Santos has unveiled its Annual Reserves and Resource Statement.
At the end of 2022, proved plus probable (2P) reserves had increased by 171 million barrels of oil equivalent (mmboe) before production to a record 1,745 mmboe.
Prior to production in 2022, 2P reserves increased by 171 mmboe. The yearly 2P reserve replacement rate was 166%, while the three-year replacement rate was 366%.
Santos anticipates an impairment charge of about US$147 million due to the Spar/Halyard reserve decline and other impairment costs of approximately US$181 million relating to other late-life producing and development assets.
Santos Managing Director and Chief Executive Officer Kevin Gallagher stated that the Annual Reserves Statement highlighted strong annual and three-year reserve replacement.
“Today’s statement is the result of Santos’ disciplined annual reserves review and accounting processes, which include external audit of approximately 97 per cent of total 2P reserves,” Gallagher said.
The Pikka Phase 1 project in Alaska received final investment approval in 2022, converting 165 million barrels of 2C resources to 2P reserves. Increases in Alaska contingent resources beyond the Pikka Phase 1 region due to new well data, notably the Mitquq and Stirrup finding wells, seismic reprocessing, and integrated reservoir analyses, more than offset this.
According to Santos, its strict operating philosophy was consistently applied, resulting in reserve expansions in onshore assets. Before production, the Cooper Basin and Queensland gained 9 mmboe and 10 mmboe 2P reserves, respectively. Prior to production, reserves were also added in Papua New Guinea, notably in the operating gas fields.
These reserve additions were countered in part by a 26 mmboe 2P reserve drop in Western Australia, owing to earlier than projected water infiltration at the Spar/Halyard field.
Santos had 841 petajoules of 2P sales gas reserves in WA at the end of 2022, after accounting for the Spar/Halyard reduction and 2022 production. This provided coverage for existing contracts. Furthermore, Santos had 1,400 petajoules of 2C sales gas resources in WA at the end of 2022 and 437 mmboe of total 2C resources when liquids were included.
Santos maintains a booking of 100 million tonnes of CO2 storage capacity and contingent resource in the Cooper Basin, which serves as the foundation for the Moomba carbon capture and storage (CCS) project. The project is on pace to begin CO2 injection in 2024. Santos is also doing front-end engineering design work on the proposed Bayu-Undan CCS project and was awarded licences in 2022 to do evaluation and appraisal work for prospective CO2 storage in the Carnarvon and Bonaparte Basins off the coast of WA.
As a result of the Spar/Halyard reserves revision, Santos anticipates recording an impairment of approximately US$147 million before and after tax in the 2022 full-year results. Additionally, as part of the routine review of asset-carrying values, Santos anticipates recording additional impairment charges of approximately US$181 million before tax (US$77 million after-tax) related to other late-life producing assets and exploration and evaluation assets.
According to Santos, the expected impairment charges will be deducted from underlying earnings and are subject to the completion of the full-year financial statements, auditor processes, and Board approval.
