RESULTS FOR ANNOUNCEMENT TO THE MARKET
APPENDIX 4D FOR THE PERIOD ENDED 30 JUNE 2019
2019US$million
2018US$million
Change
%
1,974 1,680 17.5
| Revenue from ordinary activities |
| Statutory Profit from ordinary activities after tax attributable to |
members
| 388 | 104 | 273.1 | |
| Net Profit for the period attributable to members |
388 104 273.1Interim Dividend Amount per
security
Franked amount per
security at 30% tax
US cents
| US cents | |
| Directors resolved to pay an interim dividend in relation to the |
half-year ended 30 June 2019.Ordinary securities28 August 2019 is the record date for determining entitlementsto the dividend
6.0 6.0
Half-year Report30 June 2019 Page
| CONTENTS | ||
| Directors’ Report | 2 | |
| Review and Results of Operations | ||
| Directors |
| Rounding |
| Auditor’s Independence Declaration | ||
| Half-year Financial Report | 8 | |
| Consolidated Income Statement | ||
Comprehensive Income 9
| Consolidated Statement of |
| Consolidated Statement of |
Financial Position 10
Flows 11
| Consolidated Statement of Cash |
| Consolidated Statement of |
Changes in Equity 12
Financial Statements 13
| Notes to the Half-year Consolidated | |
| Directors’ Declaration |
| Independent Auditor’s Report | 35 |
| Appendix 4D continued | 37 |
RESULTS FOR THE PERIOD
2019US$million
Change
| Underlying profit | 411 | 89% |
Product sales 1,974 18%
| EBITDAX | 1,260 | 43% |
| Free cash flow |
| 638 | 74% | |
| Interim dividend (UScps) | 6.0 | 71% |
Underlying profit, EBITDAX (earnings before interest, tax, depreciation, depletion, exploration,
evaluation and impairment) and free cash flow (operating cash flows, less investing cash flows (netof acquisitions and disposals and major growth capex), less lease liability payments) are non-IFRSmeasures that are presented to provide an understanding of the performance of Santos’operations. The non-IFRS financial information is unaudited, however the numbers have beenextracted from the financial statements which have been subject to review by the Company’sauditor.
ABOUT SANTOSSantos is an Australian natural gas company. Establishedin 1954, the company’s purpose is to provide sustainablereturns for our shareholders by supplying reliable,affordable and cleaner energy to improve the lives ofpeople in Australia and Asia.
Five core long-life natural gas assets sit at the heart of aclear and consistent strategy to Transform, Build andGrow the business: Western Australia, the Cooper Basin,Queensland & NSW, Northern Australia and Papua NewGuinea. Each core asset provides stable production, long-term revenue streams and significant upside opportunities.Santos today is a safe, low-cost, reliable and highperformance business, proudly delivering the economicand environmental benefits of natural gas to homes andbusinesses throughout Australia and Asia.
DIRECTORS’ REPORTDIRECTORS’ REPORTThe Directors present their report together with the consolidated financial report of the consolidated entity, beingSantos Limited (“Santos” or “the Company”) and its controlled entities, for the half-year ended 30 June 2019, and theauditor’s review report thereon.
REVIEW AND RESULTS OF OPERATIONS
Unless otherwise stated, all references to dollars are to US dollars.A review of the results of the operations of the consolidated entity during the half-year is as follows:
Summary of results table 2019 2018 Variance
| mmboe | mmboe | % | |
| Production volume | 37.0 | 28.0 | 32.2 |
| Sales volume | 45.2 | 38.0 | 19.0 |
| $million | $million | ||
| Product sales | 1,974 | 1,680 | 17.5 |
| EBITDAX1 | 1,260 | 883 | 42.7 |
| Exploration and evaluation expensed | (28) | (45) | 37.8 |
| Depreciation and depletion | (460) | (328) | (40.2) |
| Net impairment loss | (38) | (76) | 50.0 |
| Change in future restoration assumptions | 2 | 9 | (77.8) |
| EBIT1 | 736 | 443 | 66.1 |
| Net finance costs | (146) | (108) | (35.2) |
| Taxation expense | (202) | (231) | 12.6 |
| Net profit for the period | 388 | 104 | 273.1 |
| Underlying profit for the period2 | 411 | 217 | 89.4 |
1.EBITDAX (earnings before interest, tax, depreciation, depletion, exploration and evaluation and impairment), EBIT (earnings before interest and tax) and underlying profit/(loss) are non-IFRS
measures that are presented to provide an understanding of the underlying performance of Santos’ operations.
2.Underlying profit excludes the impacts of asset acquisitions, disposals and impairments and the impact of hedging. Please refer to page 5 for the reconciliation from net profit/(loss) to underlying
profit/(loss) for the period. The calculation of underlying profit has remained consistent with prior periods. The non-IFRS financial information is unaudited however the numbers have been extractedfrom the financial statements which have been subject to review by the Company’s auditor.Sales volume
Sales volumes of 45.2 million barrels of oil equivalent(mmboe) were 19% higher than the previous first half.The higher volumes were due to the Quadrantacquisition more than doubling sales in WesternAustralia combined with growth in the Cooper Basinand Queensland. PNG volumes recovered following thePNG Highlands earthquake in February 2018.
Sales revenue
Sales revenue was up 18% compared to the previousfirst half to a record $2 billion, primarily due to highersales volumes and higher LNG prices. The averagerealised LNG price rose 11% to US$9.97/mmBtu butthe average realised oil price fell 4% to US$72.11/bbl.
30.9
40.9
40.1
38.0
45.2
HY15HY16HY17HY18HY19
mmboe
1,261
1,191
1,449
1,680
1,974
HY15HY16HY17HY18HY19
US$million
2 Santos Limited Half-year Financial Report – 30 June 2019
DIRECTORS’ REPORTProduction
Production was up 32% to a record 37 mmboeprimarily due to the Quadrant acquisition in WesternAustralia, higher production in the Cooper Basin andQueensland, and recovery in PNG production followingthe PNG Highlands earthquake in February 2018. Thiswas partly offset by the sale of Santos’ Asian assets inthe second half of 2018.Review of OperationsSantos’ operations are focused on five core, long-lifenatural gas assets: Cooper Basin, Queensland andNSW, PNG, Northern Australia and WesternAustralia.Cooper Basin
The Cooper Basin produces natural gas, gas liquids andcrude oil. Gas is sold primarily to domestic retailers,industry and for the production of liquefied natural gas,while gas liquids and crude oil are sold in domestic andexport markets.Santos’ strategy in the Cooper Basin is to deliver a low-cost, cash flow positive business by building production,investing in new technology to lower development andexploration costs, and increasing utilisation ofinfrastructure including the Moomba plant.
| Cooper Basin | HY19 | HY18 |
| Production (mmboe) | 7.7 | 7.5 |
| Sales volume (mmboe) | 11.1 | 10.3 |
| Product sales (US$m) | 534 | 502 |
| Production cost (US$/boe) | 7.91 | 8.42 |
| EBITDAX (US$m) | 291 | 229 |
| Capex (US$m) | 130 | 108 |
Cooper Basin EBITDAX was $291 million, 27% higherthan the first half of 2018 primarily due to higher salesrevenue due to higher oil prices, in addition to lowerproduction costs of US$7.91/boe, down 6%, resultingfrom cost saving and efficiency initiatives.Santos’ share of Cooper Basin sales gas and ethaneproduction of 29.6 petajoules (PJ) was in-line with thecorresponding period. Higher production fromincreased drilling activity and newly connected wellswas offset by the impact of planned maintenance at theMoomba plant.Santos’ share of oil production was up 20% to
1.7 million barrels due to strong oil development
outcomes and a dedicated drilling rig.
Queensland and NSWThe GLNG project in Queensland produces liquefiednatural gas (LNG) for export to global markets fromthe LNG plant at Gladstone. Gas is also sold into thedomestic market. Santos has a 30% interest in GLNG.The LNG plant has two LNG trains with a combinednameplate capacity of 7.8 mtpa. Production from Train1 commenced in September 2015 and Train 2 in May2016. Feed gas is sourced from GLNG’s upstream fields,Santos portfolio gas and third-party suppliers.The LNG plant produced 2.6 million tonnes in the firsthalf of 2019 and shipped 44 cargoes.Santos aims to build GLNG gas supply throughupstream development, seek opportunities to extractvalue from existing infrastructure and drive efficienciesto operate at lowest cost.
| Queensland and NSW | HY19 | HY18 |
| Production (mmboe) | 6.3 | 5.9 |
| Sales volume (mmboe) | 10.6 | 11.0 |
| Product sales (US$m) | 516 | 463 |
| Production cost (US$/boe) | 5.32 | 6.39 |
| EBITDAX (US$m) | 321 | 285 |
| Capex (US$m) | 133 | 110 |
Queensland and NSW EBITDAX was $321 million, 13%higher than the first half of 2018. This was a result ofhigher sales revenue reflecting higher LNG prices alongwith additional cargoes shipped in the first half of 2019.Production costs of US$5.32/boe, down 17%, werelower due to higher well uptime.Papua New Guinea
Santos’ business in PNG is centred on the PNG LNGproject. Completed in 2014, PNG LNG produces LNGfor export to global markets, as well as sales gas and gasliquids. Santos has a 13.5% interest in PNG LNG.The LNG plant near Port Moresby has two LNG trainswith the combined capacity to produce more than eightmillion tonnes per annum. Production from both trainscommenced in 2014.The LNG plant produced 4.3 million tonnes in the firsthalf of 2019 and shipped 56 cargoes. Production washigher than the corresponding period due to recoveryfrom the PNG Highlands earthquake in February 2018.Santos’ strategy in PNG is to work with its partners toalign interests, and support and participate in backfilland expansion opportunities at PNG LNG. Santos,along with the other PNG LNG parties, are indiscussions to build alignment for the proposedconstruction of three additional LNG trains at the PNGLNG site, one for the PNG LNG project (Santos 13.5%interest) and two for the Papua LNG project (in whichSantos does not have an equity interest). Santos expectsto earn an access fee from the Papua LNG project foruse of existing PNG LNG infrastructure. Santos has alsosigned a letter of intent to farm-in to PRL 3 whichcontains the multi-tcf P’nyang field.
28.3
31.1
29.5
28.0
37.0
HY15HY16HY17HY18HY19
mmboe
3 Santos Limited Half-year Financial Report – 30 June 2019
DIRECTORS’ REPORT
| PNG | HY19 | HY18 |
| Production (mmboe) | 6.4 | 4.6 |
| Sales volume (mmboe) | 5.9 | 4.1 |
| Product sales (US$m) | 325 | 215 |
| Production cost (US$/boe) | 5.78 | 6.91 |
| EBITDAX (US$m) | 283 | 165 |
| Capex (US$m) | 20 | 15 |
PNG EBITDAX was $283 million, 72% higher than thefirst half of 2018, due to higher sales volumes and higherLNG prices.
Northern AustraliaSantos’ business in Northern Australia is focused on theBayu-Undan/Darwin LNG (DLNG) project. Inoperation since 2006, DLNG produces LNG and gasliquids for export to global markets. Santos has an
11.5% interest in DLNG.
The LNG plant near Darwin has a single LNG train witha nameplate capacity of 3.7 mtpa. LNG production of
1.6 million tonnes in the first half was in-line with the
corresponding period.Santos’ strategy in Northern Australia is to supportplans to progress Darwin LNG backfill, expand thecompany’s acreage footprint and appraise the onshoreMcArthur Basin.The Barossa project (Santos 25% interest) entered thefront-end engineering and design (FEED) phase in 2018and is the leading candidate to backfill Darwin LNG. Afinal investment decision is targeted in early 2020.Successful development of Barossa would extend theoperating life of Darwin LNG for more than 20 years,and more than double Santos’ current production inNorthern Australia.
| Northern Australia | HY19 | HY18 |
| Production (mmboe) | 1.6 | 1.7 |
| Sales volume (mmboe) | 1.7 | 1.7 |
| Product sales (US$m) | 85 | 76 |
| Production cost (US$/boe) | 21.31 | 23.23 |
| EBITDAX (US$m) | 50 | 35 |
| Capex (US$m) | 17 | 29 |
Northern Australia EBITDAX was $50 million, 43%higher than the first half of 2018. Unit production costswere lower than the prior first half primarily due to aplant shutdown in May 2018.Western AustraliaSantos is one of the largest producers of domesticnatural gas in Western Australia and is also a significantproducer of gas liquids and oil.
In late 2018, Santos completed the acquisition ofQuadrant Energy for US$2.15 billion plus contingentpayments related to the Bedout Basin. Quadrantsignificantly strengthened Santos’ position in WesternAustralia, including 100% ownership and operatorshipof the Varanus Island and Devil Creek gas hubs, and aleading position in the highly prospective Bedout Basin.Santos successfully appraised the significant oildiscovery at Dorado (Santos 80% interest) in theBedout Basin in the first half of 2019. Dorado opens anew basin with high prospectivity in permits whereSantos has a high equity position. A FEED-entry decisionon a potential Dorado development is targeted for2020.
| Western Australia | HY19 | HY18 |
| Production (mmboe) | 14.9 | 5.6 |
| Sales volume (mmboe) | 13.8 | 5.7 |
| Product sales (US$m) | 417 | 168 |
| Production cost (US$/boe) | 7.63 | 8.90 |
| EBITDAX (US$m) | 314 | 114 |
| Capex (US$m) | 122 | 17 |
Western Australia EBITDAX was $314 million, 175%higher than the first half of 2018, predominantly due tothe acquisition of Quadrant in the second half of 2018.Santos’ share of Western Australia gas productionmore than doubled to 68.8 PJ in the first half due to theacquisition of Quadrant.Santos’ share of condensate and oil production alsogrew strongly to 773,000 and 2,396,000 barrelsrespectively.
4 Santos Limited Half-year Financial Report – 30 June 2019
DIRECTORS’ REPORTNet ProfitThe 2019 first half net profit was $388 million; compared with a $104 million net profit at half-year 2018. The $284million increase in net profit is driven through increased production and sales volumes; as well as the significant reductionin the before tax impairment loss of $38 million posted in 2019, compared to the $76 million posted in 2018.Underlying profit of $411 million includes items after tax of $23 million (before tax of $34 million), referred to in thereconciliation of net profit/(loss) to underlying profit below.
| Reconciliation of Net Profit/(Loss) to Underlying Profit | 2019 $million | 2018 $million | |||||
| Gross | Tax | Net | Gross | Tax | Net | ||
| Net profit after tax attributable to equity holders | |||||||
of Santos Limited 388 104
| Add/(deduct) the following: | ||||||
| Impairment losses | 38 | (12) | 26 | 76 | – | 76 |
| Gains on sale of non-current assets | (10) | 3 | (7) | (55) | 16 | (39) |
| Fair value adjustments on embedded derivatives and hedges | 6 | (2) | 4 | – | – | – |
| Fair value adjustments on commodity hedges | – | – | – | 109 | (33) | 76 |
| 34 | (11) | 23 | 130 | (17) | 113 | |
| Underlying profit |
| 411 | 217 |
1.
Underlying profit excludes the impacts of asset acquisitions, disposals and impairments and the impact of hedging. The calculation of underlying profit has remained consistent to prior periods. Thenon-IFRS financial information is unaudited however the numbers have been extracted from the financial statements which have been subject to review by the Company’s auditor.EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF SANTOS LIMITED
Equity attributable to equity holders of Santos Limited at 30 June 2019 was $7,532 million.CASH FLOWThe net cash inflow from operating activities of $1,051 million was 63% higher than the first half of 2018. This increaseis principally attributable to higher receipts from customers, offset by higher payments to suppliers and employees andhigher taxes. Net cash used in investing activities of $359 million was $101 million higher than the first half of 2018,primarily due to increased asset additions, partially offset by movements in working capital. Cash flows used in financingactivities were $671 million higher than the first half of 2018, predominantly due to the repayment of the $500 millionbank term loan facility, repayment of the $600 million uncovered ECA supported loan facility, dividend payment of $127million, offset by the issuance of a $600 million senior unsecured fixed rate bond.OUTLOOK
Sales volume guidance is maintained in the range of 90 to 97 mmboe and production guidance is maintained in the rangeof 73 to 77 mmboe for 2019.
POST BALANCE DATE EVENTS
On 21 August 2019, the Directors resolved to pay a fully franked interim dividend of US$0.06 per fully paid ordinaryshare on 26 September 2019 to shareholders registered in the books of the Company at the close of business on 28August 2019 (“Record Date”). Consistent with 2018 dividends, the dividend will be paid in AUD and the currencyconversion will be based on the foreign exchange rate determined on the Record Date. The Board also resolved thatthe Dividend Reinvestment Plan (“DRP”) will not be in operation for the 2019 interim dividend.The financial effect of these dividends has not been brought to account in the half-year financial report for the six monthsended 30 June 2019.
5 Santos Limited Half-year Financial Report – 30 June 2019
DIRECTORS’ REPORT
DIRECTORS
The names of Directors of the Company in office during or since the end of the half-year are:
| Surname | Other Names |
| Allen | Yasmin Anita |
| Cowan | Guy Michael |
| Gallagher | Kevin Thomas (Managing Director and Chief Executive Officer) |
| Goh | Hock |
| Guthrie | Vanessa Ann |
| Hearl | Peter Roland |
| Shi1 | Yujiang |
| Guan2 | Yu |
| Spence | Keith William (Chairman) |
| 1Mr Shi ceased to be a Director of Santos Limited effective 2 May 2019. | |
Mr Guan was appointed a Director of Santos Limited on 3 May 2019.Each of the above named Directors held office during or since the end of the half-year. There were no other personswho acted as Directors at any time during the half-year and up to the date of this report.ROUNDING
Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Report) Instrument2016/191 applies to the Company. Accordingly, amounts have been rounded off in accordance with that Instrument,unless otherwise indicated.AUDITOR’S INDEPENDENCE DECLARATIONA copy of the auditor’s independence declaration as required by section 307C of the Corporations Act 2001 (Cth) is setout on page 7 and forms part of this report.This report is made out on 21 August 2019 in accordance with a resolution of the Directors.
21 August 2019
6 Santos Limited Half-year Financial Report – 30 June 2019
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young121 King William StreetAdelaide SA 5000 AustraliaGPO Box 1271 Adelaide SA 5001
| 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 |
Auditor’s Independence Declaration to the Directors of Santos LimitedAs lead auditor for the review of the half-year financial report of Santos Limited for the half-year ended30 June 2019, 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 inrelation to the review; andb)no contraventions of any applicable code of professional conduct in relation to the review.This declaration is in respect of Santos Limited and the entities it controlled during the financial period.
Ernst & Young
R J CurtinPartnerAdelaide21 August 2019
CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2019
| 30 June 2019 | 30 June 2018 | ||
| Note | US$million | US$million | |
| Revenue from contracts with customers |
– Product sales 2.2
1,680
| 1,974 | ||
| Cost of sales |
2.3 (1,228) (1,162)
746 518
| Gross profit |
| Revenue from contracts with customers |
– Other
2.2
| 69 |
| Other income | 55 | 68 | |
| Impairment of non |
-current assets 3.4
(76)
| (38) | |||
| Other expenses | 2.3 | (99) | (115) |
| Finance income | 4.2 | 16 | 12 |
| Finance costs |
4.2
(120)
| (162) | |||
| Share of net profit of joint ventures | 3 | 1 | |
| Profit before tax | 590 | 335 | |
| Income tax |
expense (156) (212)
| Royalty-related taxation expense | (46) | (19) | |
| Total taxation expense | (202) | (231) |
Net profit for the period attributable to owners of Santos
| Limited | 388 |
Earnings per share attributable to the equity holders of
| Santos Limited (?) | |||
| Basic profit per share | 18.7 | 5.0 | |
| Diluted profit per share | 18.5 | 5.0 |
| Dividends per share (?) |
| Paid during |
the period 2.4
–
| 6.2 | ||
| Declared in respect of the period |
2.4
3.5
The consolidated income statement is to be read in conjunction with the notes to the half-year financial statements.
8 Santos Limited Half-year Financial Report – 30 June 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 30 JUNE 2019
| 30 June 2019 | 30 June 2018 | ||
| US$million | US$million | ||
| Net profit for the period | 388 |
Other comprehensive income to be reclassified to profit or loss insubsequent periods:
Other comprehensive income, net of tax:
Exchange loss on translation of foreign operations
| Exchange loss on translation of foreign operations | – | (186) |
Tax effect
–
| – |
| – |
(186)Loss on foreign currency loans designated as hedges of net
investments in foreign operations
(83)
| – | |||
| Tax effect | – | 25 | |
| – | (58) |
Loss on derivatives designated as cash flow hedges
(16)
| (6) | |||
| Tax effect | 2 | 5 | |
| (4) | (11) |
Net other comprehensive loss to be reclassified to profit or
| loss in subsequent periods | (4) | (255) |
Items not to be reclassified to profit or loss in subsequent periods:
| Actuarial gain on the defined benefit plan | – | 3 |
Tax effect
(1)
| – |
| – |
Loss on financial liabilities at fair value through other
comprehensive income (FVOCI)(
4) (2)
| Tax effect | 1 | 1 | |
| (3) | (1) |
Net other comprehensive (loss)/income that will not be
| reclassified to profit or loss in subsequent periods | (3) |
| Other comprehensive loss, net of tax | (7) |
(254)Total comprehensive profit/(loss) attributable to owners of
| Santos Limited | 381 | (150) |
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the half-year financialstatements.
9 Santos Limited Half-year Financial Report – 30 June 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2019
| 30 June 2019 | 31 December 2018 | ||
| Note | US$million | US$million | |
| Current assets | |||
| Cash and cash equivalents | 1,215 | 1,316 | |
| Trade and other receivables | 406 | 521 |
Prepayments
| 10 | |||
| Contract assets | 17 | – |
Inventories
Other financial assets
4 28
Tax receivable
| Tax receivable | – | 13 | |
| Total current assets |
2,198
| 1,966 | ||
| Non-current assets |
Prepayments
| 15 | |||
| Contract assets | 99 | 137 | |
| Investments in joint ventures | 22 | 31 |
Other financial assets
| 36 | |||
| Exploration and evaluation assets | 3.1 | 1,107 | 1,004 |
Oil and gas assets 3.2
11,224
| 11,421 | |||
| Other land, buildings, plant and equipment | 187 | 119 | |
| Deferred tax assets | 1,746 | 1,746 |
Goodwill
| 628 | |||
| Total non-current assets | 15,261 | 14,936 | |
| Total assets |
17,134
| 17,227 | ||
| Current liabilities |
556 661
| Trade and other payables | |||
| Other liabilities | 1 | 3 |
Contract liabilities
| 80 | |||
| Lease liabilities | 5.3(c) | 91 | 1 |
Interest-bearing loans and borrowings 4.1
| 344 | |||
| Current tax liabilities | 18 | 63 | |
| Provisions | 130 | 116 |
Other financial liabilities
| 4 | |||
| Total current liabilities | 1,224 | 1,848 | |
| Non-current liabilities |
2 2
| Other liabilities | |||
| Contract liabilities | 215 | 268 | |
| Lease liabilities |
5.3(c)
| 268 | |||
| Interest-bearing loans and borrowings | 4.1 | 3,907 | 3,891 |
Deferred tax liabilities
1,614
| 1,766 | |||
| Provisions | 2,282 | 2,147 | |
| Other financial liabilities | 31 | 24 | |
| Total non-current liabilities |
8,007
| 8,471 | |||
| Total liabilities | 9,695 | 9,855 | |
| Net assets |
7,279
| 7,532 | ||
| Equity |
Issued capital 4.3
9,031
| 9,031 | |||
| Reserves | 473 | 607 | |
| Accumulated losses | (1,972) | (2,359) |
Total equity 7,532 7,279
The consolidated statement of financial position is to be read in conjunction with the notes to the half-year financial statements.
10 Santos Limited Half-year Financial Report – 30 June 2019
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 30 JUNE 2019
| 30 June 2019 | 30 June 2018 | ||
| US$million | US$million | ||
| Cash flows from operating activities |
| Receipts from customers | 2,197 | 1,725 | |
| Interest received | 16 | 12 |
Dividends received
–
| 5 | |||
| Pipeline tariffs and other receipts | 79 | 23 |
Payments to suppliers and employees
(889)
| (959) | |||
| Exploration and evaluation seismic and studies | (45) | (45) | |
| Restoration expenditure | (6) | (11) |
Royalty and excise paid
(27)
| (45) | |||
| Borrowing costs paid | (134) | (88) |
Income taxes paid
(47)
| (24) | |||
| Income taxes received | – | 2 | |
| Royalty-related taxes paid | (49) | (13) |
Other operating activities 16 2
| Net cash provided by operating activities | 1,051 |
| Cash flows from investing activities | |||
| Payments for: | |||
| Exploration and evaluation assets | (88) | (17) |
Oil and gas assets (286) (251)
| Other land, buildings, plant and equipment | (5) | (3) |
Acquisitions of oil and gas assets
–
| (8) | |||
| Costs associated with acquisition of subsidiaries | (6) | – |
Acquisitions of exploration and evaluation assets
(4)Proceeds on disposal of non-current assets
| – |
| 40 |
| Borrowing costs paid | (6) | – |
Other investing activities
(6)
| – | ||
| Net cash used in investing activities |
(258)
| (359) | |||
| Cash flows from financing activities | |||
| Dividends paid | (127) | – | |
| Drawdown of borrowings | 592 | – |
Repayments of borrowings
(112)
| (1,210) | |||
| Repayment of lease liabilities | (42) | – |
Purchase of shares on-market (Treasury shares)
(8)
| (4) | |||
| Net cash used in financing activities | (791) | (120) | |
| Net (decrease)/increase in cash and cash equivalents | (99) | 266 | |
| Cash and cash equivalents at the beginning of the period | 1,316 |
1,231Effects of exchange rate changes on the balances of cash held inforeign currencies
(5)
| (2) | ||
| Cash and cash equivalents at the end of the period | 1,215 |
1,492
The consolidated statement of cash flows is to be read in conjunction with the notes to the half-year financial statements.
11 Santos Limited Half-year Financial Report – 30 June 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2019
US$million
Issuedcapital
Translationreserve
Hedgingreserve
| Equity attributable to owners of Santos Limited | ||
| Financial | ||
liabilities atFVOCI
Accumulatedprofits reserve
Accumulated
losses
Totalequity
9,034 (528) 5 (21) 595 (1,934) 7,151
| Balance at 1 January 2018 | |||||||
| Transfer retained profits to accumulated profits reserve | – | – | – | – | 327 | (327) | – |
Items of comprehensive income:
| Net profit for the period | – | – | – | – | – | 104 | 104 |
| Other comprehensive (loss)/income for the period | – | (244) | (11) | (1) | – | 2 | (254) |
| Total comprehensive (loss)/income for the period | – | (244) | (11) | (1) | – | 106 | (150) |
| Transactions with owners in their capacity as owners: | |||||||
| On-market share purchase (held as Treasury shares) | (8) | – | – | – | – | – | (8) |
| Share-based payment transactions | 2 | – | – | – | – | 3 | 5 |
| Balance at 30 June 2018 | 9,028 | (772) | (6) | (22) | 922 | (2,152) | 6,998 |
| Balance at 1 July 2018 | 9,028 | (772) | (6) | (22) | 922 | (2,152) | 6,998 |
| Transfer retained profits to accumulated profits reserve | – | – | – | – | 736 | (736) | – |
| Items of comprehensive income: |
Net profit for the period – – – – – 526
| 526 | |||||||
| Other comprehensive (loss)/income for the period | – | (193) | 14 | 1 | – | – | (178) |
| Total comprehensive (loss)/income for the period | – | (193) | 14 | 1 | – | 526 | 348 |
| Transactions with owners in their capacity as owners: | |||||||
| Dividends paid | – | – | – | – | (73) | – | (73) |
On-market share purchase (held as Treasury shares) (2) – – – – –
| (2) | |||||||
| Share-based payment transactions | 5 | – | – | – | – | 3 | 8 |
Balance at 31 December 2018 9,031 (965) 8 (21) 1,585 (2,359) 7,279
| Balance at 1 January 2019 | 9,031 | (965) | 8 | (21) | 1,585 | (2,359) | 7,279 |
Opening balance adjustment on adoption of new accounting
| standard (refer note 5.3(c)) | – | – | – | – | – | (6) | (6) |
Items of comprehensive income:
| Net profit for the period | – | – | – | – | – | 388 | 388 |
| Other comprehensive (loss)/income for the period | – | – | (4) | (3) | – | – | (7) |
Total comprehensive (loss)/income for the period
| – | – | (4) | (3) | – | 388 | 381 | |
| Transactions with owners in their capacity as owners: | |||||||
| Dividends paid | – | – | – | – | (127) | – | (127) |
| On-market share purchase (held as Treasury shares) | (4) | – | – | – | – | – | (4) |
| Share-based payment transactions | 4 | – | – | – | – | 5 | 9 |
Balance at 30 June 2019 9,031 (965) 4 (24) 1,458 (1,972) 7,532The consolidated statement of changes in equity is to be read in conjunction with the notes to the half-year financial statements.12 Santos Limited Half-year Financial Report – 30 June 2019
NOTES TO THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2019SECTION 1: BASIS OF PREPARATION
| 1.1 | CORPORATE INFORMATION |
Santos Limited (“the Company”) is a company limited by shares incorporated in Australia whose shares arepublicly traded on the Australian Securities Exchange (“ASX”). The condensed consolidated financial report ofthe Company for the six months ended 30 June 2019 (“the half-year financial report”) comprises the Companyand its controlled entities (“the Group”). Santos Limited is the ultimate parent entity in the Group.The half-year financial report was authorised for issue in accordance with a resolution of the Directors on 21August 2019.The half-year financial report is presented in United States dollars.
| 1.2 | BASIS OF PREPARATION |
This general purpose half-year financial report has been prepared in accordance with AASB 134 Interim FinancialReporting and the Corporations Act 2001.The half-year financial report does not include all notes of the type normally included within the annual financialreport and therefore cannot be expected to provide as full an understanding of the financial performance, financialposition and financing and investing activities of the Group as the annual financial report.It is recommended that the half-year financial report be read in conjunction with the annual financial report forthe year ended 31 December 2018 and considered together with any public announcements made by theCompany during the six months ended 30 June 2019, in accordance with the continuous disclosure obligationsof the ASX listing rules.Santos Limited and some subsidiaries changed functional currency to US dollars effective 1 January 2019. Referto note 5.3(b) for further detail.Changes to significant accounting policies are described in Section 5.
| 1.3 | SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS |
The significant accounting judgements, estimates and assumptions adopted in the half-year financial report areconsistent with those applied in the preparation of the Group’s annual financial report for the year ended31 December 2018, except for those that have arisen as a result of new standards, amendments to standardsand interpretations effective from 1 January 2019, as outlined in note 5.3.
This section provides information about the basis of preparation of the half-year financial report, and certain accountingpolicies that are not disclosed elsewhere.
13 Santos Limited Half-year Financial Report – 30 June 2019
SECTION 2: FINANCIAL PERFORMANCE
| 2.1 | SEGMENT INFORMATION |
The Group has identified its operating segments to be the five key assets/operating areas of the Cooper Basin,Queensland & NSW, Papua New Guinea (“PNG”), Northern Australia and Western Australia, based on thenature and geographical location of the assets, and “Other” non-core assets. This is the basis on which internalreports are provided to the Chief Executive Officer for assessing performance and determining the allocation ofresources within the Group. Comparative disclosures have been restated to a consistent basis.Segment performance is measured based on earnings before interest, tax, impairment, exploration and evaluation,depletion, depreciation and amortisation (“EBITDAX”). Corporate and exploration expenditure and inter-segmenteliminations are included in the segment disclosure for reconciliation purposes.Changes in Segment informationAs at 1 January 2019, the “Asia” reporting segment was no longer required, due to the divestment of the majorityof the assets that were reported under that segment. Comparative disclosures have been restated to a consistentbasis.
This section focuses on the operating results and financial performance of the Group. It includes disclosures ofsegmental financial information and dividends.
14 Santos Limited Half-year Financial Report – 30 June 2019
2.1
.Inter-segment pricing is determined on an arm's length basis. Inter-segment sales are eliminated on consolidation.
Cooper
SEGMENT INFORMATIONBasin
Queensland
| Basin | & NSW | PNG |
Northern
Western
| Australia | Australia | Corporate, |
exploration,eliminations &
| other | Total | ||||||
| US$million | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 |
| Revenue | |||||||
| Product sales to external |
customers 464 487 325 85 417 196 1,974
sales
70 29 – – – (99) –
| Inter-segment product | |||||||
| Revenue – other from external customers | 34 | 6 | 3 | – | 20 | 6 | 69 |
| Total segment revenue | 568 | 522 | 328 | 85 | 437 | 103 | 2,043 |
| Costs | |||||||
| Production costs | (61) | (33) | (37) | (35) | (114) | 7 | (273) |
| Other operating costs | (41) | (39) | (24) | – | (3) | (38) | (145) |
| Third-party product |
purchases (194) (119) – – – (90) (403)
| Inter-segment purchases1 | (1) | (36) | – | – | – | 37 | – |
| Other | 20 | 26 | 16 | – | (6) | (18) | 38 |
| EBITDAX | 291 | 321 | 283 | 50 | 314 | 1 | 1,260 |
| Depreciation and |
depletion (97) (108) (66) (25) (155) (9) (460)
evaluation expensed (3) (1) (2) (5) (29) 12 (28)
| Exploration and | |||||||
| Net impairment (loss) | (2) | (4) | – | – | (32) | – | (38) |
| Change in future |
restoration assumptions – – – – 2 – 2EBIT 189 208 215 20 100 4 736
| Net finance costs | (146) | (146) | |
| Profit before tax | 590 | ||
| Income tax expense | (156) | (156) | |
| Royalty-related taxation |
expense – (15) – (10) (18) (3) (46)
| Net profit for the period | 388 |
15 Santos Limited Half-year Financial Report – 30 June 2019
2.1
.Inter-segment pricing is determined on an arm's length basis. Inter-segment sales are eliminated on consolidation.
Cooper
Basin
Queensland& NSW PNG
NorthernAustralia
WesternAustralia
SEGMENT INFORMATION
Corporate,
exploration,eliminations
& other Total
| Corporate, | |||||||
| US$million (Restated) | 2018 | 2018 | 2018 | 2018 | 2018 | 2018 | 2018 |
Revenue
customers 449 416 215 75 168 357 1,680
| Product sales to external |
| Inter-segment product sales |
| 53 | 47 | – | – | – | (100) | – | |
| Revenue – other from external customers | 27 | 6 | 2 | – | 4 | 8 | 47 |
| Total segment revenue | 529 | 469 | 217 | 75 | 172 | 265 | 1,727 |
| Costs | |||||||
| Production costs | (63) | (38) | (31) | (40) | (50) | (21) | (243) |
| Other operating costs | (31) | (38) | (22) | – | (8) | (61) | (160) |
| Third-party product |
purchases (200) (120) – – – (106) (426)
| Inter-segment purchases1 | (3) | (33) | – | – | – | 36 | – |
| Other | (3) | 45 | 1 | – | – | (58) | (15) |
| EBITDAX | 229 | 285 | 165 | 35 | 114 | 55 | 883 |
| Depreciation and |
depletion (98) (86) (58) (24) (39) (23) (328)
evaluation expensed (4) (1) (4) (9) (2) (25) (45)
| Exploration and | |||||||
| Net impairment loss | – | (4) | (25) | – | – | (47) | (76) |
| Change in future |
restoration assumptions – – – – 9 – 9
| EBIT | 127 | 194 | 78 | 2 | 82 | (40) | 443 |
| Net finance costs | (108) | (108) | |||||
| Profit before tax | 335 | ||||||
| Income tax expense | (212) | (212) | |||||
| Royalty-related taxation (expense)/benefit | – | – | – | – | (22) | 3 | (19) |
| Net profit for the period | 104 |
16 Santos Limited Half-year Financial Report – 30 June 2019
| 2.2 | REVENUE FROM CONTRACTS WITH CUSTOMERS | ||
| The Group’s operations and main revenue streams are those described in the last annual financial report. | |||
| 30 June 2019 | 30 June 2018 | ||
| US$million | US$million | ||
| Product sales: | |||
| Gas, ethane and liquefied gas | 1,364 | 1,114 | |
| Crude oil | 402 | 400 | |
| Condensate and naphtha | 161 | 132 | |
| Liquefied petroleum gas | 47 | 34 | |
| Total product sales | |||
| 1,974 |
1,680
Total product sales include third party product sales of $475 million (2018: $523 million).
| Revenue – other: | ||
| Liquidated damages | 16 | 5 |
| Pipeline tolls & tariffs | 42 | 35 |
| Unwind of acquired contract liabilities | 3 | – |
Other 8 7
| Total revenue – other | 69 |
Total revenue from contracts with customers 2,043 1,727
17 Santos Limited Half-year Financial Report – 30 June 2019
| 2.3 | EXPENSES | |||
| 30 June 2019 | 30 June 2018 | |||
| US$million | US$million | |||
| Cost of sales: |
Production costs:
Production expenses
Production facilities – operating leases
| 273 |
| – |
| Total production costs | 273 | 243 | |
| Other operating costs: | |||
| LNG plant costs | 28 | 33 | |
| Pipeline tariffs, processing tolls and other | 78 | 84 | |
| Movement on onerous pipeline contracts | (13) | – |
Royalty and excise 47 35Shipping costs
| 5 | |||
| Total other operating costs | 145 | 160 | |
| Total cash cost of production | 418 | 403 |
Depreciation and depletion costs:
| Depreciation of plant, equipment and buildings | 274 | 212 | |
| Depletion of subsurface assets | 183 | 115 | |
| Total depreciation and depletion | 457 | 327 |
Third-party product purchases
(Increase)/decrease in product stock
| 403 | ||
| (50) |
| Total cost of sales | 1,228 | 1,162 |
expenses:
| Other | |||
| Selling | 8 | 7 |
General & administration
| 29 | |||
| Depreciation | 3 | 1 | |
| Foreign exchange losses/(gains) | 1 | (90) | |
| Fair value losses on commodity derivatives (oil hedges) | – | 109 | |
| Fair value hedges, losses/(gains): |
On the hedging instrument
| 6 | |||
| On the hedged item attributable to the hedged risk | – | (13) |
Exploration and evaluation expensed
Unwind of acquired contract assets 21 –
Other
| Other | 3 | – | |
| Total other expenses | 99 | 115 |
18 Santos Limited Half-year Financial Report – 30 June 2019
| 2.4 | DIVIDENDS |
Dividends are recognised as a liability at the time the Directors resolve to pay or declare the dividend.
Franked/
| Dividends recognised during the period | unfranked | Dividend |
per share
Total
| US? | US$million | ||
| 2019 |
| Final dividend per ordinary share – paid on 28 March 2019 | Franked | 6.2 | 127 |
| 2018 | |||
| Interim dividend per ordinary share – paid on 27 September 2018 | Franked | 3.5 | 73 |
Franked/
| Dividends declared in respect of the period: | unfranked |
per share
| US? |
Total
2019
US$millionInterim dividend per ordinary share
| Interim dividend per ordinary share | Franked | 6.0 | 125 |
After the reporting date, o
US$0.06 per fully paid ordinary share, to shareholders registered in the books of the Company at the close ofbusiness on 28 August 2019 (“Record Date”). Consistent with 2018 dividends, the dividend will be paid in AUDand the currency conversion will be based on the foreign exchange rate determined on the Record Date.Consequently, the financial effect of the dividend has not been brought to account in the half-year financialstatements for the six months ended 30 June 2019, and will be recognised in subsequent financial reports.
19 Santos Limited Half-year Financial Report – 30 June 2019
SECTION 3: CAPITAL EXPENDITURE, OPERATING ASSETS AND RESTORATION
OBLIGATIONS
3.1
EXPLORATION AND EVALUATION ASSETS
| 3.1 | ||
| Six months ended |
30 June 2019
31 December 2018
| US$million | US$million |
30 June 2018
| US$million | ||
Balance at the beginning of the period 1,004 355 459
Acquisitions
| – |
624 4
Additions
| 147 |
62 25
Disposals
| – |
(2) –
| Expensed | (38) | (8) | (2) | |
| Impairment losses |
(7)
(29)
| (24) | ||||
| Transfer to oil and gas assets in production | (1) | 7 | (7) | |
| Net impairment losses on assets transferred to |
held for sale
| – |
– (76)
Exchange differences
| 2 |
(10) (19)
| Balance at the end of the period | 1,107 | 1,004 | 355 |
| Comprising: | ||||
| Acquisition costs | 695 | 687 | 70 | |
| Successful exploration wells | 148 | 221 | 173 | |
| Pending determination of success | 264 | 96 | 112 | |
| 1,107 |
1,004 355
This section includes information about the assets used by the Group to generate profits and revenue, specificallyinformation relating to exploration and evaluation assets, oil and gas assets, and commitments for capital expenditurenot yet recognised as a liability.The life cycle of our assets is summarised as follows:
Exploration and
Evaluation
Appraisal DrillingDevelopmentProductionDecommissioning
Abandonment andRestoration
20 Santos Limited Half-year Financial Report – 30 June 2019
3.2 OIL AND GAS ASSETS
| Six months ended | |
| 30 June 2019 | |
31 December 2018 30 June 2018
| US$million | US$million | US$million | |
| Assets in development | |||
| Balance at the beginning of the period | 207 | 153 | 119 |
| Additions |
| 31 | 53 | 36 | |
| Transfer to oil and gas assets in production | (191) | 1 | (1) |
| Exchange differences | – | – | (1) |
| Balance at the end of the period | 47 | 207 | 153 |
| Producing assets |
Balance at the beginning of the period
9,062 9,417Transition – Right-of-use assets
| 11,017 |
| 185 |
– –Additions
1,2
| 467 | 163 | 226 | |
| Acquisition | – | 2,241 | – |
| Transfer from exploration and evaluation assets | 1 | (7) | 7 |
| Transfer from oil and gas assets in development | 191 | (1) |
| Disposals | – | (3) |
–
| Depreciation and depletion | (457) | (328) | (316) |
Net impairment losses (31)– –Transfer to assets held for sale
–(153)Net impairment reversals on assets transferred to
| – | |||
| held for sale | – | – | 29 |
| Exchange differences | 1 | (110) | (149) |
| Balance at the end of the period |
11,374 11,017 9,062
| Total oil and gas assets | 11,421 |
11,224 9,215
Exploration and evaluation expenditure pendingcommercialisation
| Comprising: | |
| 88 |
91 98Other capitalised expenditure
11,133 9,117
| 11,333 |
| 11,421 |
11,224 9,215
1.Includes impact on restoration assets following changes in future restoration provision assumptions.
2.Includes impact of AASB 16 recognition of right-of-use assets.
.3 CAPITAL COMMITMENTS
Since 31 December 2018, the Group has entered into additional capital commitments of approximately $55million.
21 Santos Limited Half-year Financial Report – 30 June 2019
| 3.4 | IMPAIRMENT OF NON-CURRENT ASSETS |
Impairment expense recorded during the period is as follows:
30 June 2018
| 30 June 2019 | |||
| US$million | US$million | ||
| Assets held for sale | – | 47 | |
| Exploration and evaluation assets | 7 | 29 | |
| Oil and gas assets | 31 | – | |
| Total impairment | 38 | 76 |
The carrying amounts of the Group’s exploration and evaluation assets and oil and gas assets are reviewed at eachreporting date to determine whether there is any indication of impairment or impairment reversal. Where anindicator of impairment or impairment reversal exists, a formal estimate of the recoverable amount is made.Goodwill is tested at least annually for impairment and more frequently if there are indications that it might beimpaired.The expected future cash flow estimation is based on a number of factors, variables and assumptions, the mostimportant of which are estimates of reserves, future production profiles, third party supply, commodity prices, costsand foreign exchange rates. In most cases, the present value of future cash flows is most sensitive to estimates offuture commodity prices, discount rates and production.Future prices (US$/bbl) used were:
| 2019 | 2020 | 2021 | 2022 | 2023 |
| 2024 |
| 65.00 | 66.30 | 67.63 | 74.28 | 75.77 | 77.29 |
1.Based on US$70/bbl (2019 real) from 2022 escalated at 2% p.a.
The future estimated foreign exchange rate applied is A$1/US$0.75.The discount rates applied to the future forecast cash flows are based on the Group’s weighted average cost ofcapital, adjusted for risks where appropriate, including functional currency of the asset and risk profile of thecountries in which the asset operates. The range of pre-tax discount rates that have been applied to non-currentassets is between 11% and 17%.In the event that future circumstances vary from these assumptions, the recoverable amount of the Group’s oil andgas assets could change materially and result in impairment losses or the reversal of previous impairment losses.Due to the interrelated nature of the assumptions, movements in any one variable can have an indirect impact onothers and individual variables rarely change in isolation. Additionally, management can be expected to respond tosome movements, to mitigate downsides and take advantage of upsides, as circumstances allow. Consequently, it isimpracticable to estimate the indirect impact that a change in one assumption has on other variables and hence, onthe likelihood, or extent, of impairments or reversals of impairments under different sets of assumptions insubsequent reporting periods.Recoverable amounts and resulting impairment write-downs recognised for the half-year ended 30 June 2019 are:
Subsurface
assets
| Segment | US$million |
Plant andequipment
Total
| US$million | US$million |
Recoverable
amount
| US$million | |||||
| Oil and gas assets – producing: | |||||
| Barrow | Western Australia | – | 29 | 29 | nil |
| Other | Various | 2 | – | 2 | nil |
| Total impairment of oil and gas assets | 2 | 29 | 31 | ||
| Exploration and evaluation assets: | |||||
| Gunnedah Basin | Queensland & NSW | 4 | – | 4 | nil |
Other Various 3 – 3 nil
Total impairment of exploration and evaluation
7 – 7
| Total impairment of exploration and evaluation |
| Total impairment of exploration and evaluation |
and oil and gas assets 9 29 38
1.Recoverable amounts represent the carrying values of assets before deducting the carrying value of restoration liabilities. All producing oil
and gas asset amounts are calculated using the value in use (“VIU”) method, whilst all exploration and evaluation asset amounts use thefair value less costs of disposal (“FVLCD”) method.
2.I
mpairment of exploration and evaluation assets relates to certain individual licenses/areas of interest that have been impaired to nil.
22 Santos Limited Half-year Financial Report – 30 June 2019
| 3.4 | IMPAIRMENT OF NON-CURRENT ASSETS (continued) |
Oil and gas assetsBarrowThe impairment of Barrow has arisen due to an increase in oil and gas asset carrying values, following remeasurementof restoration obligations. The recoverable amount of the asset is nil.
23 Santos Limited Half-year Financial Report – 30 June 2019
NOTES TO THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2019SECTION 4: FUNDING AND RISK MANAGEMENT
| 4.1 | INTEREST-BEARING LOANS AND BORROWINGS |
On 13 March 2019, the Group issued a US$600 million senior unsecured fixed rate bond transaction in the USdollar Regulation S market. The bonds have been priced at a fixed coupon of 5.25%, for a period of 10 years,maturing on 13 March 2029.Additionally, during the six months ended 30 June 2019, debt repayments included the repayment of the US$500million bank term loan facility on 14 March 20
on 21 March 2019.
| 19 and US$600 million of uncovered ECA supported loan facility | |
| 4.2 |
30 June 2019 30 June 2018
NET FINANCE COSTSUS$million
| US$million | US$million |
Finance income:
Interest income
| 16 | |
| Total finance income | 16 |
| Finance costs: | ||
| Interest paid to third parties | (121) | (95) |
| Finance costs associated with lease liabilities | (9) | (4) |
Deduct borrowing costs capitalised6 2
(97)Unwind of the effect of discounting on provisions and deferred revenue
| (124) |
| (38) |
(23)
| Total finance costs | (162) | (120) |
Net finance costs (146)
(108)
Our business has exposure to capital, credit, liquidity and market risks. This section provides information relating toour management of, as well as our policies for, measuring and managing these risks.
24 Santos Limited Half-year Financial Report – 30 June 2019
| 4.3 | ISSUED CAPITAL |
| Six months ended | |
| 30 June 2019 Number of shares | |
31 December 2018Number of shares
30 June 2018Number of shares
31 December 2018
US$million
30 June 2018
US$million
| 30 June 2019 US$million | ||||||
| Movement in fully paid ordinary shares | ||||||
| Balance at the beginning of the period | 2,082,979,345 | 2,083,015,428 | 2,083,070,879 | 9,031 | 9,028 | 9,034 |
| Share purchase plan, net of costs | – | – | – | – | – | – |
| On-market shares purchased (Treasury shares) | – | – | – | (4) | (2) | (8) |
| Issue of Treasury shares on vesting of employee |
share schemes– – – 4
shares with shares purchased on-market
| Replacement of restricted classes of ordinary | (15,472) |
(36,083) (55,451)
–
| – |
–
| Balance at the end of the period | 2,082,963,873 | 2,082,979,345 | 2,083,015,428 | 9,031 | 9,031 | 9,028 |
30 June 2019
31 December 2018
Number of shares
30 June 2018Number of shares
| Number of shares | |||
| Movement in Treasury shares | |||
| Balance at the beginning of the period | 1,231,710 | 2,121,765 | 587,993 |
| On-market shares purchased | 750,000 | 500,000 | 2,000,000 |
| Treasury shares utilised: | |||
| Santos Employee Share1000 Plan | – | (176,480) | – |
| Santos Employee ShareMatch Plan | – | (439,664) |
–
| Utilised on vesting of SARs | (26,682) |
(575,010) (40,461)
| Executive STI (deferred SARs) | (696,921) | – | (312,731) |
| Executive STI (ordinary shares) | (80,571) | – | – |
| Executive sign-on grants | – | (166,911) | (42,585) |
| Santos Employee Share1000 Plan (relinquished shares) | – | 4,093 |
–
| Replacement of partially paid shares with shares purchased on-market | – |
–
| (15,000) | |||
| Replacement of ordinary shares with shares purchased on-market | (15,472) | (36,083) | (55,451) |
| Balance at the end of the period | 1,162,064 |
1,231,710 2,121,765
25 Santos Limited Half-year Financial Report – 30 June 2019
| 4.4 | FINANCIAL RISK MANAGEMENT |
Exposure to foreign currency risk, interest rate risk, commodity price risk, credit risk and liquidity risk arises in thenormal course of the Group’s business. The Group’s overall financial risk management strategy is to seek to ensurethat the Group is able to fund its corporate objectives and meet its obligations to stakeholders. Derivative financialinstruments may be used to hedge exposure to fluctuations in foreign exchange rates, interest rates and commodityprices.The Group uses various methods to measure the types of financial risk to which it is exposed. These methodsinclude cash flow at risk and sensitivity analysis in the case of foreign exchange, interest rate and commodity pricerisk, and ageing and credit rating concentration analysis for credit risk.Financial risk management is carried out by a central treasury department which operates under Board-approvedpolicies. The policies govern the framework and principles for overall risk management and covers specific financialrisks, such as foreign exchange risk, interest rate risk and credit risk, approved derivative and non-derivative financialinstruments, and liquidity management.(a) Foreign currency riskForeign exchange risk arises from commercial transactions and valuations of assets and liabilities that aredenominated 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 capitaland operating expenditure incurred in currencies other than the functional currency. In order to economicallyhedge foreign currency risk, the Group may from time to time enter into forward foreign exchange, foreigncurrency swap and foreign currency option contracts.The Group has certain investments in operations whose net assets are exposed to foreign currency translationrisk.US dollar denominated borrowings, previously held by AU dollar functional currency companies, are now heldby US dollar functional currency companies (refer to note 5.3(b) for further detail). All associated hedges of USdollar denominated investments in foreign operations ($1,407 million principal value) were terminated on 1January 2019. There were no net foreign currency gains or losses arising from US dollar denominatedborrowings recognised in the income statement in 2019.The Group has AU dollar denominated lease liabilities, and other monetary items, including financial assets andliabilities, denominated in currencies other than the functional currency of an operation. These items are restatedto US dollar 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 operatingsites that are capitalised in oil and gas assets.
(b) Market risk
Cash flow and fair value interest rate riskThe Group’s interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Groupto cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest raterisk.The Group adopts a policy of ensuring that the majority of its exposure to changes in interest rates onborrowings is on a floating rate basis. Interest rate swaps have been entered into as fair value hedges oflong-term notes. When transacted, these swaps had maturities ranging from 1 to 20 years, aligned with thematurity of the related notes.The Group had entered into interest rate swaps which fixed the reference rate on $1.2 billion of US dollardenominated floating rate debt. These contracts matured in March 2019.The Group’s interest rate swaps have a notional contract amount of $377 million (2018: $1,577 million) and anet fair value of $30 million (2018: $45 million). The net fair value amounts were recognised as fair valuederivatives.Commodity price riskThe Group is exposed to commodity price fluctuations through the sale of petroleum products and other oilprice linked contracts. The Group may enter into crude oil price swap and option contracts to manage itscommodity price risk. At 30 June 2019, the Group has 9.6 million barrels (December 2018: 4.9 million barrels)of open oil price swap and option contracts, 5.4 million barrels covering 2019 exposures (December 2018: 4.9million barrels) and 4.2 million barrels covering 2020 exposures (December 2018: nil). These contracts aredesignated as cash flow hedges.26 Santos Limited Half-year Financial Report – 30 June 2019
| 4.4 | FINANCIAL RISK MANAGEMENT (continued) |
(c) Fair values
The financial assets and liabilities of the Group are all initially recognised in the statement of financial position attheir fair values. Receivables, payables, interest-bearing liabilities and other financial assets and liabilities, whichare 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 financialinstruments:
DerivativesThe fair value of interest rate swaps is calculated by discounting estimated future cash flows based on the termsof maturity of each contract, using market interest rates for a similar instrument at the reporting date. Wherethese cash flows are in a foreign currency, the present value is converted to US dollars at the foreign exchangespot rate prevailing at reporting date.Financial liabilitiesFair value is calculated based on the present value of future principal and interest cash flows, discounted at themarket rate of interest at the reporting date. Where these cash flows are in a foreign currency, the presentvalue is converted to US dollars at the foreign exchange spot rate prevailing at reporting date.Interest rates used for determining fair valueThe interest rates used to discount estimated future cash flows, where applicable, are based on the market yieldcurve and credit spreads at the reporting date.The interest rates including credit spreads used to determine fair value were as follows:
| 30 June 2019 | 31 December 2018 | |
| % | % | |
| Derivatives | 1.7 – 2.4 | 1.5 – 2.8 |
| Loans and borrowings | 1.7 – 2.4 | 1.5 – 2.8 |
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments byvaluation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;Level 2: other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly;Level 3: techniques which use inputs which 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.
27 Santos Limited Half-year Financial Report – 30 June 2019
SECTION 5: OTHER
| 5.1 | CONTINGENT LIABILITIES |
There has been no material change to the contingent liabilities disclosed in the most recent annual financial report.
| 5.2 | EVENTS AFTER THE END OF THE REPORTING PERIOD |
On 21 August 2019, the Directors of Santos Limited declared an interim dividend on ordinary shares in respectof the 2019 half-year period. Consequently, the financial effect of these dividends has not been brought to accountin the half-year financial statements for the six months ended 30 June 2019. Refer to note 2.4 for details.
| 5.3 | ACCOUNTING POLICIES |
(a) Significant accounting policiesThe accounting policies adopted in the preparation of the half-year financial report are consistent with thoseapplied in the preparation of the Group’s annual financial report for the year ended 31 December 2018,except for new standards, amendments to standards and interpretations effective from 1 January 2019.The Group has adopted AASB 16 Leases (“AASB 16”), AASB 2018-6 Amendments to Australian AccountingStandards – Definition of a Business and IFRIC 23 Uncertainty Over Income Tax Treatments from 1 January 2019.The impact of the adoption of these standards and other new accounting policies are disclosed in moredetail below.(b) Functional currencyThe Group performed a reassessment of the parent entity’s (Santos Limited) functional currency, resulting init changing its functional currency to the US dollar, effective 1 January 2019. Additionally, a number of wholly-owned subsidiaries within the Group that had the AU dollar as their functional currency, also changed theirfunctional currency to the US dollar effective 1 January 2019.
secondary indicators of economic environment that impacts the cash inflows and outflows of the companies.This included factors such as a change in mix of income stream and in some instances where companies wereacting as extensions of the parent entity. The US dollar was determined to be the currency that predominantlyimpacted each of the companies.The presentation currency of the Group remains US dollars.(c) Adoption of AASB 16DescriptionAASB 16 introduced a single, on-balance sheet accounting model for lessees, which replaced AASB 117Leases and AASB Interpretation 4 Determining Whether an Arrangement contains a Lease. As a result, theGroup, as a lessee, has recognised right-of-use assets representing its right to use the underlying asset, andlease liabilities, representing its obligation to make lease payments.The Group
| has applied AASB 16 using the modified retrospective approach, under which the cumulative |
effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparativeinformation presented for 2018 has not been restated – i.e. it is presented as previously reported underAASB 117 and related interpretations. The details of the change in accounting policy are disclosed below.Definition of a leasePreviously, the Group determined at contract inception whether an arrangement was or contained a leaseunder AASB Interpretation 4. The Group now assesses whether a contract is or contains a lease based onthe new definition of a lease. Under AASB 16, a contract is, or contains, a lease if the contract conveys aright to control the use of an identified asset for a period of time in exchange for consideration.
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, and changes to accountingpolicies and disclosures.
28 Santos Limited Half-year Financial Report – 30 June 2019
| 5.3 | ACCOUNTING POLICIES (continued) |
(c) Adoption of AASB 16 (continued)Accounting policyUnder AASB 16, as a lessee the Group will recognise a right-of-use asset, representing its right to use theunderlying asset, and a lease liability, for all leases with a term of more than 12 months, exempting thoseleases 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. whenthe underlying asset is first available for use. The right-of-use asset is initially measured to be equal to thelease liability and adjusted for any lease incentives received, initial direct costs and estimates of costs todismantle or remove the underlying leased asset. Subsequently the right-of-use asset is measured at costless any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of thelease liability.The lease liability is initially measured at the present value of the lease payments that are not paid at thecommencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readilydetermined, the Group’s incremental borrowing rate.The lease liability is subsequently increased by the interest cost on the lease liability and decreased by leasepayments made. It is remeasured when there is a change in future lease payments arising from a change inan index or rate, a change in the estimate of the amount expected to be payable under a residual valueguarantee, or as appropriate, changes in the assessment of whether purchase; renewal or terminationoptions are reasonably certain to be exercised.The Group has applied judgement to determine the lease term for some lease contracts in which it is alessee that include purchase, renewal or termination options. The assessment of whether the Group isreasonably certain to exercise such options impacts the lease term, which affects the value of lease liabilitiesand right-of-use assets recognised.Modifications to lease arrangementsIn the event that there is a modification to a lease arrangement, a determination of whether the modificationresults 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 anincrease in scope of a lease through additional underlying leased assets and a commensurate increase inlease 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 themodification, the Group will remeasure the lease liability using the redetermined lease term, lease paymentsand applicable discount rate. A corresponding adjustment will be made to the carrying amount of theassociated right-of-use asset. Additionally, where there has been a partial or full termination of a lease, theGroup will recognise any resulting gain or loss in the income statement.Lease impact on joint operating arrangementsWhere lease arrangements impact the Group’s joint operating arrangements (“JOA”), the facts and
obligations associated with the lease arrangement.The Group applies judgement in its determination of which party directs the use of a leased asset. Outlinedbelow are a number of scenarios that could exist for lease arrangements which impact the Group’s JOAs:
?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 andright-of-use asset on its balance sheet.?If it has been determined that the leased asset is either jointly controlled by all parties in a jointoperation, or is utilised by a single joint operation, and the Group is the only party with a legalobligation to pay the lessor; the Group will recognise its net share of the right-of-use asset; areceivable for the amounts recoverable from other parties, and the full lease liability.?In instances where it has been determined that all parties to the joint arrangement jointly have the
right to control the leased asset and all parties have a legal obligation to make lease payments tothe lessor, the Group will recognise only its net share of the lease liability and right-of-use asseton its balance sheet.
29 Santos Limited Half-year Financial Report – 30 June 2019
| 5.3 | ACCOUNTING POLICIES (continued) |
(c) Adoption of AASB 16 (continued)TransitionThe Group previously classified leases as operating or finance leases based on its assessment of whetherthe lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the Group asa lessee recognises right-of-use assets and lease liabilities for contracts that convey a right to control theuse of an identified asset for a period of time in exchange for consideration.The Group applied the modified retrospective transition approach, resulting in the cumulative effect ofadopting AASB 16 as an adjustment to opening retained earnings at 1 January 2019, with no restatement tocomparative information.At transition, for leases classified as operating leases under AASB 117:
?Lease liabilities were measured at present value of the remaining lease payments, discounted using
the determined incremental borrowing rate, as appropriate for each identified lease arrangement,as at 1 January 2019;
?Right-of-use assets were measured at either: (i) their carrying amount as if AASB 16 had been
applied since the commencement date, discounted using the lessee’s incremental borrowing rateat the date of initial application; or (ii) an amount equal to the lease liability, adjusted by the amountof any prepaid or accrued lease payments; and
?In addition, the Group elected to apply the option to adjust the carrying amount of the right-of-use assets for any onerous lease provisions that had been recognised on the Group balance sheetas at 31 December 2018.
The impact on transition is summarised below:
January 2019
| US$million | |
| Oil and gas assets – right-of-use assets | 185 |
Other land, buildings, plant and equipment – right-of-use assets 79
| Other financial assets – net investment in sub-lease | 4 |
Reduction of onerous lease provision
| 4 | |
| Lease liabilities | 280 |
Net impact on retained earnings, before tax 8
| Deferred tax asset | 2 |
| Net impact on retained earnings, after tax | 6 |
When measuring lease liabilities for leases that were previously classified as operating leases, the Groupdiscounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted-averagerate applied is 4.68%.Transition practical expedients:
The Group elected to apply the following transition practical expedients:
i.Exemption for lease arrangements with a short-remaining-term from the date of initial application;ii.Discount rates applied to a portfolio of leases with similar characteristics;iii.Exemption for leases where the value of the underlying leased asset is deemed to be low-value; andiv.Use of hindsight with regards to determination of the lease term.With the application of the above transition practical expedients, the Group recognises the lease paymentsassociated with short-remaining-term and low-value leases as an expense on a straight-line basis over thelease term. The disclosed operating lease c
statements for the year ended 31 December 2018, included amounts related to such leases.Leases that were classified as finance leases under AASB 117 will continue to be recognised on thebalance sheet under AASB 16. The carrying amount of the right-of-use asset and the lease liability at 1January 2019 were determined to be the carrying amount of the lease asset and lease liability under AASB117 immediately before that date.
30 Santos Limited Half-year Financial Report – 30 June 2019
| 5.3 | ACCOUNTING POLICIES (continued) |
(c) Adoption of AASB 16 (continued)
The table below reconciles the Group’s operating lease commitments at 31 December 2018 to thetransition lease liabilities recognised at 1 January 2019:
January 2019
Operating lease commitment at 31 December 2018
| US$million |
| 242 |
Adjusted for:
| Short-remaining-term leases exemption | (4) |
Low-value leases exemption
| (3) | |
| Leases with a commencement date post 1 January 2019 | (11) |
Arrangements reassessed as service type arrangements
| (26) | |
| Gross lease liabilities at 1 January 2019 | 198 |
Effect of discounting (51)
| Redetermination of lease term | 42 |
Lease arrangements previously disclosed within capital commitments
Lease liability recognised on adoption of AASB 16 at 1 January 2019
| 91 |
| 280 |
Present value of existing finance leases at 31 December 2018 62Total lease liabilities recognised at 1 January 2019 342Current periodThe Group leases a number of different types of assets, including properties and plant and productionequipment, such as oil rigs. The Group presents the following in relation to AASB 16:
?Depending on the type of leased asset, right-of-use assets are presented in either ‘Other land,
buildings, plant and equipment’ or ‘Oil and gas assets’; and?Lease liabilities in ‘Lease liabilities’ in the statement of financial position.The table below provides a summary of the impact of AASB 16 on the Group’s consolidated incomestatement, consolidated statement of financial position and consolidated statement of cash flows for the sixmonth period ended 30 June 2019:
Note
30 June 2019
| US$million | ||
| Consolidated income statement | ||
| Expenses | ||
| Depreciation included in production costs | 6 | |
| Depreciation included in production costs, related to JOA recoveries | a. | 18 |
| Operating expenses | b. | (7) |
| Finance cost | 6 |
| Income | ||
| Other income, related to JOA recoveries | a. | 18 |
| Foreign exchange gain | 3 |
| Net expense recognised in the income statement | 2 |
(predominantly production costs) or capitalised as part of non-current assets.
31 Santos Limited Half-year Financial Report – 30 June 2019
| 5.3 | ACCOUNTING POLICIES (continued) |
(c) Adoption of AASB 16 (continued)
30 June 2019
| Note | US$million | |
| Consolidated statement of financial position | ||
| Assets | ||
| Oil and gas assets – right-of-use assets | 211 | |
| Other land, buildings, plant and equipment – right-of-use assets | 75 | |
| Other financial assets – net investment in sublease | 4 | |
| Deferred tax asset | 2 |
| Liabilities | ||
| Lease liabilities | 297 | |
| Onerous lease provisions | (3) |
| Net impact on net assets | (2) |
| Equity | ||
| Income statement impact related to leases for the period | (2) |
| Total impact on equity | (2) |
| Consolidated statement of cash flows | ||
| Operating cash flows | ||
| Pipeline tariffs and other receipts (Inflow) | a. | 18 |
| Payments to suppliers and employees (Inflow) | c. | 16 |
| Payment of lease liability financing costs (Outflow) | (5) |
| Investing cash flows | ||
| Oil and gas assets (Inflow) | c. | 13 |
| Financing cash flows | ||
| Repayment of lease liabilities (Outflow) | (42) |
| Net impact on cash flows | – |
Notes:
a.Where the Group has recognised the gross right-of-use asset and is the only party with a legal obligation to pay the
lessor, depreciation is recognised on the entire right-of-use asset and a finance cost is recognised on the leaseliability. Any recovery of the lease payments from other parties is recognised as other income – related to JOArecoveries in the income statement. This results in an insignificant impact to the income statement.b.
AASB 117, now capitalised as part of the right-of-use asset under AASB 16, which will be depreciated.c.The impact on operating cash flows and investing cash flows is the removal of the payments for operating lease
costs incurred (previously under AASB 117), which were either expensed through operating costs or capitalised to
non-current assets.
| For the six month period ended 30 June 2019, the following expense has been recognised in the income |
statement for lease arrangements that have been classified as short-term or for low-value assets:
| 30 June 2019 US$million | |
| Short-term leases | 3 |
Leases for low-value assets 1
| Total expense recognised | 4 |
32 Santos Limited Half-year Financial Report – 30 June 2019
| 5.3 | ACCOUNTING POLICIES (continued) |
(d) AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
DescriptionThe effect of these changes is that the new definition of a business is narrower. The new definition clarifies
input and substantive process, that together significantly contribute to the ability to create outputs.This could result in fewer business combinations being recognised, more specifically where acquisitions anddisposals relate to exploration and evaluation assets. Whilst the amendments provide additional guidance,
| it introduces a number of considerations and decision points which need to be assessed to apply the new |
definition. The standard also provides an optional ‘asset concentration test’, which when applied offers asimplified assessment of whether the acquisition is a business or not.
ImpactThe recognition criteria and other considerations will be applied to any acquisition and disposal transactionsfrom 1 January 2019 onwards.(e) IFRIC 23 – Uncertainty Over Income Tax TreatmentsDescriptionThe Group have applied IFRIC 23 from 1 January 2019 and it serves to clarify how to apply the recognitionand measurement requirements of AASB 112 Income Taxes, when there are uncertain tax positions (‘UTP’).When there is a UTP, the interpretation addresses the following:
?Recognition and measurement using either a:
(i) ‘most likely amount’ methodology – when the outcome is binary or concentrated to a specific
matter; or(ii) ‘expected value’ or probability-weighted methodology – when there is a range of possibleoutcomes;?
estimates/assumptions used in determining tax related balances; and?Whether UTPs are to be assessed separately or bundled together.ImpactThe recognition, measurement and disclosure requirements of the standard have been applied to any UTPswhich were under consideration for the period ended 30 June 2019.
Where UTPs have required significant estimates and judgements to be made around determination ofrelated tax balances, these will be disclosed.
33 Santos Limited Half-year Financial Report – 30 June 2019
DIRECTORS’ DECLARATION
FOR THE SIX MONTHS ENDED 30 JUNE 2019
In accordance with a resolution of the Directors of Santos Limited (“the Company”), we state that:
In the opinion of the Directors of the Company:
1.The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001
(Cth), including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its
performance for the half-year ended on that date; and(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations
2001 (Cth); and
2.There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.Dated this 21st day of August 2019On behalf of the Board:
Adelaide
34 Santos Limited Half-year Financial Report – 30 June 2019
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young121 King William StreetAdelaide SA 5000 AustraliaGPO Box 1271 Adelaide SA 5001
| Ernst & Young121 King William StreetAdelaide SA 5000 AustraliaGPO Box 1271 Adelaide SA 5001 | Tel: +61 8 8417 1600 Fax: +61 8 8417 1775ey.com/au |
Independent Auditor's Review Report to the Members of SantosLimitedReport on the Half-Year Financial ReportConclusionWe have reviewed the accompanying half-year financial report of Santos Limited (the Company) and itssubsidiaries (collectively the Group), which comprises the condensed consolidated statement offinancial position as at 30 June 2019, the condensed consolidated statement of comprehensiveincome, condensed consolidated statement of changes in equity and condensed consolidatedstatement of cash flows for the half-year ended on that date, notes comprising a summary ofsignificant accounting policies and other explanatory information, and the directors’ declaration.Based on our review, which is not an audit, nothing has come to our attention that causes us to believethat the half-year financial report of the Group is not 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 30 June 2019and of its consolidated financial performance for the half-year ended on that date; andb)complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.Directors’ Responsibility for the Half-Year Financial Report
The directors of the Company are responsible for the preparation of the half-year financial report thatgives a true and fair view in accordance with Australian Accounting Standards and the CorporationsAct 2001
and for such internal control as the directors determine is necessary to enable thepreparation of the half-year financial report that is free from material misstatement, whether due tofraud or error.Auditor’s ResponsibilityOur responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to statewhether, on the basis of the procedures described, anything has come to our attention that causes usto believe that the half-year financial report is not in accordance with the Corporations Act 2001including: giving a true and fair view of the Group’s consolidated financial position as at 30 June 2019and its consolidated financial performance for the half-year ended on that date; and complying withAccounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirementsrelevant to the audit of the annual financial report.A review of a half-year financial report consists of making enquiries, primarily of persons responsiblefor financial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standardsand consequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.
IndependenceIn conducting our review, we have complied with the independence requirements of the CorporationsAct 2001.
Ernst & Young
R J Curtin L A CarrPartner PartnerAdelaide21 August 2019
APPENDIX 4DFOR THE SIX MONTHS ENDED 30 JUNE 2019For ‘Results for Announcement to the Market’ refer to page 1 of this Half-year ReportNTA BACKING
30 June 2019 30 June 2018Net tangible asset backing per ordinary security N/A N/ACHANGE IN OWNERSHIP OF CONTROLLED ENTITIES
NilDETAILS OF JOINT VENTURE AND ASSOCIATE ENTITIES
Percent ownership interestheld at the end of the period30 June 2019 30 June 2018
% %
Joint venture entitiesDarwin LNG Pty Ltd
| Darwin LNG Pty Ltd | 11.5 | 11.5 |
GLNG Operations Pty Ltd
30.0
| 30.0 | ||
| GLNG Property Pty Ltd | 30.0 | 30.0 |
37 Santos Limited Half-year Financial Report – 30 June 2019