Santos Limited (OTCPK:STOSF) Q2 2022 Earnings Conference Call August 16, 2022 9:00 PM ET

Kevin Gallagher - Managing Director and CEO

James Redfern - Bank of America

Saul Kavonic - Credit Suisse

Mark Samter - MST Marquee

Gordon Ramsay - RBC Capital Markets

Nik Burns - Jarden Australia

Thank you for standing-by and welcome to the Santos' 2022 Half Year Results Webcast. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator instructions]

I'd now like to hand the conference over to Mr. Kevin Gallagher, Managing Director and Chief Executive Officer. Please go ahead.

Thank you. Hello and welcome to this presentation of Santos' 2022 half year results.

I'd like to start by acknowledging the traditional lines of the Aboriginal people of the Adelaide plains from where I am speaking today. I pay my respect to their elders past, present and emerging. I also acknowledge the traditional owners and indigenous people of all the areas where Santos operates including in Papua New Guinea, Timor-Leste and Alaska. I'm pleased to present yet another strong set of financial results that demonstrate the strength of a disciplined low-cost operating model. They're record results, the highest first half revenue, free cash flow and underlying profit in Santos’ history. Importantly, we're driven by higher commodity prices and strong customer demand for our products.

Before I discuss the results, I want to make a few observations regarding global energy markets. The ongoing war in Ukraine and instability in other regions is deeply troubling on many levels. It is impacting the global economy, driving inflation, disrupting markets and causing volatility and commodity prices. There has been a significant shift in global energy policy towards energy security as a key priority. We're seeing these issues play out in the Asian LNG market as supplies are drawn away from Asia into Europe and fears of shortages flow through to higher prices.

These issues are creating structural changes to the global energy markets, which will be with us for some time. These changes are shaping our corporate strategy and the allocation of capital to prioritize shareholder returns and disciplined development, along with the need to maintain a diversified and balanced portfolio of assets. They have strengthened their resolved for Santos to be a low-cost, high performance business throughout the cycle and they become a global leader in the transition to cleaner energy and clean fuels that are both affordable and sustainable.

I will now provide an overview of the half-year financial results for 2022 before handing over to Chief Financial Officer, Anthea McKinnell to discuss them in more detail. This is the first financial period, since the merger of Santos and Oil Search. The results demonstrate the financial strength of the combination and the benefits of creating a new Santos with strong diversified cash flows and capacity to provide sustainable shareholder returns and fund new developments and the transition to a lower carbon future.

Before we start, I draw your attention to the usual disclaimer. The financial results for the first half were outstanding. We set new records for sales revenue, free cash flow and underlying profit. Strong operational and cost performance, combined with higher prices delivered $1.7 billion of free cash flow, up 199% and underlying profit of $1.3 billion up 300%. We intend to return $605 million to shareholders comprising a 38% increase in the interim dividend to $0.76 per share unfranked and an increase in the on-market buyback from $250 million to $350 million.

Our journey to become Australia's safest operator continues. Always safe is a core value at Santos. Our expectation is that every day, everyone who works at Santos is focused on keeping themselves and their workmates safe and going home healthy. I was pleased to see your personal safety performance improved in the first half and a continuation of the recent downward trajectory of loss of containment incidents.

Importantly, these health, safety and environmental results have continued to improve as a number of assets in the business has grown. I remain focused on ensuring that we learn from these events and drive forever safer workplaces and fewer safety incidents. Likewise, we are committed to continue the improvements we have made in recent years in process safety performance, focused on driving incidents down.

It's been a busy first half for all of us at Santos, as we execute our strategy and seek to deliver long-term value for shareholders. The portfolio optimization process announced in February is nearing completion. We have sold 12.5% of Barossa to JERA for $327 million. And we are in advanced discussions with shortlisted parties for the sale of 5% of PNG, LNG with expected proceeds in line with market consensus valuation.

The asset is performing well in the current environment and not surprisingly, there's been strong interest from reputable counterparties for equity in this project. Accordingly, we have decided to only sell 5% of PNG, LNG. This would leave us with a 37.5% stake.

Today, we have announced a final investment decision to proceed with Phase 1 of the Pikka oil project in Alaska. Pikka is an outstanding project that is ready for development now. We have a strong team and contracts in place to underpin the development costs. Phase 1 of the project is expected to produce 80,000 barrels of oil per day. First oil is anticipated in 2026.

The project has strong economics, is located in a world-class oil producing province with significant existing infrastructure, has low emissions intensity and strong support from the Alaskan Government, indigenous and local communities. Importantly, it is in a jurisdiction with low sovereign risk, an internationally competitive investment environment and a workable regulatory regime that ensures world-class safety and environmental protection.

It also provides an opportunity for Santos to further diversify its portfolio to include oil production outside of key operations in Australia, PNG and Timor-Leste and reduce concentration risk. Santos has mission-reduction plans to achieve net-zero scope 1 and 2 emissions by 2040. And in line with that commitment, we intend to develop Pikka as a net zero scope 1 and 2 project from first production and have entered into Memorandums of Understanding with Alaska native corporations to deliver carbon offset projects.

Alaska also gives Santos access to potential carbon capture and storage developments that are strongly supported by the Alaskan and US federal governments.

Although we have been unable to agree an equity sell down to date, with strong supply contracts and the project in an excellent state of readiness, we feel now is the time to monetize this exciting opportunity and are happy to move it forward. Like Barossa, we may yet sell down before first production. We do not need to wait and delay our investment decision and risk a loss of and value for Santo shareholders.

We have continued to deliver project and cost discipline throughout the first half of 2022. The Barossa and Moomba CCS projects are progressing on schedule and budget. Barossa was 43% complete at the end of July and Moomba CCS was 20% complete. Consistent with that being experienced across industry, we are seeing some supply chain and cost pressures, but these are being managed within the project contingencies.

We have announced reductions in our unit cost and CapEx guidance for this year as we continue to focus on safe, efficient and low cost operations. The merger integration process is progressing well with $106 million in sustaining annual synergies delivered to date. This enables us to lift guidance to $110 million to $125 million in annual synergies.

Finally, following the board's approval of new capital management framework earlier in the year, we are now in a position to deliver higher returns for shareholders through an increase in the interim dividend and on market share buyback. The strong first half results enabled the board to increase returns consistent with the company's new capital management framework. Santos intends to return $605 million to shareholders equivalent to $0.18 per share from the interim dividend and on-market buyback.

This slide shows a forecast of sources and uses of cash to 2030. I think the chart clearly demonstrates a scale of the diversified portfolio of cash generative assets we have built at Santos. At a range of $65 to $100 long-term oil prices, Santos would expect to generate between $23 billion and $34 billion in free cash flow in this period. The strong cash flow from today's business are further strengthened from the low cost LNG production at Barossa from 2025 and oil production at Alaska from 2026. This free cash would more than fund our committed project CapEx of about $7 billion.

Between $16 billion and $27 billion in free cash would then be available for additional shareholder returns and to drive shareholder value through the investment of capital into development and the energy transition projects that meet our disciplined capital allocation criteria.

I have already mentioned that Santos and their partner Repsol have decided to proceed with the Pikka Phase 1 oil project in Alaska. Alaska has a rich and proud oil and gas history, skilled workforce, strong contractors and suppliers, and a very supportive regulatory regime. Taking FID on Phase 1 is consistent with our strategy of phased and development, utilizing existing infrastructure. Phase 1 will execute a responsible development plan with a small surface footprint and utilize existing infrastructure, including the Kuparuk transportation pipeline and the Trans-Alaska pipeline.

Indeed, the development approach for Pikka is not dissimilar to our upstream hub development approach in Queensland on our GLNG project. We are committed to delivering a net zero project for equity share scope 1 and 2 emissions, and have signed MOUs with Alaska native corporations to deliver high quality carbon offset projects. Low carbon oil projects like Pikka Phase 1 are critical for global and United States energy security.

We believe that this is the right project at the right time. Strong investment metrics underpin FID including a forecast IRR of about 19% at less than $60 long term oil price and a life cycle breakeven oil price of around $40 per barrel, including carbon pricing. The strength of the merge company is best demonstrated by the fact that our share of Phase 1 CapEx of $1.3 billion over four years would represent about 4.5 months free cash flow at average, first half 2022 commodity prices.

In relation to Dorado and following the exploration success at Pavo earlier this year, we remain disciplined in our approach and intend to undertake further work, to fully appraise and optimize the development concept, integrating oil and gas production. The current inflationary cost environment, combined with regulatory and supply chain uncertainty provide additional risk and therefore do not support a final investment decision at this time.

This means FID will be later than originally planned, but as I said, we will be disciplined to ensure that the right project is executed at the right time. This is consistent with our discipline and phased approach to investing in major projects.

And at Narrabri, we continue with planning for resource appraisal. We are also focused on obtaining relevant pipeline licenses for the project. We have had significant interest from New South Wales customers looking to sign long-term offtake agreements. Narrabri is a very strong project that can supply affordable gas to New South Wales customers. However, in line with our disciplined approach, we will not commit any significant capital until all approvals are secured.

Following our merger with Oil Search, Santos is now a global low cost producer of oil and gas committed to ever cleaner energy and fuel production with operations across Australia, Papa New Guinea, Timor-Leste, and North America. This slide sets out our investment proposition to deliver long-term value to shareholders. We are a top 10 global independent with a balanced and diversified portfolio of long-life assets weighted to gas and LNG.

With $8 million tons per annum of equity LNG capacity, we are a leading global independent supplier increasingly leveraged to strong demand for LNG, particularly in Asia. Our climate transition action plan launched in March, sets out our plans to decarbonize our base business and achieve net zero Scope 1 and 2 emissions by 2040 through investing in operational efficiency, deploying renewables, carbon capture and storage, carbon solutions and clean fuels.

It is the very strong cash flows from PNG, Barossa and Alaska that will help fund our transition action plan projects in the second half of this decade and beyond. Our capital management framework provides investor participation in oil and LNG price upside as demonstrated today with $605 million in returns to shareholders. I am confident this is a unique investment proposition that will deliver long-term value and builds on the same strategy and operating model we have consistently implemented since 2016. It is a successful strategy that has delivered almost $7 billion in free cash flow over the past six and a half years.

Let me finish with some further comments on energy security, the role of gas, decarbonization and market demand for LNG. As mentioned earlier, Russia's invasion of Ukraine brought global energy security into the spotlight, particularly for natural gas, with higher prices and a supply crunch in the wake of rapidly recovering demand. Global energy demand already returned to pre-COVID levels last year, under investment and gas supply. So a 9% increase in coal-fired electricity to a global all-time high. The increase in global emissions from coal in 2021 was equivalent to all the emissions reduction achieved in the USA from the integration of renewables over the past 15 years.

On the East Coast of Australia, we recently saw unplanned outages at coal fired power stations leading to a period of extreme gas demand and higher sport prices. Santos responded by diverting gas from GLNG and adding a fifth drilling rig in the Cooper Basin and facilitating time and location swaps with other producers to get gas in the right place at the right time.

Gas remains a critical fuel for an orderly energy transition, but we must invest in new supply. Indeed for any chance of an orderly transition where people can still have access to affordable energy, there is a need for more gas supply, not less. However, it is vitally important that investment in new supply occurs in a sustainable way. At Santos, we are focused on supplying critical fuels, more sustainably to meet society's demand. Driving investment and new supply to less transparent producers or producing nations will not reduce global emissions or advance the transition to net zero.

LNG demand is at record levels with under investment driving significant price increases as we have seen in Europe and limiting access to energy for those who can least afford it. In the Asia Pacific, LNG demand is expected to double by 2040 according to this forecast from Wood Mackenzie. As a leading global independent LNG supplier, Santos is well positioned to benefit from this increasing demand with our 8 million tons of equity share LNG capacity. With our Japanese and Korean partners, we are investing significant capital in bringing new supply to market through Darwin LNG from Barossa, but we need stable regulatory and fiscal regimes to enable this and any future investments in Australia.

The ADGSM process continues to be very concerning for our neighbors in Asia, who are also the investors and customers that have underpinned Australian resource development for 60 years and rely on us for their own energy and in turn social and economic security. They are also in many cases, friends and allies who are crucial to long-term stability in our region.

Decarbonizing natural gas supports the long-term supply of reliable and affordable energy, as well as the production of clean fuels, including hydrogen and ammonia. As the head of the international energy agency has said, reaching net zero goals without CCS will be almost impossible. We have seen the recent Inflation Reduction Act Bill passed in the US Senate include significant incentives, supporting carbon capture and storage, as well as direct air capture technologies, recognizing the critical need for development and deployment of these, to be able to achieve a net zero future.

We are seeing global momentum behind CCS with more than 27 projects across the world, in countries such as Canada, that USA and Norway storing around 48 million tons per annum.

We are developing a three hub CCS and clean fuel strategy across our operating footprint in Australia and Timor-Leste. Our Moomba CCS project, which will be one of the biggest in the world paves away for a significant carbon reduction and storage story for Santos and for Australia. We also look forward to commencing trials of direct air capture technologies in the Cooper Basin next year. These technologies could, if successful leverage a significant infrastructure, CO2 storage capacity and Moomba CCS project to build a new carbon reduction business for Santos that also helps other industries decarbonize as well as provide significant Scope 3 production opportunities.

In summary, it was a great first half. The business is running well, and we have created a global energy company of size and scale. With size and scale comes the opportunity to deliver stronger returns to shareholders and progress our aspiration to become a clean fuels company and reaching our net zero commitment by 2040.

I'll now hand over to Anthea to provide a detailed review of our financial results.

Thanks, Kevin and hello to everybody. Santos is delivered record financial results driven primarily by our increased working interest in Papua New Guinea and higher commodity prices. I'll go through these items in more detail over the next slides.

These are strong results highlighted by record first half free cash flow of $1.7 billion up almost 200% and underlying profit of $1.3 billion up 300%. Consistent with our capital management framework, we've increased returns to shareholders through a combination of the sustainable base dividend and additional returns via share buybacks.

Santo's balance sheet continues to strengthen with net debt reduced by $1 billion in the past six months, and gearing reduced to 22.5%, positioning the company to fund future activities, including the energy transition. Refinancing of our 2024 and 2026 debt facilities is substantially progressed and will result in no significant near term debt maturities until 2027, excluding the PNG, LNG non-recourse finance, which is funded from project cash flows.

We've been very well supported by a banking group industry finance and the facility was oversubscribed. The strength of our balanced and diversified portfolio has delivered record financial results for the first half. Operating cash flows increased by 127% driven by increased volumes and high commodity prices.

The chart on the right shows free cash flow, which has increased almost 200% compared to the first half of 2021. The trend in earnings metrics is a similar story to cash flow, a diversified portfolio of five core assets, comprising strong LNG contracts, liquids and fixed price domestic gas contracts underpin a record first half EBITDAX of $2.7 billion and record underlying first half profit of $1.3 billion.

This table shows a snapshot of the half year results outlining the strength across our five core assets and their contributions to EBITDAX and margins. It highlights our diversified and balance portfolio of core assets with strong margins, which increased to over 70% for the first half across our five core segments.

Unit production costs increased slightly to $8.16 per barrel of oil equivalent, primarily due to lower volumes at Bayu-Undan and expected late and expected natural field decline. We expect Bayu-Undan will reach end of field life later this year. Excluding Bayu-Undan, costs of $7.08 per barrel. Unit costs were driven largely by reduced volumes in both the Cooper Basin due to planned maintenance and weather effects and Western Australia largely due to customer outages. We also have an increased proportion of higher unit cost volumes in Papua New Guinea following the merger with Oil Search.

We continue to seek efficiencies in cost savings to offset cost and supply chain we are seeing and are maintaining 2022 guidance at $7.90 to $8.30 per barrel of oil equivalent for the full year.

Turning to CapEx, 2022 guidance for the base business is unchanged at $1.1 billion, comprising $900 million for sustaining and $200 million for restoration costs. Importantly, in 2022, this spend is self-funded from within the disciplined operating model. 2022 major project CapEx guidance has reduced to approximately $1.5 billion and includes Pikka Phase 1, now that this project has been sanctioned.

Over the four years for the Pikka project, CapEx is estimated at $2.6 billion gross, and $1.3 billion at Santos' working interest of 51%. CapEx guidance also reflects our decision to undertake further appraisal drilling at Papa, which means the decision on drive there will be later than previously planned.

And in April, 2022, we released our new capital management framework. Santos' strategy is to maintain a disciplined low cost operating model that is designed to deliver strong cash flows to the oil price cycle. Consistent with the operating model, over the longer term, we are targeting a free cash flow breakeven oil price of less than $35 a barrel. This includes activities to sustain production at our five hubs and undertake planned restoration work.

The free cash flow generated above sustaining capital requirements is available to maintain the balance sheet, deliver sustainable returns to shareholders by the base dividend plus additional returns when the oil price is above $65 per barrel, investing major projects and importantly invest in the energy transition.

The chart represents the breakdown of returns to shareholders for the first half with a visual representation of the calculation methodology. The framework comprises two elements; a sustainable base dividend, and an additional shareholder return in the form of on market share buybacks. The current starting point is a free cash flow breakeven price for 2022, which is currently forecast at around $25 per barrel, actual free cash flow generated above this starting point in the first half with $1.7 billion.

The base dividend policy targets pay-out of 10% to 30% of free cash flow, excluding major growth up to $65 a barrel at average data rent. Based on $855 million of free cash flow available, the board declared an interim dividend of $0.076 per share, reflecting a payout at the top end of the range. Additional returns to shareholders of at least 40% of the increment of free cash flow excluding major growth apply when the average data Brent price is above $65 a barrel data. Brent averaged $105 for the period.

Based on $853 million of free cash flow available, the board has increased to previously announced share buyback of $250 million by $100 million to a total of $350 million. And this reflects a 41% payout. For the first half of 2022, total returns to shareholders was $605 million when combining the interim dividend and additional returns through share buybacks. This comprises about 35% of free cash flow for the period and is a significant increase compared to the first half of 2021. This reflects our commitment to delivering increased returns to our shareholders, particularly during periods of higher oil prices.

Refinancing activities have been undertaken to optimize the draw and debt maturity profile by refinancing $1 billion in drawn and $200 million in revolving loans due 2024 and 2026 with fully revolving facilities due in 2025 and 2028 on an amended extend basis. Following refinancing, there will be no significant debt maturing until 2027 excluding the PNG project finance, which is repaid during project cash flows.

Approximately 45% of total debt portfolio is PNG, LNG project finance debt and which is forecast to be repaid by 2026. Net debt, including lease liabilities was $4.1 billion at the end of June. We hold strong liquidity of $5.4 billion comprising $3.4 billion in cash and $2.1 billion in committed undrawn debt. Under our capital management framework, we are now targeting gearing to be less than 25%. The strong free cash flow generated during the first half have supported rapid gearing to 22.5% with reduced gearing and a strength and balance sheet, we're ready to fund our projects and the energy transition.

Thank you. And I'll now hand you back to Kevin.

Thanks, Anthea. In summary, as I said at the outset, I'm very pleased to present a record set of financial results. We have been and remain unrelenting and sticking to a strategy and implementing a discipline low cost operator model, an operating model that has proven its value by delivering consistent results, keeping the business resilient and performing strongly. We continue to generate strong free cash flows, maintain the strength of our balance sheet and provide returns to shareholders.

Thank you. We'll now be happy to take your questions.

[Operator instructions] Your first question comes from Tom Allen with UBS. Please go ahead.

Hey morning, Kevin and the team. Just on capital management, firstly, so the distribution payout range for free cash generated when oil price is above $65 a barrel, is fairly broad with a payout of at least 40% and your Slide 22 is helpful, but I was wondering if you could please describe the key considerations or a framework that have led the board to arrive at a payout of 41% of free cash generated over $65 a barrel, just recognizing that the average dated rent over the half was, comfortably over a $100 a barrel.

Yeah, so the 41% really, it was looking at over 40% and they rounded up to $350, which is where we got the 41%. It's a board-by-board decision that we're taking into account a number of factors, including, what we have coming up, prevailing all prices, debt repayments, etcetera. So, that was a decision for this board was to maintain it at the 40%, just over 40%. But it is a board-by-board decision.

Sure. So commodity prices, is there a bit of a tighter range on leverage that you think, might see that they see a scenario where the board pay a much higher payout on that component?

Well, look, I think Tom, that'll be a decision for the board to take, just as with dividends, based on the prevailing conditions at the time. And it's something that the board will give consideration to as we go forward. There's a lot of flexibility in that as you can see. Yeah.

Yep. No, that makes sense. Just at PNG LNG, so that Uni [ph] and BP midterm LNG SBAs expire, I think in March and July next year respectively. I was just wondering if you could provide some color on the marketing strategy for that LNG. So might we see a shift to an equity marketing model at PNG LNG and might that volume be sold at a JKM index from the second half of next year?

Well, look, Tom, we don't, I mean, you're right. In terms of the renegotiation dates that you referred to. We don't -- we can't comment on the specific negotiation strategies. We will obviously inform the market if and when we're in a position to do so, but we work alongside the operator, other joint venture partners to develop those strategies and obviously to agree what the outcomes are. It's not what any one party wants and we'll inform you, when we've got something to tell you.

Of course that makes sense. And then just finally congratulations on taking FID on Phase 1 in Alaska. Now that you've committed to develop that project, can you please just clarify, Santos' sell down aspirations from here. You mentioned that Santos was unable to agree an equity sell down to date, just wanted to confirm with the processes now concluded for the time being.

Well, look, I think as I've said previously, and my speech today, we, don't think we have to wait to develop this project for other folks, it has been interest in the project and good interest in the project. But as I said, in my speech, we've been able to get anything agreed in the timeframe to date.

And we do know that others sheet value, but we think it was a project that will become more valuable over time, and we think now is the time to develop it. We talked a lot about how the world has changed over the last six months. And as I said, we don't need to wait and settle down before we can move it forward. But we're still open to sell during development phase. Just like we did on the Barossa project where we sold down to JERA after FID.

Your next question comes from James Redfern with Bank of America. Please go ahead.

Hi, Kevin. Anthea, hope you well. Just wanted ask first one around the 5% sell down PNG LNG, I'm just wondering, can you confirm that Exxon is happy for Santos to continue to have a higher equity stake than them of 37.5% in PNG LNG post a sell down, and then also rule that 5% sell down achieves your target of $2 billion to $3 billion of sale proceeds. Thank you.

Thank you, James. I think the first question's an easy one for me to answer. I can forward you the mobile numbers of the executives at Exxon, and it's really a question for them. I can't comment on whether they're happy or unhappy. Put it this way, they haven't communicated to me that they're unhappy, whether they have any problem with what our equity positions. And we do enjoy a very positive and strong relationship with Exxon. A lot of respect for them, that are very safe and extremely competent operator.

And in terms of the second part of the question that was focused on the sell down, yeah; $2 billion to $3 billion of process. What we're really saying there is that we think that across that period, that process, if you like the optimization process that we're running is coming to an end now where we expect to complete the 5% sell down in PNG over the next couple of months.

We expect that to be closed. We're very happy with the valuation as part of that process and we've given you some guidance in terms of consensus and so we're very comfortable with the valuation of the asset. In terms of the overall number you're talking about, we've completed the JIRA sell down. We'll get the value for that.

I think what you have to take into consideration is as well, James is that these assets are generating very considerable cash, and they have done during this period, and we will keep that cash and so we've made a -- we've made a decision to draw a line in that sand and not simply stick to a target because a put a tag out there in February before the Russian invasion of Ukraine, not going to be that stubborn.

At the end of the day, we think these assets could generate a lot of cash. We're very positive on the outlook for our commodities and as such, that will be drawing a line under that process. An absolute capital basis that might still show fall just slightly short of the lower end of that range. But I think if you put the cash flows into that number as well, it would be comfortably over the bottom end of the range, and we believe it's the highest value outcome for the shareholders over the longer term.

Okay, excellent. Thanks, Kevin. And this second question, if I can please, just in relation to Dorado, FIDs being delayed possibly to next year at the earliest, given inflation pressures and supply chain issues. So I'm just maybe wondering if you could please comment on what you're seeing in terms of CapEx inflation relative to the CapEx guides that was provided for Dorado previously. Thank you.

Well, thanks for that, James. Unlike Pikka where we've been able to lock in very competitive rates through our contracts. What we found with Dorado really was quite a different environment. The shipyards environments across Asia, the contractor availabilities, the impacts of COVID still with some of those workforces is going to push the labor shortages we're seeing in certain parts. All add to a very inflationary environment.

In addition to that, we've seen a volatility in the contractor environment where at least one of our contractors is going into Chapter 11 during the period and we think there are other liquidity issues with some of the contractors out there. And when you put all of that together and the inflationary numbers we saw coming through in the project, it just doesn't make sense.

Now, when you couple through that, the fact that we had a successful drilling result at Pavo. However, one that was a little bit unexpected in terms of the fluid composition, we want to establish a bit more gas before we take FID and bottom line is that the concept will then need to change for what will effectively become a better project but a different project and so we've not put a timeline on that. James. We've a bit of work to do probably a little bit more appraisal and a bit more engineering work to optimize the concept.

Okay, perfect. Thanks, Kevin. Appreciate it.

Your next question comes from Mark Wiseman with Macquarie. Please go ahead.

Hi, good day, Kevin. And Anthea thanks for the update today. Just, I had a question on Dorado as well. Can we just clarify that the Phase 2 project, which was the gas development, it sounds like that will now form part of the first phase. So it would be an oil development with the active [ph] for the gas from the beginning. Am I hearing that correctly?

What you're hearing me see Mark, is that, that we believe that's the concept, an integrated concept that includes the development of gas reserves in the basin. We believe there are very significant gas reserves in the basin, and if we can get a development that gives us backflow for island [ph] for the longer term, without having to go spending significant CapEx up and down the Carnarvon Basin chasing backflow, we see that as an optimal outcome for all parties. And so your point is correct. We're viewing this now as an integrated oil and gas air project from day one.

Okay, fantastic. Thanks for that. And just on Slide 6, the committed projects CapEx of $7 billion, it actually sounds a little lower than we would've expected given the backfill projects on the Old Sands assets. Yeah, I would assume for PNG that number would include Pinang [ph], and I guess we would've expected some ongoing CapEx in the Cooper Basin and at GLNG. I just wonder if you could provide some discussion around, what's in that number beyond the major growth projects that you've specified there.

All right. So, thanks for that, Mark. Look, we're talking here about the major project CapEx, your major growth CapEx as we refer to it. So your Cooper Basin sustaining CapEx before is before the generation of free cash flow, right? So that's self-funded, and it's before it's absorbed, if you like in those pre-cast flow numbers.

So we're only really talking about the CapEx here for major growth projects and what's important is to recognize that we're saying only committed projects. So we're not including non-committed projects. We may not do them, and that's why we see in the other parts of that chart, that the UCs would be for returns to shareholders and of course, for investment and either our climate transition action plan projects or development projects in the future if they became FID projects. But at this point in time, we've not included any project in there that's not committed. I'm trying to give some guidance on that. We're trying to give some guidance on that, on the chart, by listing the major projects that are included in that seven number.

Okay. Okay. Thank you. And I just wondered on the East Coast gas market discussion and the projected shortage for next year. I just wondered if you could provide any updates on whether heads of agreement can potentially be reached here. Is there anything you're able to say on it?

Well, look I think, what I would say is that there hasn't been a shortfall in the last six years. It's not the first time one of the forecasters has predicted there would be. There never has been. I don't believe there will be next year either. The LNG projects have worked collaboratively over that time since the first introduction of ADGSM through the existing HOA to ensure supply was made available to the market. I believe that we can work again with government to make sure that that supply is available to the market.

As I've said repeatedly, there is more uncontracted gas than any predicted shortfall, but I still don't actually believe there will be a shortfall. I think it's important to look at the assumptions in the ACCC report. And there are some wide ranging assumptions there that I wouldn't necessarily agree with all of them. All of those things won't come to pass I suspect, and hence I don't believe there will be a shortage.

And, I go back to the point, Mark, there wasn't a shortage this year either. There was a drop in supply of coal and an efficiency of renewables that meant the gas that was meant for the existing normal domestic market was pulled away for PowerGen, and that led to the short term very significant gas spikes that we saw.

Your next question comes from Dale Koenders with Barrenjoey. Please go ahead.

Morning, just a couple of quick questions, especially just building on your comments, Kevin, around shipyards and COVID impacts and labor shortages and etcetera and the challenges for Dorado. Can you sort of explain why those pressures are any different for the Darwin backfield project and why we should be anticipating delays in CapEx for Barossa.

Yeah. Well, first of all, Barossa's contracting was done much earlier and we got our lump sum contracts, got our shipyard slots and we've, I can't remember the number but it's a large percentage of our contracts in the Barossa project are fixed price. And of course at this point in time, we're well advanced.

So one of the advantages of the Barossa project was in fact that we started it at a point in time where not many people had started projects. We started it in 2021 when we're still during the pandemic. So that's given us a bit of a head start before many of these inflationary pressures have come through and that may be good fortune rather than good design, but it's kind of worked in our favors.

We are seeing inflationary pressures on the variable components of the project and if you speak to some of the contractors, we have seen some impact, but so far we've been able to work with that within our contingency allocations in the project and for example, we have put with a shipyard component of that project, we have put some incentives in place to assist the shipyard contractors, but so far so good and we're obviously paying very, very close attention to it, but at this stage Barossa is traveling very well.

Okay. So no CapEx overrun anticipated is I guess the takeaway. Secondly, just on the structure of the dividend with free cash flow effectively, the tier above $65 a barrel, should we continue to assume that going forward that continues to be a buyback on market or will that vary between dividends and buybacks and other things?

Well, look, I can't think of why it would change in the short term particularly, well short of Frankie credits, but what I would say is that, and I have to say is that that will be a decision for the board every time we -- every six months we take these recommendations to the board, the dividends and the buyback decisions are decisions for the board.

Okay. But I guess the signal is you think it's a good investment in your stock at the current share prices.

If you're asking me, do I think Santos is significantly undervalued? you would not be surprised to hear me say yes. I would probably say that most times, but the share price in this climate $90 to a $100 oil I think that we are very significantly in devout and I think that's a good use of the funds for shareholders.

Finally, just on CapEx for the East Coast gas market, your joint venture partner has sort of spoken about $0.5 billion over the next 12 months. A lot of that is Western flank oil, not a project you're involved in but drilling for the Cooper Basin, JV, a hundred wells per annum, do you think that that rate will continue indefinitely over the next few years and what contribution for production increases do you think that that will provide?

Well, look, we just had the Cooper Basin absolutely humming in 2018, 2019 before COVID came along and we saw the reduction in CapEx in the Cooper Basin resulting in a drop in number of wells over three consecutive terms. And of course we've seen production drop in the Cooper Basin as a consequence of that.

Please note, we're beginning to see it bottom out and turning back up again as we we're drilling more wells this year, which I think we're forecasting around 110 wells this year. And we're starting to connect those wells and we're starting to see it turning around just as we did back in 2018 when we went through this same experience. So I'm confident in the medium term and I think your question goes to, will we have enough good prospects to keep drilling that number of wells each year?

Pleasingly, we're seeing a lot of good wells coming on, some good production rates from some of the new wells coming on. And there's still a lot of gas and a lot of liquids across the cooper basin and thus far at least is a function of how many wells we're drilling. But look, we hope to get that production back up and like I say around about a 100 wells to 110 wells a year seems to be the steady state efficient model works well for the Cooper Basin and that's what we're aiming to get back to.

Your next question comes from Saul Kavonic with Credit Suisse. Please go ahead.

Thanks, gents. Look a few questions, but perhaps to starting with what are the strategic thoughts behind re-weighting the portfolio away from near term LNG via a small sell down of PNG, LNG and more into long term oil, given general market sentiment prefers more waitings to LNG and less waiting long like oil. And what do you say to the idea that selling the market's favorite asset, which is PNG, LNG and defer nearby by Dorado, which is relatively smaller, shorter cycle oil project in order to do Alaska is actually doing the opposite of what most investors want.

Thanks for the question. So look, first of all it's really about ensuring we've got a balanced and diverse portfolio of assets and really avoiding over concentrating in any one place, and hence we're only selling 5%, but we think 37.5% is a good equity level to move forward LNG, PNG on.

In terms of Alaska it's really about delivering the highest value outcome from that resource. And from that opportunity for our shareholders. We're not doing Dorado. We still see value in Dorado, but we don't think the project is right to go forward at this point in time, and quite frankly I'm pleased that we're able to show the discipline to kind of step back if a project's not ready rather than diving in and going forward at all costs.

And so look, I think it's a disciplined approach. We can't develop everything at once. But from a portfolio basis, it's really just a case of diversification not only across a product, but across different regions as well. We actually see that we'll grow our LNG production over the next few years and when Barossa comes on, of course, we've got very strong linkage to JTM from 2025. So, we're pretty happy with our portfolio balance going forward.

Further on, on the PPG LNG sell-down, where you mentioned you have line of sight to this being in line with consensus. Could you perhaps just elaborate on what your view of consensus is and does consensus refer to what the consensus value for the asset is per percentage point, or does it refer to what consensus view of a sell down will achieve, which some people are doing a significant discount to the asset value?

Yeah, look, first of all, it's consensus to what the asset valuation, the market asset valuation is because we're in negotiations and discussions with the shortlisted parties, I'm not going to put a number out there, so, but what I would say is any of the numbers I've seen flying around, I'm very comfortable with those numbers that are flying around.

Understood. if we were to revised about six months ago, I think those kind of market expectations that, Alaska would be sold completely. You see some big sell downs of Dorado and PNG, PNL, and then there could be scope for a big buyback. It's almost like there've been an about face on all of those expectations. Is there any prospect of a large buyback occurring now or larger capital management beyond the current formula you framed or the $2 billion to $3 billion sale down targets kind of on the back burner now, the scope for additional upsides of capital management, isn't really there in near term?

Well, first of all, I can't remember ever saying there was going to be ever any major buyback. I don't think we ever put that out there, but that may well have been an expectation of some. What I would say Saul, is what I said earlier. The world has changed a lot in the last six months. There's a focus on energy security that wasn't really there.

When, we last talked results in February and since then the world has changed very considerably. When it comes to Alaska we did run a process. We were not able to get the sell down we wanted that we thought was a good value outcome in that timeframe. Now that's not to say that we will not sell down during the development phases.

I've said earlier on just as we did with the Barossa project and we're open to that. We'll remain open to that, but we do believe that project will become more valuable with time. And we believe that the need for oil production and from an energy security point of view has increased quite significantly during that team and we're getting a lot of support for that project.

So look, I think as I said in the speech, you know, we don't need to wait to settle down. We believe now is the time to develop it. And if we do sail down during development phase, we'll you, when we do that as for any major one off buybacks you know, I'd say the board's focus was more on our rolling buyback program, which what we have communicated the market a few months ago and has talked about that on this call today. That's our focus. If we get into position where we accumulate a lot of cash, we go below the, the sort of bottom of our gearing range. Then that may be a consideration for the board at that particular time.

Thanks just on the balance sheet, obviously forward curves prices are high now, but we're also heading into a recession. So we can't discount downside scenarios. If we do see a downturn, oil goes back to $40, $50 for a few years. Where does that leave balance sheet credit ratings those kind of metrics for the next few years now that you are committed to Pikka and Barossa?

Well, Barossa is 43% complete. I'll let Anthea talk about credit ratings in a second. But what I would say is we're going to continue to run the business in a very disciplined manner funding it within our means and we run our business as, as you know on a free cash will break even basis across assets. None of that will, will, will change.

I was pleased to seeing the results, if you back out the late life production costs at buy one, and you'll see our average production costs are lower than there been at any other point in time. Over my six years here, the company, despite the inflation leave challenges, we're seeing a across the industry. And I was also pleased to see that the integration synergies we've delivered around $106 million us dollars at the end sustainable annual synergies at the end of last month.

And we've up the guidance now between $110 and $120 to $125 in fact million dollars in annual synergies. So I'm pleased to see we're still making progress and, and maintaining that discipline of running the company with a low cost focus. And do you anna talk about credit ratings?

Yeah, I suppose I just to, just to add to that. So the discipline operating model does ensure that from a sustaining business, we are resilient at lower prices. We do phase our CapEx to live within our means. We do model you know, forward, forward views at downside all prices to ensure that the portfolio is resilient to lower prices, having a kind of a de geared balance sheet. So the gearing has come down considerably over this year. That positions us quite well.

If there was a downturn in the future from a credit metrics perspective, we're extremely strong in the metrics. So there's definitely room to move from a credit rating perspective and having the three ratings there is, is very helpful too. So we're, we're fairly comfortable if there was a dip in the oil price in time that we'd be very well positioned to, to get through that without losing the credit writing.

I think it's also worth, so just to add to that, you know, we we've guidance out before about our our gearing ratio aspects of our operating model ceiling. And we wouldn't be taking F ID and any of the projects, if we thought we were ever going to exceed that, that would be the constraining metric, if you like for any, any, any other capital investment decisions.

Thanks. Well, one last one for me, just focusing on Alaska, he Al color where the cost risk sits with Alaska. So obviously like for us, you've offs sell a lot of cost risk to contractors. Is that the same case in Alaska, or is the inflation new environment we're seeing there Santo where's that I guess the second point on this is why should investors have confidence that Alaska is worth what you say it is if Noah other industry participant has been willing to put the bid on the table, which remotely reflects that. So therefore you weren't gonna sell down on that basis?

Well, look, I think, as I said earlier, others do see value in Alaska and, and all I've said is we've not been able to agree a deal in that timeframe. But we think, you know, we do think it'll become more valuable over time. And, and it's really a case of us not waiting forever for other people to, to, to finish their processes. We don't have to do that. The project's in good shape, we've got good contracts in place that we want to maintain.

We want to maintain, you know, the cost of steel that we've got secured and, and the biggest interesting with the interesting thing about the Alaska project is that the, the civil works are largely done for this project. So it's really drilling drilling's the biggest cost in, in this project, the cost of the Wells and we have those contracts in place for the drilling rigs for this project.

So it's very much like an upstream project you would see on shore Australia, other than the environment, which is quite different as you know, but it's an upstream project. And so it's drilling costs and it's pipeline connections essentially with, with relatively simple processing facilities. So there's no big LNG plants. There's no offshore shipyard vessels, and so risk was a big factor in prioritizing this project over the other opportunities, as well as the economics. So it's a very strong project. We've got a world class team in place I've been over there, spent some time with them. It's a very assured project.

So we're very confident that and in fact, because of the long time we've been asking these guys to recycle this project is probably the most FID ready project I've experienced in my, my career. And, and with engineering done to a very high level of completeness FID. So I'm feeling good about the risk profile of this project. And as I say that the major cost exposure is drilling costs.

Thanks, Kevin. Thanks. And yeah, that's all for me. I'll hop back in the queue.

Your next question comes from Mark Samter with MST Marquee. Please go ahead.

Yeah. Morning guys. A couple of questions. If I can. Kevin, I'm going to ask a bit more direct one about the the buyback of the capital returned framework. Obvious you've said it's all between a carrying range of 15% to 25%. Well, we can, I won't, we won't on exactly what consensus is for PPG down, but broad numbers, a 5% sale given, cash flows from L and G, as long as you produce is pretty much locked in given the lag and contracts it's got gearing probably is going to be plus minus 15% by the end of this calendar year Slide 6 shows us that 65, you've got a hundred percent of your market cap to return to shareholders over the next eight years share price.

I think in both of our view is ridiculous at these levels. I, I guess I just cannot understand why the board wouldn't be looking to return material anymore than the, the 40% as we get to next year. That's more like a statement and a question, but there was, there was a question mark at the end of that.

Well, look thanks for all of that, Mark. I'm going to try and cover I was taking notes furiously, as you were running through those different points, but look, first of all, I'd say the 15% you're right. If we get below that's a very soft balance sheet, if you like at that point, a very strong balance sheet, but very de levered balance sheet and consequently, that would be a consideration. I'm sure the board would make at that point in time, but I can't speak for the board. What I would say is that the board made a first step in that direction this year with the new capital management F framework and I was very grateful to the board for doing that and returning more value to shareholders.

And they've been true to that through throughout year. And I expect that they'll continue with that framework for the foreseeable future, if the gearing, if we do complete in that timeframe and, and the PNG sell down, the getting does go below that level, then I'm sure they will consider given the strength of the balance sheet at that time, whether or not to return additional returns to shareholders, and as we go forward.

And if we are in a world of higher oil prices and we are generating those cash flows, like we've shown on Slide 6, then, I'm sure that would be a more regular consideration for the board.

Okay. Thanks. And then second question, if I, this is slightly strange one, but I guess when we're thinking about Alaska, and obviously you've been through an attempted sales process, I'm just really interested if there's anything that potential bars are seeing in this asset.

And I guess, with your conversation to the market, too, when I sit down, I'm not asking you to comment on your competitors' projects, but I just find it absolutely incredible that people are worried about your balance sheet and stressing scenario evolves going down to $40 or $50 when there's a very large other Australian company, that's taken FID with the project at a hundred percent equity on something that's 25% of their market cap and another project, the 82%, that's 10% of the market cap. Yeah. And Alaska's six, 7% of their market cap, your net CapEx on it. Is there something you're backing up against from corporates in particular, why we should be so panicked about this project versus other projects?

Well, look, I said in my speech part that we, we, we think it's an outstanding project. It is true that I wanted, and I communicated previously that I wanted to get a lower equity level in this project and that we would be open previously to, to all, all types of offers you know, for a number of different reasons people may or may not come forward and put that offer on the table. Some of that can be strategic.

Some of it can be political. The volatility that we've seen no past six months has made it very difficult. And in fact, I would argue the volatility has made it difficult to sell anything other than L and G projects. And so you know, if you've got a good LNG project to sell equity in, then I can't see why you couldn't do that in this environment, because most of them are, have got long term price contracts, and it's quite easy to value and less volatility if you like in those long term L and G valuations than there would be in oil or even in some cases, domestic gas.

So, for us, I think the volatility has certainly played a part. What I can say is we a lot of interest in the asset. And as I said earlier, people have seen value, do see value in it, but so far we've not been able to progress that. And we've made a decision that we didn't want to be sitting here waiting forever. So we, we think the best way to monetize this asset is to F I D well remaining open to a sell down during development phase like we did in Bara.

And if that happens, we we'll obviously communicate that to the market if, and when it does, but we believe there's a lot of value in this project. And it will become more valuable over time. And look, the one thing I would like passionately agree with you, I mean, there's not a lot wrong with our forecast IRR of 19% at less than $60 oil. And I believe this will deliver excellent value to shareholders if we end up developing it and holding equity in it.

Perfect. Thanks, Kevin. I'm very keen to get older ex excellent executives, mobile numbers off you, if you want, give them

I'll bear that on mine. Thank you.

Your next question comes from Gordon Ramsay with RBC Capital Markets. Please go ahead.

Thank you very much. And congratulations, Kevin on, on pick a, I mean, it's very rare that you see a billion barrels of recoverable oil in an OCD country in a pro developed pro-development state. So I think potentially it will be an outstanding project just on pick. There had previously been some press commentary above road access and the potential cost of that and, and how that could, could affect the project. Go ahead. Assuming you've FID now, has that all been sorted out?

Well, the permits being granted for, for, for road access and, and that remains current Gordon there is currently an appeal on that. So, so, you know, I'll be upfront with that. However, that that should have no operational impact. We're very confident. It may, you know, may well end up in the future that commercial terms get adjusted, but, but the permit's being granted and there should be no operational impact. We're looking forward to going to work in a few months time and start drilling campaign.

And again, on this project, now that Willow looks like it's getting, you know, moving forward with the environmental aspects of that project, potentially getting approved. Is there any potential to work with ConocoPhillips on accessing some key equipment that might be similar or has there been any discussion at all about that to try and lower costs?

Absolutely. You know, and, and you know, I think Cono our excellent operator, I've worked with him over many years. Always made the point that the, the strong safety culture and a strong operational culture, we, we, we will want to work with Cono in that region when we go forward.

And, hopefully that can be beneficial for both parties and indeed you know, they will benefit from our oil in that pipeline, as you know, as that will lower the tariff for everybody as it's volume based. So, look, as I said earlier, we're pleased to be there. And we're looking forward to working with KCO and the other operators in the region. I was up there recently and you're right. If Willow goes ahead, there's going to be a lot of activity and the most activity that's been there in quite some time.

Okay. And just jumping across to Dorado I think had mentioned that, you know, and then you followed up with further appraisal drilling on PVO clearly that's oil, but you also mentioned you want to firm up gas. Can we be looking towards a multi-well program in the future, in the bed outside basin?

Well, look, it's too soon to say Gordon, what the program will be like. We're very mindful of, of managing our, our CapEx within our guidelines, as we've said previously, but we're now looking at the appraisal opportunities and we'll work with our joint venture partner degree in that program, but, I don't want to be down in the RA. I it's very important. Yes, we've deferred it.

Yes, we have said it needs more work and we are focused on looking at an integrated concept integrated for oil and gas. But it's an excellent prospect. You can't do everything at once. And what I would say is that Pika won the race in terms of economics and readiness and DRA will have its time. It's just not now.

Your next question comes from Nik Burns with Jarden Australia. Please go ahead.

Yeah, thanks Kevin. Anthea, just another question on Alaska. Overall, the numbers you presented today, look broadly in line with what oil search was presented say 18 months ago. Can you just talk about the work that you've undertaken since taking over the project? And are you comfortable with the work that oil search did and whether you've made any changes in scope in any way, or essentially they identical to the project that all search was proposing things.

Look, there's been sharpening up frankly, over the time and that's a team end country doing most of that work. Nick you'd see, CapEx has come down a little bit. But, but, but I, I would say that what the main work we've done over the last sort a year or so, or six months, I guess, has been, has really been in, in contracting and getting the right contracts and, and getting the readiness to do the project and de-risking the project.

Look, I think a lot, a lot of the work oil sales did was excellent. And, and, but again, it's the team and country that, that have led most of that work, as you know, they were probably set up as a quite independent team in, in the previous all search organization. What I would say is they're a little bit more integrated into the overall Santos we've spent six months assuring and linking them to the corporate center, so that we've got that governance across the operations and building the connection between the team and country with the corporate body back here in Australia.

As I say, I spent a bit of time over there with some of my team recently met all the local stakeholders, the indigenous stakeholders, governors, senators and I got a lot of support for the project I would say, and we'll make sure, and we'll look forward to introducing to our shareholders and yourselves at the next investor day.

Some of the team from Alaska, it is a world class team. I have been very impressed by the team that Bruce has assembled in country with a very experienced Alaska experienced individuals making up that team and I'm sure they're very happy today with this announcement, as I know they've been anxious for some time now, but great team in country great asset low risk asset.

Nik, as I say, it's mainly a drilling project. Now, the majority of the civil works are done. The pads are era. I was on the pad just a few weeks back and the roads are there. So, so yeah, we're in good shape.

That's great. Look, my other question, I guess, just, you, you mentioned that you see further upside in your share price, probably not too surprising, but from a market perspective feels like one of the factors weighing on the share price recently has been this C report on that's predicted a gas shortfall this year.

Now irrespective of any realism around that shortfall emerging, it does feel like the market is looking for some degree of clarity or certainty around any potential impact on Santos from any rule changes that might come through in the forms of a revised GSM or HOA. Can you talk about the timeframe where we can get that that sort of that information in the market so we can all make an assessment about what that potential impact might be? Thanks.

Well, look, thanks for that, Nik. First of all, what I would say is I've been really encouraged by the tone and the comments have come from minister king around this issue. She's taking a very mature and balanced approach to understand the issues and, and to work with the issues.

And likewise, what I've heard from our new prime minister is very encouraging. They taking a very measured approach to understanding this issue. I think in the past, that's not always been the case and indeed, with dare say, chess beating threatens to intervene, threat, threatening, to intervene in markets which has never happened, of course never occurred only causes that instability, but more important than just me winging about the impact that has on my share price is the impact that has on our foreign investors.

The people invest in these projects in Australia that underpin these long term developments and the customers, of course, who off-take from these projects. These are the same customers in the same investors we will need for clean fuels in the future. And that's why I said in my speech's important that all stakeholders remember the need for a very stable regulatory environment and, and government policy environment.

When it comes to domestic gas, I'm on record as not opposing gas reservation on, on a prospective basis. And that's something that I'll pull out there again that I've never ever opposed. Now, not everybody agrees with me or not, but, but that's fine. It's my view when it comes to, to domestic gas sorry gas going through LG plants and potential domestic gas market shortfalls. I would just ask you to think logically about how you would solve that when you have uncontracted gas available, that is of a higher volume and there's more of it than any forecast shortfall in the next year or two versus why you would ever want to go and break into international off-take agreements.

There's a few countries that have tried that over the year. Very few have, have succeeded by the way. And most of them would destroy their export markets in the process. And so I don't, I don't think that's, that's, what's going to occur. I'm very confident that the LNG projects, as they did last time when asked, sat down with government putting HOA together and we solve the problem.

However, the problem will never go away unless governments. And I say governments with an S unlock new supply, and it comes down to supply at the end of the day. And so I'm hopeful that with what I'm hearing from minister king and the prime minister on this issue, that be able to get all the key stakeholders together, to think longer term and get the right policies in place to support new developments in a sustainable way that can then help take this issue off the table and ensure we've got a supply of gas for our lo our manufacturing and gas users on the East Coast.

That's clear. Thanks, Kevin cheer.

Your next question comes from Daniel Butcher with CLSA. Please go ahead.

Okay. Thanks, Dan. I think you; I think you're the last one on to this, so over to you, man.

Oh, great. So I can ask a load of questions then. Thanks. Look just quickly, just to clarify a couple little things around Alaska first. It's I suppose it's still considered non-core and you said you would take offers during construction if they came in, when will you actively try and sell it down again? And are you still aiming to sell the whole 51% despite calling it outstanding?

We're going forward on the project down that sort of focus. And I want provides certainty to organization and everybody on this call that, that that's what we're doing. What I'm saying is we're still open to sell down if anybody comes forward during the development, but we're not running any specific processes or announcing any processes. That would just be like we did with Bara to get to an optimum level. And so, I think I've answered that enough during this, this call already, and hopefully that's clear.

Okay, great. Maybe just trying a little bit again on the contracting strategy for Alaska you mentioned a little about locking competitive rates. Can you talk me a little bit about what aspects are locked in on fixed rate per day or lump sum and which ones are exposed to increases any areas. And also is that part of the reason why you went to FID now to sort of lock in those before they roll off on previous offers for APC contracts and so forth?

Well, look, it was a consideration. It was a consideration. I think one of the things I would say is that on all of our projects I conducted a review a few months back over our contracting strategies looking at which countries a lot of our contracts were with. And that was really in response to the invasion of Ukraine and trying to understand what risks we had in terms of anything being manufactured or fabricated in Ukraine.

You'd be surprised how much comes from that part of the world or near nearby countries where gas might be cut off to those countries. And, and our supply chain be impacted. So we've reviewed that. We've looked at China and Chinese exposure for contracting and other, other parts of Asia. One of the things that makes me feel very comfortable about Alaska is that 89% of the spend; not that I want to be too specific, but I think your find it's on chart.

I think that although we didn't put that on spike, I'm sorry. Yeah, it's in the release. But 89% of the spend is within north America. And so there's very little contracting outside of the us, which is a, and, and there's very volatile and unstable environment. We see as a big advantage. There is no Russian content and around about 55, 50 5% or so of the cost on this project would be fixed rate. And the remaining 45% or so is mostly labor costs.

So with most of that cost, and of course we currently contingency in the project as well. So I think we, we include cost to 10% contingency on this project. So it's a relatively law risk project because we don't have any of those huge plant, like an LNG plant or an offshore vessel components to the project. It's really now it's a drilling process, sorry, a drilling project with some processing kit which makes it a relatively, excuse me, a relatively low risk project. And it's the variable drilling costs. So it's more about the days it takes to drill Wells as opposed to the, the rates, if that makes sense.

No, that's great. Thanks for the color. That makes perfect sense. Look, just little detail question, but you, you sort of said 1.3 billion, which is the upper end of the old search range of 1.1 to 1.3. I'm just kind of curious in the course of the scope, was there any shifting of the maintenance well drilling from post start-up to pre start-up or vice versa?

I think no, no. All we're doing is take 51% of the 2.6 CapEx to, to, to name plate capacity done. And obviously well, it's just, it's just arithmetic it's just to share of those costs. So there's no shifting of anything around.

All right. Great. and I guess I might try again on, on the PNG sell down what were the cost base for the sale? Would it be acquisition, price and oil search, or would it be your original investment, which might get a bit of capital gains tax on that, on that sell down?

So there's details in the accounts, it's in the held for sale notes. So you can see the, the amount of the 5% that we've pulled out of the accounts, that's where you get line of sight to that.

And that's for the tax cost base, not for your accounting cost base.

Oh, so tax cost base will be a little bit different. Yep.

Yeah. Will you be able to give me color on that?

Yeah. So we can't really, because it depends on the consideration so we can, we can give you accounting base, but any, any tax calculation be depending on consideration.

Okay. Can I have, at what consensus is it just under our 300 million that we have in our model for asset? You have,

You can have a point, Dan

You've got consensus can't you just tell us what it's?

No, we we're right in the middle of negotiations with our short pocket, I just don't want to put any numbers out there if

No worries. All right. That's very helpful. One final question. If I can if the GSM was invoked and if LNG is a net contributor was hit, had to divert some cargos on what price linkage would you need to sell the, the gas domestically or could you get away with selling it domestically?

I'm confident. GLNG won't be head done,

Right. Fine. Thanks. I'll leave it there.

All right. Thanks mate. Thank you.

Thank you. There are no further questions. I'll now hand back to Mr. Gallagher for closing remarks.

Okay, well look, I'd just like to thank everyone again for the attention this morning and just to reiterate that we're very pleased with the strong results. The company is in great shape. We're generating very strong cash flows with higher returns and that gives us the ability to get higher returns to shareholders and the confidence to develop new projects. So thank you very much. I'll look forward to talking to many of you over the next few days on our road shows. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.