Santos (ASX:STO) today announced its full-year results for 2022, reporting record free cash flow of US$3.6 billion and underlying profit jumping 160% to US$2.5 billion. The results reflect significantly higher oil and LNG prices compared to 2021, due to stronger global energy demand, combined with a higher interest in PNG LNG following its merger with Oil Search.
The reported net profit after tax more than trebled, up 221% year-on-year to US$2.1 billion. This includes the previously announced impairment charges of US$224 million after tax, losses on commodity hedging and one-off costs associated with acquisitions and disposals.
Santos paid US$1.1 billion in government royalties and excise, royalty-related taxes and income taxes in 2022 and spent US$385 million in its host communities supporting local businesses and community initiatives.
Santos said it is also investing in decarbonisation projects consistent with its Climate Transition Action Plan. The Moomba carbon capture and storage (CCS) project was 40% complete at the end of the year and on track for first injection of CO2 in 2024.
Santos and Beach Energy said in 2021 they would invest US$165 million to build the Moomba CCS project, which Santos expects to become a new revenue stream and is part of a wider carbon capture business it is targeting to build up to help achieve emission reduction targets.
Santos has announced the return of US$1.5 billion to shareholders for 2022 under the company’s capital management framework, comprising US$755 million in unfranked dividends and the previously announced on-market share buyback of US$700 million, of which US$384 million had been completed by the end of 2022.
Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos delivered record production, free cash flow and underlying earnings in 2022 as the company benefited from strong customer demand for its products, higher commodity prices and disciplined cost management.
“Today’s results demonstrate the strength of Santos, with strong diversified cashflows and capacity to provide sustainable shareholder returns, fund new developments and the transition to a lower carbon future,” Gallagher said.
“Strong free cash flows mean we are in a position to deliver higher shareholder returns through an increase in the final dividend and previously announced increase in the on-market buyback, consistent with our disciplined capital management framework.
“Demand for our products has remained strong in both Australia and internationally, due to increased demand and shortages of supply from producing nations because of global underinvestment in new supply sources.
“Our critical fuels not only play a key role in the energy security of Australia and Asia, but they also provide affordable and reliable alternatives to switch from higher emitting fuels.
“We are focused on backfill projects to sustain production of these critical fuels in our core assets,” he said.
However, the Barossa offshore gas project in the Timor Sea, designed to backfill Darwin LNG, remains stalled after an unexpected court ruling last year that overturned a regulatory approval for the venture. It forced Santos to undertake further extensive consultation with indigenous people in the region, notably Tiwi Islanders.
Santos reported that the US$10 billion Papua LNG venture in Papua New Guinea is close to a major announcement. The joint venture partners led by France’s TotalEnergies are planning to announce a decision within weeks to begin engineering and design work. A final investment decision (FID) for construction is aimed at the end of 2023 or early 2024.
Santos also noted that FIDs for the Narrabri gas project in New South Wales and the Dorado oil and gas project in Western Australia are targeted in 2024.
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