Annual 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 h t e r a s P M K t n e r r u c e h T . t c A s n o i t a r o p r o C e h t r e d n u d e r i u q e r s a 2 2 0 2 d n a 3 2 0 2 n i s P M K e v i t u c e x E r o f n o i t a r e n u m e r e h t f o s l i a t e d d e s i r a m m u s s t n e s e r p 9 e b a T l . t c A s n o i t a r o p r o C e h t r e d n u d e r i u q e r s a l e n n o s r e P t n e m e g a n a M y e K f o n o i t i n fi e d e h t t e e m o t y t i l i b i s n o p s e r d n a y t i r o h t u a e t i s i u q e r e h t e v a h o h w s e v i t u c e x E n o i t a r e n u m e r e v i t u c e x E 1 . 8 s e g n a h c r a e y - n o - r a e Y . . . 2 2 0 2 r o f 9 4 9 6 0 $ d n a 3 2 0 2 r o f 4 4 6 6 0 $ f o e t a r e g a r e v a n a g n i s u $ S U o t $ A m o r f d e t r e v n o c n e e b e v a h s t n e n o p m o c n o i t a r e n u m e r y r o t u t a t S . $ A n i i d a p t n u o m a e h t n i e g n a h c a y l i r a s s e c e n t o n d n a s n o i t a i r a v e t a r e g n a h c x e o t e b a t u b i r t t a y l t r a p e r a $ S U n l i d e t a t s n e h w s t n u o m a n o i t a r e n u m e r n i % l a t o T k s i r - 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y t i u q e e h t l f o e u a v e h t f o n o i t r o p o r p a s e d u c n l i n o i t a r e n u m e r , s d r a d n a t S g n i t n u o c c A e h t f o s t n e m e r i u q e r e h t h t i w e c n a d r o c c a n I 1 e t o N n i l t u o t e s e r a n o i t a u a v e h t g n y l r e d n u s n o i t p m u s s a e h t i f o s l i a t e D . l i d o h t e m n o i t a u m i s o l r a C e t n o M e h t g n y p p a t n e m y a P d e s a b - e r a h S 2 B S A A h t i l w e c n a d r o c c a n i i d e n m r e t e d s a w n o i t a s n e p m o c d e k n i l - y t i u q e . s t n e m e t a t s l i a c n a n fi e h t o t 2 7 . n i s d o o W B d n a n o s l i e N A , l l i e n n K c M A , r e h g a l l a G K o t e d a m s t n e m y a p l a i t r a p r o l l u f e h t d n a , 4 2 0 2 h c r a M g n i r u d d a p e b i l l i w h c h w i , 3 2 0 2 r o f d r a w a e c n a m r o f r e p I T S e h t f o n o i t r o p h s a c e h t s t n e s e r p e r t n u o m a s i h T . s t fi e n e b y r a t e n o m - n o n r e h t o d n a e c n a w o l l a n o i t a s i l i b o m d n a t n e m n g i s s a s a h c u s , n o i t a r e n u m e r s a d e t a e r t s t n e m y a p c o h d a s e s i r p m o c ’ r e h t O ‘ . t n e m y a p r i e h t f o % 0 0 1 d e t i e f r o f y e l r a D B d n a s k n a B D . I P K l a t n e m n o r i v n E d e h h t i l w 2 2 0 2 e h t o t n o i t a e r l e h t t a h t ) y n a f i ( t fi e n e b l a u t c a e h t , f o e v i t a c d n i i r o , o t e v i t a e r l t o n s i n o i t a r e n u m e r s a d e t a c o l l a t n u o m a e h T . s e t a e r l i t n a r g e h t h c h w o t e c v r e s i f o d o i r e p r a e y - o w t a d n a e c n a m r o f r e p f o r a e y e h t g n e b d o i r e p g n i t s e v i l r a e y - e e r h t a r e v o d e s n e p x e y e v i s s e r g o r p d n a t n e m y a P d e s a b - e r a h S 2 B S A A f o s t n e m e r i u q e r e h t h t i w e c n a d r o c c a n i i d e n m r e t e d , I T S d e r r e f e d e h t l f o e u a v d e t a m i t s e e h t f o n o i t r o p o r p a s t n e s e r p e r t n u o m a s i h T ’ s e v i t u c e x E e h t f o t c e p s e r n i e d a m e b o t s w o fl t u o h s a c e r u t u f d e t a m i t s e e h t l f o e u a v t n e s e r p e h t s a d e r u s a e m s t n e m e l t i t n e e v a e l i e c v r e s g n o l ’ s e v i t u c e x E e h t n i t n e m e v o m e h t s t n e s e r p e r ’ s t fi e n e b m r e t - g n o l r e h t O ’ . s e t a d g n i t r o p e r e v i t c e p s e r e h t n e e w t e b e c v r e s i s i H . 4 2 0 2 y r a u n a J y l r a e n i n o i t a n m r e t i l i t n u e t a d s i h t i m o r f e v a e L g n n e d r a G n o d e d e e c o r p e H . e t a d s i h t o t d e t a r - o r p n e e b e v a h n o i t a u n n a r e p u S d n a y r a a S e s a B s i H l . 3 2 0 2 r e b m e t p e S 1 m o r f P M K a s a d e s a e C . s l i a t e d r o f s t n e m e t a t s l i a c n a n fi e h t n i . 2 7 e t o N o t r e f e R . l s n a p e r a h s e e y o p m e l l a r e n e g s o t n a S e h t r o f d e s u m r e t e v i t c e l l o c e h t s i S U L P e r a h S . 4 2 0 2 h c r a M n i d e t a c o l l a e b o t d e d n e t n i s i d r a w a I T S 3 2 0 2 e h t f o t n e n o p m o c y t i u q e d e r r e f e d e h T . s t n e m u r t s n i g n i t n u o c c A y b d e r i u q e r d n a n o i t a n m r e t o t e u d t s e v t o n d d t a h t i i s t n a r g 2 2 0 2 d n a 1 2 0 2 , 0 2 0 2 r o f d o i r e p g n i t s e v e h t g n i r u d d e s n e p x e y e v i s s e r g o r p n o i t a s n e p m o c e h t l f o n o i t r o p o r p e h t f o l a s r e v e r e h t t n e s e r p e r . s t s o c s d r a d n a t S d n a n o i t a s n e p m o c d e k n i l - y t i u q e e h t o t n o i t a e r n l i e r a s e i r t n e s t n e m y a p d e s a b - e r a h S e v i t a g e N . 3 2 0 2 r e b m e c e D 1 3 l i t n u 3 2 0 2 r e b m e t p e S 1 m o r f n o i t a u n n a r e p u S s u p y r a a S h s a C e d u c n l l l i s t fi e n e B n o i t a n m r e T i y t i u q e e h t l f o e u a v r i a f e h t f o e t a m i t s e n a n o d e s a b t n e m y a P d e s a b - e r a h S 2 B S A A h t i w e c n a d r o c c a n i l l d e t a u c a c n e e b s a h e u a v e h T l . t s e v s t n e m u r t s n i y t i u q e e h t d u o h s e s i l l l a e r y e t a m i t l u y a m s e v i t u c e x E r o n e S i 2 3 4 5 6 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 l a t o T 3 2 0 2 – 5 4 1 9 8 8 5 , 4 3 0 6 , ) 7 7 1 ( ) 2 8 7 ( ) 3 4 5 ( ) 1 7 4 ( – ) 5 5 1 ( ) 6 8 ( ) 5 7 ( ) 8 1 ( 3 8 0 4 , ) 8 5 8 , 1 ( ) 7 2 2 ( 6 4 0 2 , ) 5 8 4 ( 9 1 8 , 1 2 8 6 1 4 , 1 3 1 1 7 3 2 3 2 5 2 , 3 7 8 , 2 2 2 ) 0 6 ( ) 8 9 1 ( 3 1 1 7 1 2 ) 3 8 ( ) 4 2 ( ) 5 2 ( ) 8 1 ( – ) 0 5 1 ( ) 7 2 2 ( – ) 5 8 4 ( – 4 4 4 6 8 4 6 0 1 3 ) 5 0 2 ( ) 2 8 2 ( s n o i t a n m i i l e 3 2 0 2 r e h t o & 3 2 0 2 s o t n a S y g r e n E s n o i t u o S l , e t a r o p r o C , n o i t a r o p x e l & s a G m a e r t s p U – – 9 7 3 9 7 3 ) 3 2 1 ( ) 8 2 ( – – ) 6 1 ( 2 1 2 – – – – l a t o T 3 2 0 2 8 4 5 0 2 9 7 5 5 , 2 3 8 5 , ) 1 8 6 ( ) 5 5 4 ( ) 3 7 2 ( ) 3 1 1 ( ) 6 5 3 ( ) 1 6 ( ) 7 5 ( ) 8 1 ( 4 5 9 3 , ) 4 3 8 , 1 ( i s d u q L i 2 1 2 4 8 9 , 1 – 2 8 8 5 2 3 ) 8 ( – 1 1 5 3 1 1 5 6 1 – 2 3 2 8 2 8 , 1 0 6 0 2 , – 3 2 0 3 5 0 3 – – 7 0 4 7 0 4 – 3 4 1 2 5 5 5 9 6 – 9 3 0 6 2 9 9 2 . n o i t a d i l o s n o c n o d e t a n m i i l e e r a s e s a h c r u p d n a s e a s l t n e m g e s - r e t n I . s i s a b h t g n e l ' s m r a n a n o d e n m r e t e d s i i i g n c i r p t n e m g e s - r e t n I . . ) 5 3 e t o N r e f e r ( s n o i t p m u s s a n o i s i v o r p n o i t a r o t s e r n i s e g n a h c g n w o i l l o f s t e s s a n o i t a r o t s e r n o t c a p m i s e d u c n l I 1 2 4 5 4 4 8 3 5 8 ) 1 6 ( ) 0 2 1 ( ) 2 2 ( – ) 4 7 1 ( 6 7 4 ) 4 6 7 ( ) 8 1 ( ) 7 5 ( ) 3 1 ( ) 6 7 3 ( – – 1 4 1 1 4 1 ) 4 0 1 ( 1 – – 0 1 8 4 ) 2 1 ( ) 3 ( – ) 9 ( 4 2 – 9 2 3 4 6 1 5 5 8 2 , 3 7 2 , 1 4 8 8 , 2 2 3 3 , 1 ) 6 5 2 ( ) 3 8 1 ( ) 5 1 ( – ) 8 8 ( ) 6 1 ( ) 3 4 5 ( 2 4 3 , 2 – 4 ) 7 8 ( ) 8 1 1 ( ) 6 3 2 ( ) 9 0 1 ( 3 1 ) 9 ( 5 9 7 ) 3 4 2 ( – – 7 8 7 , 1 3 4 5 L T , U A n r e h t r o N , A W G N P , U A n r e t s a E 3 2 0 2 n r e t s e W a i l a r t s u A e t s e L 3 2 0 2 n r e h t r o N a i l a r t s u A - r o m T & i G N P 3 2 0 2 W S N & d n a l 3 2 0 2 - s n e e u Q n i s a B r e p o o C 3 2 0 2 ) 2 ( 6 6 4 8 5 1 2 2 6 ) 4 1 1 ( ) 4 9 ( – ) 4 ( ) 7 1 1 ( 3 9 2 ) 2 7 2 ( ) 5 1 ( – – 6 – – 7 4 7 0 3 4 5 3 s r e m o t s u c l a n r e t x e o t s e a s l t c u d o r P e u n e v e R 1 s e a s l t n e m g e s - r e t n I r e h t O s e s a h c r u p t c u d o r p y t r a p - d r i h T e u n e v e r t n e m g e s l a t o T s t s o c g n i t a r e p o r e h t O s t s o c n o i t c u d o r P s t s o C n o i l l i m $ S U 1 s e s a h c r u p t n e m g e s - r e t n I l d e s n e p x e n o i t a u a v e d n a n o i t a r o p x E l l n o i t e p e d d n a n o i t a c e r p e D i X A D T I B E r e h t O s s o l t n e m r i a p m i t e N s n o i t p m u s s a n o i t a r o t s e r e r u t u f n i e g n a h C s n o i t i s i u q c a d n a s n o i t i d d a t e s s A e s n e p x e x a t d e t a e r - y t l a y o R l t fi o r p t e N e s n e p x e x a t e m o c n I x a t e r o f e b t fi o r P s t s o c e c n a n fi t e N T I B E l s t e s s a n o i t a u a v e d n a n o i t a r o p x E l 2 s t e s s a s a g d n a l i O n o i t a s i n o b r a c e D i s d u q L & i s a G m a e r t s p U ) D E U N I T N O C ( N O I T A M R O F N I T N E M G E S 1 . 2 80 Financial ReportSantos Annual Report 2023 l a t o T 2 2 0 2 – 7 9 1 0 9 7 7 , 7 8 9 7 , ) 7 0 8 ( ) 6 5 5 ( ) 7 5 7 ( – ) 1 2 2 ( 6 4 6 5 , ) 7 4 7 , 1 ( ) 8 4 1 ( ) 8 2 3 ( ) 1 2 2 ( ) 4 5 2 ( 2 0 2 , 3 ) 1 9 ( ) 5 4 7 ( 2 1 1 , 2 8 4 9 2 , 0 7 2 5 2 4 0 6 , 1 6 2 9 , 1 r e h t o & 2 2 0 2 2 2 0 2 8 1 4 ) 9 5 2 ( ) 9 9 2 ( ) 0 4 1 ( 5 3 ) 5 6 ( ) 3 5 2 ( 5 7 4 0 1 ) 4 4 2 ( ) 4 1 ( ) 6 2 ( – ) 3 ( ) 7 8 2 ( ) 4 5 2 ( – ) 5 4 7 ( 6 6 7 1 1 – 3 8 1 – – 8 1 4 8 1 4 ) 1 3 ( ) 2 3 1 ( – – ) 4 2 ( 1 3 2 – – – – 1 3 2 – – 2 2 0 7 2 9 s n o i t a n m i i l e s o t n a S y g r e n E s n o i t u o S l , e t a r o p r o C , n o i t a r o p x e l & s a G m a e r t s p U i s d u q L i l a t o T 2 2 0 2 8 7 9 5 2 2 7 3 7 , 9 0 7 7 , ) 0 1 7 ( ) 0 6 4 ( ) 4 0 5 ( ) 4 0 1 ( ) 2 7 2 ( 9 5 6 5 , ) 3 3 7 , 1 ( ) 2 2 1 ( ) 8 2 3 ( ) 8 1 2 ( 8 5 2 , 3 L T , U A n r e h t r o N , A W G N P , U A n r e t s a E i s d u q L & i s a G m a e r t s p U ) D E U N I T N O C ( N O I T A M R O F N I T N E M G E S 1 . 2 2 2 0 2 n r e t s e W a i l a r t s u A e t s e L 2 2 0 2 n r e h t r o N a i l a r t s u A - r o m T & i 4 5 – 1 8 8 0 , 1 9 2 6 G N P 2 2 0 2 – 2 3 7 2 4 3 , W S N & d n a l 2 2 0 2 - s n e e u Q 9 9 9 2 0 1 4 , 1 7 9 0 , 1 0 3 6 9 5 4 3 , 8 3 5 , 1 ) 2 1 ( ) 0 1 ( – ) 9 0 1 ( ) 4 3 1 ( 2 3 8 ) 0 9 5 ( ) 3 4 ( ) 6 2 3 ( ) 4 3 1 ( ) 1 6 2 ( – – – 3 1 ) 8 3 1 ( ) 3 1 1 ( 5 0 5 ) 7 1 ( ) 2 ( ) 1 9 ( 2 8 2 ) 2 8 2 ( ) 7 9 1 ( ) 8 ( – ) 2 5 ( ) 6 4 ( ) 9 4 5 ( 0 2 9 2 , – 7 ) 9 7 ( ) 2 2 1 ( ) 7 3 2 ( ) 0 0 1 ( ) 6 1 ( ) 7 ( 4 8 9 ) 8 3 2 ( – – n i s a B r e p o o C 2 2 0 2 1 1 8 1 8 6 5 1 5 8 9 ) 2 0 1 ( ) 9 2 1 ( ) 9 4 2 ( ) 4 ( ) 3 8 ( ) 9 ( 8 1 4 ) 3 4 2 ( – – 2 3 3 , 2 9 3 7 6 6 1 s r e m o t s u c l a n r e t x e o t s e a s l t c u d o r P n o i l l i m $ S U e u n e v e R s e s a h c r u p t c u d o r p y t r a p - d r i h T e u n e v e r t n e m g e s l a t o T s t s o c g n i t a r e p o r e h t O s t s o c n o i t c u d o r P s t s o C 1 s e a s l t n e m g e s - r e t n I r e h t O 1 s e s a h c r u p t n e m g e s - r e t n I l d e s n e p x e n o i t a u a v e d n a n o i t a r o p x E l l n o i t e p e d d n a n o i t a c e r p e D i X A D T I B E r e h t O s s o l t n e m r i a p m i t e N s n o i t p m u s s a n o i t a r o t s e r e r u t u f n i e g n a h C e s n e p x e x a t e m o c n I x a t e r o f e b t fi o r P s t s o c e c n a n fi t e N T I B E – 6 8 1 5 6 4 , 1 1 5 6 , 1 – 8 0 1 5 6 5 3 7 6 – 2 4 2 4 6 2 4 1 4 3 – 4 4 – 1 1 3 0 2 4 1 2 – 4 2 0 7 2 4 9 2 l s t e s s a n o i t a u a v e d n a n o i t a r o p x E l 2 s t e s s a s a g d n a l i O n o i t a s i n o b r a c e D ) 1 9 ( ) 9 2 1 ( 8 3 – – – e s n e p x e x a t d e t a e r - y t l a y o R l s n o i t i s i u q c a d n a s n o i t i d d a t e s s A t fi o r p t e N . n o i t a d i l o s n o c n o d e t a n m i i l e e r a s e s a h c r u p d n a s e a s l t n e m g e s - r e t n I . s i s a b h t g n e l ' s m r a n a n o d e n m r e t e d s i i i g n c i r p t n e m g e s - r e t n I . . ) 5 3 e t o N r e f e r ( s n o i t p m u s s a n o i s i v o r p n o i t a r o t s e r n i s e g n a h c g n w o i l l o f s t e s s a n o i t a r o t s e r n o t c a p m i s e d u c n l I 1 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 4,798 650 390 51 5,889 99 5 41 145 6,009 1,087 568 126 7,790 104 6 87 197 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 144 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 146 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 148 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 LimitedBNP Paribas Noms Pty Ltd BNP Paribas Nominees Pty Ltd Argo Investments Limited BNP Paribas Nominees Pty Ltd Acf Clearstream HSBC Custody Nominees (Australia) Limited BNP Paribas Noms Pty Ltd Deutsche Bank Tca BNPP Noms Pty Ltd Hub24 Custodial Serv Ltd HSBC Custody Nominees (Australia) Limited - A/C 2 Netwealth Investments Limited Australian Foundation Investment Company Limited CPU Share Plans Pty Ltd UBS Nominees Pty Ltd Australian Foundation Investment Company Limited The Senior Master of The Supreme Court Total: Total remaining holders balance Balance at 31 January 2023 1,050,947,209 527,743,697 399,554,085 119,220,639 109,995,778 58,263,548 55,003,068 36,118,684 27,604,895 26,829,137 22,917,089 21,484,232 15,205,919 11,336,440 10,421,948 9,589,773 7,997,057 6,374,286 4,330,916 4,004,000 % Units 32.36 16.25 12.30 3.67 3.39 1.79 1.69 1.11 0.85 0.83 0.71 0.66 0.47 0.35 0.32 0.30 0.25 0.20 0.13 0.12 2,524,942,400 722,830,561 77.74 22.26 151 Santos Annual Report 2023 Securities exchange and shareholder information continued ANALYSIS OF SHARES – RANGE OF SHARES HELD 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 over Rounding Total Fully-paid ordinary shares (holders) Number of shares held % of shares held 72,944 32,044,444 65,956 163,871,896 17,419 125,387,838 12,592 272,088,822 407 2,654,379,961 – – 0.99 5.05 3.86 8.38 81.73 -0.01 169,318 3,247,772,961 100.00 Less than a marketable parcel of $500 3,458 Substantial Shareholders as disclosed by notices received by the Company as at 31 January 2024: Name BlackRock Group Vanguard Group (The Vanguard Group, Inc. and its controlled entities) Number of voting shares held 129,700,122 165,560,037 Date of notice 30 March 2021 3 April 2023 State Street Corporation and subsidiaries 166,917,302 20 December 2023 For Directors’ shareholdings see the Directors’ Report as set out on page 19 of this Annual Report. VOTING RIGHTS Every member present in person, or by an attorney, a proxy or a representative, shall on a show of hands, have one vote and upon a poll, one vote for every fully-paid ordinary share held. Pursuant to the Rules of the Santos Executive Share Plan, Plan 2 and Plan 0 shares do not carry any voting rights except on a proposal to vary the rights attached to Plan shares. 152 Financial ReportSantos Annual Report 2023 Glossary DEFINITIONS Absolute When used in reference to emissions reduction targets, means reduction against the total emissions at the relevant point in time, rather than a relative or comparative amount ACCU Australian Carbon Credit Unit. Each ACCU issued represents one tonne of carbon dioxide equivalent (tCO2e) Barrel (bbl) The standard unit of measurement for all oil and condensate production: one barrel equals 159 litres or 35 imperial gallons Capacity When being used in the context of CO2 storage as per the SRMS, means those storable quantities of CO2 anticipated to be commercially stored by application of development projects from a given date forward under defined conditions. Capacity must satisfy four criteria: it must be discovered, storable, commercial, and remaining (as of a given date) on the basis of the development project(s) applied Carbon capture and storage (CCS) A process in which greenhouse gases, including carbon dioxide, methane and nitrous oxide, from industrial and energy- related sources, are separated (captured), conditioned, compressed, transported and injected into a geological formation, that provides safe and permanent storage deep underground CEO Chief Executive Officer Company Santos Limited and all its subsidiaries Condensate A mixture of hydrocarbons (mainly pentanes and heavier) that exist in the gaseous phase at original temperature and pressure of the reservoir, but when produced, are in the liquid phase at surface pressure and temperature conditions. Condensate differs from natural gas liquids in two respects: 1. natural gas liquid is extracted and recovered in gas plants rather than lease separators or other lease facilities, and 2. natural gas liquid includes very light hydrocarbons (ethane, propane, or butanes) as well as the pentanes-plus that are the main constituents of condensate Contingent resources (2C) Those quantities of hydrocarbons that are estimated, on a given date, to be potentially recoverable from known accumulations, but that are not currently considered to be commercially recoverable. Contingent resources may be of a significant size, but still have constraints to development. These constraints, preventing the booking of reserves, may relate to lack of gas marketing arrangements or to technical, environmental or political barriers Critical Fuels Hydrocarbon fuels, including oil and natural gas, that supply around 80 per cent of the world’s primary energy supply. Hydrocarbon fuels are critical to meet current and forecast energy demand and to the manufacturing of everyday products Crude Oil Crude oil is the portion of petroleum that exists in the liquid phase in natural underground reservoirs and remains liquid at atmospheric conditions of pressure and temperature (excludes retrograde condensate). Crude oil may include small amounts of non- hydrocarbons produced with the liquids but does not include liquids obtained from the processing of natural gas Decarbonise The process of avoiding, reducing or offsetting anthropogenic greenhouse gas emissions through operational activities or efficiencies, technology deployment, use of generated or acquired carbon credit units, and/or other means Earnings per share Total net profit or loss divided by the weighted average number of ordinary shares on issue EBITDAX Earnings before interest, tax, depreciation and depletion, exploration and evaluation expensed, impairment and change in future restoration assumptions Emissions Greenhouse gas emissions, unless otherwise specified Emissions Intensity The amount of greenhouse gas emissions per unit of specified output, such as production or facility throughput Emissions reduction units An emissions reduction unit represents one tonne of carbon dioxide equivalent (tCO2e) emissions reduction or removal Emissions reporting The reporting obligations which are administered under the National Greenhouse and Energy Reporting Act 2007 (Cth) Exploration Drilling, seismic or technical studies undertaken to identify and evaluate regions or prospects with the potential to contain hydrocarbons Free cash flow Operating cash flows less investing cash flows (net of acquisitions and disposals and major growth capex) less lease liability payments Free cash flow breakeven (FCFBP) The average annual US$ oil price at which cash flows from operating activities (before hedging) equal cash flows from investing activities. Excludes one-off restructuring and redundancy costs, costs associated with asset divestitures and acquisitions, and major project capex. Includes lease liability payments. Forecast methodology uses corporate assumptions Gearing Net debt divided by the sum of net debt and net equity Hydrocarbon Compounds containing only the elements hydrogen and carbon, which may exist as solids, liquids or gases Joules The metric measurement unit for energy LNG Liquefied natural gas. Natural gas that has been liquefied by refrigeration to store or transport it. Generally, LNG comprises mainly methane 153 Santos Annual Report 2023 Glossary continued LPG Liquefied petroleum gas. A mixture of light hydrocarbons derived from oil bearing strata that is gaseous at normal temperatures but that has been liquefied by refrigeration or pressure to store or transport it. Generally, LPG comprises mainly propane and butane Market capitalisation A measurement of a company’s stock market value at a given date. Market capitalisation is calculated as the number of shares on issue multiplied by the closing share price on that given date 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 Net Zero In relation to greenhouse gas emissions, is achieved when anthropogenic emissions of greenhouse gases are balanced by anthropogenic removal of greenhouse gases through means such as operational activities or efficiencies, technology (e.g, CCS), offset through the use of emission reduction units, or other means Oil A mixture of liquid hydrocarbons of different molecular weights Petroleum resource rent tax (PRRT) A tax applied to profits generated from the sale of marketable petroleum commodities from Australian offshore petroleum projects. Marketable petroleum commodities include crude oil, condensate, LPG, natural gas and ethane that are sold, used as feedstock for conversion to another product or direct consumption as energy Possible Reserves (3P) An incremental category of estimated recoverable quantities associated with a defined degree of uncertainty. Possible reserves are those additional reserves that analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P), which is equivalent to the high estimate scenario. When probabilistic methods are used, there should be at least a 10% 154 probability that the actual quantities recovered will equal or exceed the 3P estimate Probable reserves An incremental category of estimated recoverable quantities associated with a defined degree of uncertainty. Probable reserves are those additional Reserves that are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P). In this context, when probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the 2P estimate Production cost The costs associated with producing gas and liquid hydrocarbons, including extracting, processing, storing, repairs and maintenance and overhead costs allocated to the above activities Proved reserves (1P) An incremental category of estimated recoverable quantities associated with a defined degree of uncertainty. Proved reserves are those quantities of petroleum that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. If deterministic methods are used, the term “reasonable certainty” is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate Reserves Those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of a given date) based on the development project(s) applied Reserves replacement ratio The ratio of the change in petroleum reserves (excluding production) divided by production. Organic reserves replacement ratio excludes net acquisitions and divestments Return on average capital employed (ROACHE) Is measured as the underlying earnings before interest and tax (EBIT) divided by the average capital employed, being shareholders’ equity plus net debt Sales Gas Natural gas that has been processed by gas plant facilities and meets the required specifications under gas sales agreements Scope 1 emissions Direct greenhouse gas emissions that occur from sources that are owned or controlled by the reporting company Scope 2 emissions Indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the reporting company Scope 3 emissions All indirect greenhouse gas emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions Sustainable/Sustainability At Santos, sustainability is about striving to ensure safe operations, minimising environmental harm and greenhouse gas emissions, and creating long term value for our stakeholders including our customers, community, employees, partners and shareholders; balancing the needs of today without undermining the ability to meet the demands of tomorrow Target When referenced in the context of Santos, an outcome sought that Santos has identified a potential pathway, or pathways, toward delivery, subject to conditions and assumptions Total Fixed Remuneration Total Fixed Remuneration (TFR), comprising cash salary and company superannuation contributions (where provided or required to ensure compliance) Financial ReportSantos Annual Report 2023 Total shareholder return (TSR) Total capital growth plus dividends as a percentage of purchase price Underlying profit Underlying profit excludes the impacts of asset acquisitions, disposals and impairments, hedging, as well as items that are subject to significant variability from one period to the next, including the effects of fair value adjustments ABBREVIATIONS Units of measure ACCU Australian carbon credit unit CCS Carbon capture and storage CO2 Carbon dioxide CO2e Carbon dioxide equivalent CSG Coal seem gas CTAP Climate Transition Action Plan DAC Direct air capture DLNG Darwin LNG FEED Front-end engineering design FID Final investment decision Gas Natural gas GLNG Gladstone LNG IOGP The International association of Oil and Gas producers IRR Internal rate of return Joules The metric measurement unit for energy KPI Key Performance Indicator LNG Liquefied natural gas LPG Liquified petroleum gas LTIR Lost time injury rate MOU Memorandum of understanding NPAT Net profit after tax PNG Papua New Guinea bbl boe kt mmbbl mmboe mmBtu MtCO2e Mtpa PJ t TJ Barrel Barrels of oil equivalent Thousand tonnes Million barrels Million barrels of oil equivalent Million British thermal units Million tonnes of carbon dioxide equivalent Million tonnes per annum Petajoules, 1 joule x 1015 Tonnes Terajoules, 1 joule x 1012 Conversion factors Sales gas and ethane 1 PJ = 171.937 boe x 103 Crude oil 1 barrel = 1 boe Condensate 1 barrel = 0.935 boe LPG LNG LNG 1 tonne = 8.458 boe 1 PJ = 18,040 tonnes 1 tonne = 52.54 mmBtu For a comprehensive online conversion calculator tool, please visit: www.santos.com/conversion- calculator 155 Santos Annual Report 2023 Corporate directory Santos Limited ABN 80 007 550 923 SECURITIES EXCHANGE LISTING Santos Limited. Incorporated in Adelaide, South Australia, on 18 March 1954. Quoted on the official list of the Australian Securities Exchange (ordinary shares code STO). Quoted on the official list of the Papua New Guinea National Stock Exchange (ordinary shares code STO). COMPANY SECRETARY Amelia Senneck LLB (Hons), BCom (Hons) (International Business and Management) Company Secretary and Head of Business Integrity Ms Senneck joined Santos in 2014 and was appointed to the role of Company Secretary and Head of Business Integrity in 2024. She has over 18 years’ experience in commercial and corporate legal practice. REGISTERED AND HEAD OFFICE Ground Floor Santos Centre 60 Flinders Street Adelaide SA 5000 Australia GPO Box 2455 Adelaide SA 5001 Australia Telephone: +61 8 8116 5000 Facsimile: +61 8 8116 5050 Website: www.santos.com SHARE REGISTER Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street Sydney NSW 2000 Australia GPO Box 2975 Melbourne VIC 3001 Australia Website: www.computershare.com/au Shareholder Access: www.investorcentre.com.au Telephone: 1300 096 259 (within Australia) + 61 3 9415 4397 (International) 156 Financial ReportSantos Annual Report 2023 Designed and produced at twelvecreative.com.au POSITIONAL ONLY PRINTER TO INSERT 157 Santos Annual Report 2023