Australia: Santos Increases 2P Reserves to 1,445 Million Barrels

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.

Year-end 2010 reserves are calculated after the sale of a 15% interest in GLNG to Total announced on 9 September 2010 but before the sale of a further 15% interest in GLNG to Total and KOGAS announced on 17 December 2010, as the latter sale transactions will not complete until early 2011. Completion is expected to result in the sale of approximately 110 mmboe of 2P reserves.

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.

GLNG

GLNG dedicated 2P CSG sales gas reserves were 5,009 PJ as at December 2010. The project continued its track record of reserves build in 2010, adding over 1,000 PJ of 2P reserves in the GLNG dedicated areas since December 2009.

Table above excludes 750 PJ of GLNG dedicated Santos portfolio gas supply. CSG sales gas reserves are estimated after deducting the fuel, flare and vent necessary to produce and deliver sales gas to the LNG plant.

GLNG reserves and resources were independently certified by Netherland, Sewell & Associates, Inc. (NSAI) as at 31 October 2010. NSAI estimated that the ultimate potential 2P reserves maturation in the GLNG dedicated areas was 9,848 PJ. The NSAI reserves maturation assessment is based on full success of the Santos CSG field development plan in converting possible and contingent resource areas to 2P reserves.

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Source: Santos, February 8, 2011;