Australia: Santos Delivers its Seventh Consecutive Annual Reserves Increase

Santos today announced that proved and probable (2P) hydrocarbon reserves increased to 1,445 million barrels of oil equivalent (mmboe) as at the end of 2010. This represents a 2P reserves replacement ratio of 110% and is the company’s seventh successive annual increase in its reserves.

Successful exploration, appraisal and commercialisation activity, along with the sanctioning of new projects, added 165 mmboe of 2P reserves in 2010

The increase in reserves was driven by strong growth in coal seam gas (CSG) reserves dedicated to the GLNG project. Reserves also increased in the Cooper Basin and through the sanctioning of the Spar (Western Australia) and Wortel (Indonesia) gas projects.

After the sale of a 15% interest in GLNG to Total for $650 million announced in September (approximately 110 mmboe) and 2010 production of 50 mmboe, Santos’ year-end 2P reserves increased to 1,445 mmboe.

Santos Chief Executive David Knox said consistent delivery of Santos’ strategy had again delivered reserves growth in 2010.

“The quality of our reserve base is also improving – more than half of our reserves are targeted at the higher margin LNG business.”

“Today’s announcement means Santos has delivered its seventh successive annual reserves increase, positioning the company for significant future production growth,” Mr Knox said.

On a proved (1P) basis, year-end reserves were 646 mmboe, after allowing for 2010 production of 50 mmboe. This represents a 1P reserves replacement ratio (RRR) of 201% on a 3-year rolling-average basis.

On a proved and probable (2P) basis, year-end reserves increased to 1,445 mmboe. This represents a 2P RRR of 457% on a 3-year rolling-average basis.

2P reserves growth from project sanctions and commercialisation success

Development approvals for the Spar project offshore Western Australia and the Wortel project offshore Indonesia added 36 mmboe in aggregate to 2P reserves.

The Spar project involves the staged development of the Spar gas field, initially at the Halyard subsea well and followed by the tie-in of the Spar-2 well. First gas is scheduled for mid-2011.

The Wortel project includes two gas wells, a minimum facility wellhead platform and a 10-kilometre gas pipeline to the existing Oyong well-head platform. First gas is scheduled for the end of 2011.

39 mmboe of 2P reserves were added in the Cooper Basin from improved base performance, identification of additional compression projects and conversion of the first tranche of infill contingent resources to reserves.

Following the 2010 start-up of production from the Henry and Netherby fields, offshore Victoria, production performance data indicates accessed reserves for each reservoir are lower than the previously booked volumetrically based estimates. Consequently, 2P reserves for the fields have been reduced by 14 mmboe Santos share.

Commercialisation of contingent resources

Santos continued to deliver on its strategy to commercialise its significant contingent resource base in 2010. Key milestones were:

* The sale of contingent resources to Total as part of the 15% sell-down in GLNG for A$650 million.

* Commercialisation of resources to reserves related to Spar, Wortel and CSG.

* Additions to CSG contingent resources in Queensland and NSW.

Overall, contingent resources decreased by 236 mmboe to 2.3 billion boe, reflecting the sale to Total, conversions to reserves and reassessments, offset by additions to CSG resources through exploration and appraisal.

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Source:Santos, February  8, 2011;