at the end of the performance period.
The numbers of SARs outstanding at the end of, and movements throughout, the financial year are:
Year
2023 Total
2022 Total
Beginning of
the year
No.
Granted
No.
Lapsed
No.
Vested
No.
End of
the year
No.
9,884,206
4,143,255
(2,165,079)
(817,004)
11,045,378
9,068,020
4,355,676
(1,362,982)
(2,176,508) 9,884,206
The SARs granted during 2023 totalling 4,143,255 were issued across the following four tranches, each with varying
valuations:
Senior Executive LTI – granted 22 May 2023
2023
Performance Awards
25%
25%
25%
25%
Performance index
Fair value at grant date (A$)
Share price on grant date (A$)
Exercise price (A$)
Expected volatility (weighted average, % p.a.)
Right life (weighted average, years)
Risk-free interest rate (% p.a.)
Total granted (No.)
ASX 100
$4.84
$7.38
nil
41%
4
3.2%
749,769
S&P GEI
$5.41
$7.38
nil
41%
4
3.2%
749,747
FCFBP
$7.38
$7.38
nil
41%
4
3.2%
749,726
ROACE
$7.38
$7.38
nil
41%
4
3.2%
749,712
Senior Executive LTI – granted 19 June 2023
2023
Performance Awards
25%
25%
25%
25%
Performance index
Fair value at grant date (A$)
Share price on grant date (A$)
Exercise price (A$)
Expected volatility (weighted average, % p.a.)
Right life (weighted average, years)
Risk-free interest rate (% p.a.)
Total granted (No.)
ASX 100
$5.03
$7.57
nil
41%
4
3.9%
142,085
S&P GEI
$5.51
$7.57
nil
41%
4
3.9%
142,080
FCFBP
$7.57
$7.57
nil
41%
4
3.9%
142,078
ROACE
$7.57
$7.57
nil
41%
4
3.9%
142,075
136
Financial ReportSantos Annual Report 2023
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
ii. Executive Long-Term Incentive share-based payment plans (continued)
Senior Executive LTI – granted 15 September 2023
2023
Performance Awards
25%
25%
25%
25%
Performance index
Fair value at grant date (A$)
Share price on grant date (A$)
Exercise price (A$)
Expected volatility (weighted average, % p.a.)
Right life (weighted average, years)
Risk-free interest rate (% p.a.)
Total granted (No.)
ASX 100
$6.35
$7.91
nil
41%
4
3.8%
74,973
S&P GEI
$4.00
$7.91
nil
41%
4
3.8%
74,970
FCFBP
$7.91
$7.91
nil
41%
4
3.8%
74,969
ROACE
$7.91
$7.91
nil
41%
4
3.8%
74,967
Senior Executive LTI – granted 1 December 2023
2023
Performance Awards
25%
25%
25%
25%
Performance index
Fair value at grant date (A$)
Share price on grant date (A$)
Exercise price (A$)
Expected volatility (weighted average, % p.a.)
Right life (weighted average, years)
Risk-free interest rate (% p.a.)
Total granted (No.)
ASX 100
$4.33
$6.90
nil
41%
4
4.0%
69,027
S&P GEI
$4.23
$6.90
nil
41%
4
4.0%
69,026
FCFBP
$6.90
$6.90
nil
41%
4
4.0%
69,026
ROACE
$6.90
$6.90
nil
41%
4
4.0%
69,025
The above tables include the valuation assumptions used for Performance Awards SARs granted during the
current year. The expected vesting period of the SARs is based on historical data and current expectations and
is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption
that the historical volatility over a period similar to the life of the SARs is indicative of future trends, which may not
necessarily be the actual outcome.
Vesting of Performance Awards
All Performance Awards are subject to hurdles based on the Company’s TSR relative to both the ASX 100 and S&P
GEI comparator group over the performance period, as well as the FCFBP and ROACE at the end of the vesting
period. There is no re-testing of performance conditions. Each tranche of the Performance Awards subject to TSR
granted during 2023 vests in accordance with the following vesting schedule:
TSR percentile ranking
% of grant vesting
< 51st percentile
= 51st percentile
0%
50%
52nd to 75th percentile
Further 2% for each percentile over 51st
≥ 76th percentile
100%
137
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 7: People
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
iii. Executive Deferred Short-Term Incentives (STIs)
Short-term incentive outcomes for Senior Executives and Executives are delivered in a mix of cash and equity,
which are subject to a two-year restriction period. For the Managing Director and Chief Executive Officer and his
direct reports, the equity is provided in the form of deferred shares. For other Executives, the equity is provided in
the form of Share Acquisition Rights.
Deferred shares
The deferred shares are subject to a 24-month continuous service period following the year to which the STI is
related. The number of deferred STI shares outstanding at the end of, and movements throughout, the financial
year are:
Year
2023 Total
2022 Total
Beginning of
the year
No.
Granted
No.
Lapsed
No.
Vested
No.
End of
the year
No.
697,789
502,979
(159,126)
(577,346)
464,296
576,552
742,162
(52,778)
(568,147)
697,789
On 27 March 2023, the Company issued 502,979 deferred shares to eligible Executives. The share price and fair
value on the grant date was A$6.74, with no discounting applied for a dividend yield assumption, given the deferred
shares being eligible to receive dividends from the date of grant.
Share acquisition rights
The share acquisition rights are subject to a 24-month continuous service period following the year to which the
STI is related. The number of deferred STI share acquisition rights outstanding at the end of, and movements
throughout, the financial year are:
Year
2023 Total
2022 Total
Beginning of
the year
No.
Granted
No.
Lapsed
No.
Vested
No.
End of
the year
No.
674,749
836,463
(202,079)
(528,141)
780,992
514,917
688,219
(39,257)
(489,130)
674,749
On 24 March 2023, the Company issued 836,463 acquisition rights to eligible Executives. The share price and fair
value on the grant date was A$6.85. No discounting was applied for a dividend yield assumption, as for SARs which
vest. Participants receive additional Santos shares equivalent in value to notional dividends accrued and reinvested
during the period between allocation and vesting, or the cash equivalent value. No entitlement to additional shares
or cash payment is provided in respect of SARs which do not vest.
iv. Other equity grants
The SARs in the table below are subject to varying continuous service periods, depending on the specific grant. The
number of other equity grants outstanding at the end of, and movements throughout, the financial year are:
Year
2023 Total
2022 Total
Beginning of
the year
No.
Granted
No.
Lapsed
No.
Vested
No.
End of
the year
No.
3,859,861
1,597,584
(345,176)
(875,293) 4,236,976
2,502,743
2,136,938
(141,924)
(637,896)
3,859,861
138
Financial ReportSantos Annual Report 2023
7.2 SHARE-BASED PAYMENT PLANS (CONTINUED)
iv. Other equity grants (continued)
The other SARs granted during the year are as follows:
Continuous Service Period
Grant Date
2023
Grant Date
Granted Commencing
Expiring
SARs
Vesting
Date
Share
Price
Fair
Value
Dividend
Yield
19 Apr 2023
4,874
6 Feb 2023
5 Feb 2024
6 Feb 2024
25 Apr 2023
421
6 Oct 2022
5 Oct 2025
6 Oct 2025
28 Apr 2023
134,830
6 Oct 2022
5 Oct 2025
6 Oct 2025
5 May 2023
23,005
5 May 2023
14 Jun 2024
15 Jun 2024
5 May 2023
23,004
5 May 2023
14 Mar 2026
15 Mar 2026
15 Jun 2023
1,000
22 Mar 2022
20 Mar 2025
21 Mar 2025
30 Jun 2023
926,970
1 Jan 2023
30 Dec 2025
31 Dec 2025
14 Jul 2023
483,480
1 Jan 2023
30 Dec 2025
31 Dec 2025
7.12
7.10
7.07
7.16
7.16
7.30
7.52
7.70
7.12
7.10
7.07
7.16
7.16
7.30
7.52
7.70
–
–
–
–
–
–
–
–
7.3 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Key management personnel compensation
Short-term benefits
Retirement benefits
Other long-term benefits
Termination benefits
Share-based payments
2023
US$000
2022
US$000
7,103
202
171
183
4,773
12,432
7,583
212
209
–
6,965
14,969
139
Santos Annual Report 2023
Notes to the Consolidated Financial Statements
Section 8: Other
This section provides information that is not directly related to the specific line items in the financial statements,
including information about contingent liabilities, events after the end of the reporting period, remuneration of
auditors and changes to accounting policies and disclosures.
8.1 CONTINGENT LIABILITIES
Contingent liabilities arise in the ordinary course of business through claims against the Group, including contractual, third-
party and contractor claims. In most instances it is not possible to reasonably predict the outcome of these claims. As at the
reporting date, the Group believes that the aggregate of such claims will not materially impact the Group's financial report.
8.2 EVENTS AFTER THE END OF THE REPORTING PERIOD
On 20 February 2024, the Directors of Santos Limited resolved to pay a final dividend of US$17.5 cents in respect of the
2023 financial year. Consequently, the financial effect of these dividends has not been brought to account in the full-year
financial statements for the year ended 31 December 2023. Refer to Note 2.6 for details.
Subsequent to 31 December 2023, the Group announced the partial completion of sale of 2.6 per cent of PNG LNG to Kumul
Petroleum Holdings Limited (Kumul). Santos and Kumul have agreed an amendment to the Sale Agreement where Kumul
has taken an effective interest in the Santos entity that holds the 2.6 per cent sale interest. Kumul has paid US$352 million
to Santos (equivalent to a ~1.6 per cent interest) on 31 January 2024 to allow partial completion of the transaction. The
amendment provides additional time for Kumul to pay the remaining purchase price of US$241 million. Until final completion,
Santos retains control of the entity holding the 2.6 per cent and, in order to assist with purchase of the remaining interest,
future project distributions associated with the interest sold to Kumul will be applied to acquiring the remaining interest.
8.3 REMUNERATION OF AUDITORS
The auditor of Santos Limited is Ernst & Young.
(a) Audit and review services
Amounts received or due and receivable for an audit or review of the financial report of the entity and any other entity
in the Group by:
Audit of statutory report of Santos Limited Group
Audit of statutory report of controlled entities
2023
US$000
1,209
795
2,004
2022
US$000
1,504
832
2,336
(b) Other services
Amounts received or due and receivable for other services in relation to the entity and any other entity in the Group by:
Ernst & Young for other assurance services required by legislation,
to be performed by the auditor
Ernst & Young (Australia) for other assurance services,
not required to be performed by the auditor
Ernst & Young (Australia) for taxation and other services
2023
US$000
2022
US$000
279
759
662
1,700
297
589
492
1,378
140
Financial ReportSantos Annual Report 2023
8.4 ACCOUNTING POLICIES
(a) Changes in accounting policies and disclosures
The Group applied the following amendment to accounting standards applicable for the first time for the financial year
beginning 1 January 2023:
• AASB 2021-5 Amendments to AASB 112 – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
These amendments have not had a significant or immediate impact on the Group’s annual consolidated financial
statements or half-year condensed financial statements.
• AASB 2023-2 Amendments to AASB 112 – International Tax Reform – Pillar Two Model Rules
At 31 December 2023, the Group has adopted amendments to IAS 12 issued by the IASB and AASB on 23 May 2023 and
27 June 2023, respectively, in relation to the Organisation for Economic Co-operation and Development (OECD)/G20
Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Pillar Two income tax. The amendments introduced a
temporary exception to the requirements of IAS 12 under which a company does not recognise or disclose information
about deferred tax assets and liabilities related to the proposed Pillar Two model rules.
(b) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual reporting periods
beginning on or after 1 January 2024 and have not been applied in preparing these consolidated financial statements.
The Group’s assessment of the impact of these new standards, amendments to standards and interpretations is set out
below.
i) Amendments to AASB 101 – Classification of Liabilities as Current or Non-current
Description
The amendments clarify that liabilities are classified as either current or non-
current depending on the rights that exist at the end of the reporting period.
Classification is unaffected by the entity’s expectations or events after the
reporting date (e.g. the receipt of a waver or a breach of covenant). The
amendments also clarify what it means when it refers to the ‘settlement’ of
a liability.
Impact on Group financial report Management do not expect there to be a material impact on the Group’s results or
Application of standard
1 January 2024 (applied retrospectively)
disclosures.
Several other amendments to standards and interpretations will apply on or after 1 January 2024, and have not yet
been applied, however, they are not expected to impact the Group’s annual consolidated financial statements.
(c) Australian sustainability reporting standards
In October 2023, the Australian Accounting Standards Board (AASB) released the exposure draft (ED), ED SR1
Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information, for disclosure
of climate-related information.
ED SR1 includes three proposed Australian Sustainability Reporting Standards (ASRS) that are aligned internationally to
the IFRS Sustainability Disclosure Standards:
• ASRS 1 General Requirements for Disclosure of Climate-related Financial Information
• ASRS 2 Climate-related Financial Disclosures
• ASRS 101 References in Australian Sustainability Reporting Standards
In January 2024, the Australian Treasury released its Final Policy position for climate-related disclosures, including
Exposure Draft legislation and accompanying explanatory materials. This confirms the pathway to mandatory reporting
of climate-related financial disclosures subject to the passage of legislation through Parliament. While the standards
are still draft and are not mandatory for compliance with Australian Accounting Standards, the Group is monitoring the
development of the standards.
141
Santos Annual Report 2023
Directors’ Declaration
for the year ended 31 December 2023
In accordance with a resolution of the Directors of Santos Limited (the Company),
we state that:
1.
In the opinion of the Directors:
(a) the financial statements and notes of the consolidated entity are in
accordance with the Corporations Act 2001 (Cth), including:
(i)
giving a true and fair view of the consolidated entity’s financial
position as at 31 December 2023 and of its performance for the
year ended on that date
(ii) complying with Accounting Standards and the Corporations
Regulations 2001 (Cth)
(b) the financial statements and notes comply with International Financial
Reporting Standards as disclosed in Note 1.1 and
2.
3.
(c) there are reasonable grounds to believe that the Company will be able to
pay its debts as and when they become due and payable.
This declaration has been made after receiving the declarations required
to be made to the Directors in accordance with Section 295A of the
Corporations Act 2001 (Cth) for the financial year ended 31 December 2023.
As at the date of this declaration, there are reasonable grounds to believe
that the members of the Closed Group identified in Note 6.6 will be able to
meet any obligations or liabilities to which they are or may become subject to
by virtue of the Deed of Cross Guarantee between the Company and those
members of the Closed Group pursuant to ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785.
Dated this 20th day of February 2024 on behalf of the Board:
Signature to come
Director
142
Financial ReportSantos Annual Report 2023
Independent Auditor’s Report
to the members of Santos Limited
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Santos Limited (the Company) and its subsidiaries (collectively the Group), which
comprises the consolidated statement of financial position as at 31 December 2023, the consolidated income statement, the
consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, notes to the consolidated financial statements, including material accounting policy
information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a. Giving a true and fair view of the consolidated financial position of the Group as at 31 December 2023 and of its
consolidated financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and
in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section
of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on
the accompanying financial report.
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143
Santos Annual Report 2023 Independent Auditor’s Report
to the members of Santos Limited
continued
Carrying values of exploration and evaluation, oil and gas assets and goodwill
Why significant
How our audit addressed the key audit matter
Assessing indicators of impairment
We evaluated whether there had been significant changes to the external or
internal factors considered by the Group, in assessing whether indicators of
impairment or reversal of impairment existed. Those indicators included specific
matters related to the Group, CGUs and industry as well as broader market-
based indicators.
Impairment testing of CGUs with goodwill and those for which triggers were
identified
We focussed on the composition of the forecast cash flows and the
reasonableness of key inputs used to formulate recoverable amounts.
Depending on the CGU, these procedures included:
• Reconciling future production profiles to the latest hydrocarbon reserves
and resources estimates (discussed further below), current sanctioned
development budgets, long-term asset plans and historical operations.
•
•
•
Independently developing a reasonable range of forecast oil and gas
prices, based upon external data. We compared this range to the Group’s
forecast oil and gas price assumptions to challenge whether the Group’s
assumptions were reasonable. In developing our ranges, we obtained a
variety of reputable third-party forecasts, peer information and market
data, which contemplate forecast oil and gas demand in a decarbonising
global economy.
Independently evaluating discount rates used by the Group for impairment
tests, which contemplate costs of capital considerations in light of a
decarbonising global economy.
Independently evaluating the reasonableness of inflation rates, foreign
exchange rates and carbon costs used by the Group for impairment tests
• Understanding the operational performance of the CGUs relative to plan,
comparing future operating and development expenditure within the
impairment assessments to current sanctioned budgets, historical
expenditures and long-term asset plans and ensuring the Group’s
judgements were within our expectations based upon other information
obtained throughout the audit.
• Examining the key drivers of changes to calculated recoverable amounts
and ensuring the reasonableness of those drivers’ assumptions.
•
Testing the mathematical accuracy of the Group’s discounted cash flow
models and their compliance with the requirements of the Australian
Accounting Standards.
Australian Accounting Standards
require the Group to assess in respect
of the reporting period, whether there
is any indication that an asset may be
impaired, or conversely whether reversal
of a previously recognised impairment
may be required. If any such indication
exists, an entity shall estimate the
recoverable amount of the asset or Cash
Generating Unit (CGU).
At year end, the Group identified
impairment indicators in respect
of certain oil and gas asset CGUs.
Where required, impairment testing
was undertaken, which resulted in an
impairment charge of $57m being
recognised, as disclosed in Note 3.4 of
the financial report.
The Group also identified impairment
indicators in respect of certain
exploration and evaluation assets. The
impairment testing of those assets
resulted in an impairment charge of
$18m being recorded during the year,
as set out in Note 3.4 of the financial
report.
The assessments for indicators of
impairment and reversals of impairment
are judgmental and include assessing a
range of external and internal factors.
Where impairment indicators are
identified, forecasting cash flows for the
purpose of determining the recoverable
amount of a CGU involves critical
accounting estimates and judgements
and is affected by expected future
performance and market conditions.
The key forecast assumptions, including
discount rates, foreign exchange rates,
commodity prices and recoverable
hydrocarbon reserves used in the
Group’s impairment assessment are set
out in the financial report in Note 3.4.
We considered the impairment testing
of the Group’s CGUs and its exploration
and evaluation assets, and the related
disclosures in the financial report, to be
a key audit matter.
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Financial ReportSantos Annual Report 2023 Why significant
How our audit addressed the key audit matter
Future production profiles
A key input to impairment assessments is the Group’s production forecast, which
is closely related to the Group’s hydrocarbon reserves and resource estimates
and development plans. Our audit procedures focused on the work of the
Group’s internal and external experts and included:
• Assessing the processes and controls associated with estimating reserves
and resources.
• Reading reports provided by internal and external experts and assessing
their scopes of work and findings.
• Assessing the qualifications, competence and objectivity of the Group’s
internal and external experts involved in the estimation process.
• Considering whether key economic assumptions used in the estimation of
reserves and resources volumes were consistent with those used by the
Group in the impairment testing of oil and gas assets and goodwill, where
applicable.
• Understanding the reasons for reserve changes or the absence of reserves
changes, for consistency with other information that we obtained
throughout the audit.
Impact of Sustainability and Climate-Related Risks
In undertaking our impairment procedures, we incorporated consideration of
sustainability and climate change-related risks by:
• Performing independent sensitivity analysis of recoverable amounts across
a range of key inputs which have been formulated to incorporate
uncertainty risk associated with climate change, such as the inclusion of
premiums in discount rates and alternative oil price forecasts which
contemplate varied climate change-related assumptions and scenarios.
• Assessing the recoverable amount impact of the inclusion of carbon costs,
including consideration of differing quantities of the Group’s carbon
emissions subject to a carbon cost.
• Considering the audit results of procedures carried out over restoration
and rehabilitation obligations and their impact on impairment risk (refer to
the ‘Accounting for Restoration Obligations’ Key Audit Matter below).
•
Inquiring of management and reading the Group’s communications and
publicly stated climate-related commitments regarding sustainability and
climate-related risks where relevant and their impact on financial
reporting;
• Reading the ‘other information’ presented by the Group, for consistency
with key inputs used in the Group’s impairment testing.
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145
Santos Annual Report 2023 Independent Auditor’s Report
to the members of Santos Limited
continued
Why significant
How our audit addressed the key audit matter
Exploration and Evaluation Assets
For exploration and evaluation assets, we assessed whether any impairment
indicators, as set out in AASB 6 Exploration for and Evaluation of Mineral
Resources, were present, and performed audit procedures in respect of the
conclusions reached by management, including:
• Considering whether the Group’s right to explore was current, which
included obtaining and assessing supporting documentation such as
licenses, permits and agreements.
• Considering the Group’s intention to carry out significant ongoing
exploration and evaluation activities in the relevant areas of interest and
enquiring of senior management as to their intentions and the strategy of
the Group as it relates to particular areas of interest.
• Assessing whether exploration and evaluation data or other information
existed to indicate that the carrying value of capitalised exploration and
evaluation assets was unlikely to be recovered through successful
evaluation and development or sale.
With respect to impairment generally, we also assessed the adequacy of the
financial report disclosures regarding the assumptions, key estimates and
judgments applied by the Group in relation to the carrying values of exploration
and evaluation, oil and gas assets and goodwill.
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Financial ReportSantos Annual Report 2023 Accounting for Restoration Obligations
Why significant
How our audit addressed the key audit matter
At 31 December 2023, the Group has
recognised provisions for restoration
obligations relating to onshore and
offshore assets of $4,338 million. As
disclosed in Note 3.5, the calculation
of restoration provisions is conducted
by specialist engineers and requires
judgemental assumptions to be made
by the Group regarding removal
date, compliance with environmental
legislation and regulations, the extent
of restoration activities required, the
engineering methodology for estimating
costs, future removal technologies in
determining the removal costs and
liability-specific discount rates to
determine the present value of these
cash flows.
The judgements and estimates in
respect of restoration provisions are
based upon conditions existing at
31 December 2023, including key
assumptions related to certain items
remaining in-situ. Australian regulatory
approval for these items remaining in-
situ will only be sought towards the end
of the respective asset’s field life and
accordingly, at 31 December 2023, there
is uncertainty whether the Australian
regulator will approve plans for these
items to be decommissioned in-situ.
The significant assumptions and
estimates outlined above are
inherently subjective. Changes to these
assumptions can lead to changes in the
restoration provisions. In this context,
the disclosures in the financial report
provide important information about
the assumptions made in the calculation
of the restoration provision and
uncertainties at 31 December 2023, in
arriving at the Group’s best estimate of
the present value of future obligations.
We consider the restoration provision
calculation and the related disclosures
in the financial report to be a key
audit matter. We draw attention to the
information in Note 3.5.
We assessed the restoration obligation provisions prepared by the Group,
evaluating the assumptions and methodologies used and the estimates made.
Our audit procedures included the following:
• Evaluating the Group’s process for identifying its legal and regulatory
obligations for restoration and decommissioning and testing the
completeness of operating locations;
• Understanding and testing controls over the Group’s internal methodology
for determining and approving gross cost estimates used to calculate the
Group’s restoration provisions;
•
In conjunction with our environmental specialists, assessing the
reasonableness and completeness of restoration cost estimates based on
the relevant current legal and regulatory requirements;
• Assessing the competence, capability and objectivity of the Group’s
internal and external experts engaged to carry out the gross restoration
cost estimations as a basis for our reliance on the output of their work;
• Comparing current year cost estimates to those of the prior year and
considering explanations by management and both internal and external
experts for observed changes;
• Comparing the timing of the future cash outflows against the anticipated
end-of-field lives, cross-checking that these dates were consistent with the
Group’s reserve estimates and impairment calculations;
• Evaluating the appropriateness of the discount rates, inflation rates and
foreign exchange rates used to calculate the present value of each of the
provisions;
•
Testing the mathematical accuracy of the restoration provision
calculations.
Impact of Sustainability and Climate-Related Risks
In undertaking our restoration procedures, we incorporated consideration of
sustainability and climate change-related risks by:
• Understanding the regulatory framework in which each project operates
to ensure compliance with the regulatory requirements of the various
jurisdictions as they relate to restoration obligations;
• Evaluating the assumptions associated with the form and extent of
abandonment activities, including conformity with regulation and industry
practice and the nature of the items expected to be left in-situ, in
abandonment activities;
• Reading litigation registers, correspondence with solicitors and regulators
to confirm the completeness of liabilities recognised;
• Considering the estimated dates for the commencement of restoration and
rehabilitation activities, possible impacts of physical risks of climate
change and performing sensitivity analyses aligned with a range of
scenarios associated with the Group’s net zero climate-related targets.
We also considered the adequacy and completeness of the financial report
disclosure of the assumptions, key estimates and judgements applied by the
Group.
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147
Santos Annual Report 2023 Independent Auditor’s Report
to the members of Santos Limited
continued
Information Other than the Financial Report and Auditor’s Report thereon
The directors are responsible for the other information. The other information comprises the information included in the
Company’s 2023 annual report, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether
the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
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Financial ReportSantos Annual Report 2023 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of
the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON THE AUDIT OF THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 37 to 68 of the directors’ report for the year ended 31
December 2023.
In our opinion, the Remuneration Report of Santos Limited for the year ended 31 December 2023, complies with section
300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
D Lewsen
Partner
Adelaide
20 February 2024
D Hall
Partner
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
149
Santos Annual Report 2023
Auditor’s independence declaration
to the members of Santos Limited
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of Santos Limited
As lead auditor for the audit of the financial report of Santos Limited for the financial year ended 31 December 2023,
I declare to the best of my knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Santos Limited and the entities it controlled during the financial year.
Ernst & Young
D S Lewsen
Partner
20 February 2024
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
150
Financial ReportSantos Annual Report 2023 Securities exchange
and shareholder information
Listed on the Australian Securities Exchange at 31 January 2024 were 3,247,772,961 fully-paid ordinary shares. Unlisted
were 5,000 partly-paid Plan 0 shares and 5,000 partly-paid Plan 2 shares.
There were 169,318 holders of all classes of issued ordinary shares, including: one holder of Plan 0 shares; one holder of
Plan 2 shares. This compared with 176,153 holders of all classes of issued ordinary shares a year earlier.
As at 31 January 2024 there were also: 1778 holders of 17,780,472 Share Acquisition Rights pursuant to the SEEIP and
1,312 holders of 1,935,365 Share Acquisition Rights pursuant to the ShareMatch Plan.
The listed issued ordinary shares plus the ordinary shares issued pursuant to the SEEIP, and the restricted shares issued
pursuant to the SESPP and ShareMatch Plan represent all of the voting power in Santos. The holdings of the 20 largest
holders of ordinary shares represent 77.74 per cent of the total voting power in Santos (77.12 per cent on 31 January 2023).
The largest shareholders of fully-paid ordinary shares in Santos as shown in the Company’s Register of Members at 31
January 2024 were:
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
UBS Nominees Pty Ltd
Citicorp Nominees Pty Limited
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