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Santos on Board shuffle, major natural gas contract and record financial results

Oil and gas producer, Santos, has announced changes to its Board, reported record financial results and confirmed new contracts following its Annual General Meeting held earlier this month.

Guan Yu joined the energy company’s Board as a Non-Executive Director effective 3 May 2019.

Guan is President and a Director of ENN Ecological Holdings. Prior to joining ENN, Guan held senior executive roles with Shell China and Schneider Electric. Guan holds an EMBA from China Europe International Business School.

Guan replaces Yujiang (Eugene) Shi as the ENN nominated director. Shi resigned from the Santos Board at the conclusion of the 2019 Annual General Meeting held in Adelaide on 2 May.

Santos Chairman, Keith Spence, has welcomed Guan to the Santos Board and thanked Shi for his contribution and insights since his appointment to the Board in 2017.

Under the strategic relationship agreement signed with ENN in 2017, ENN has the right to nominate one person as a director of Santos, provided that it has an aggregate relevant interest of 15 per cent or more in Santos.

In other news, earlier this month, Santos signed a non-binding agreement with  Brickworks and Weston Energy for the supply of natural gas from the Narrabri Gas Project.

Under the proposed transactions, Santos would supply Brickworks with up to three petajoules per year of natural gas from Narrabri for seven years from 2025 and Weston Energy with 10 petajoules per year for 10 years, commencing no earlier than 2023. The supply of Narrabri gas is subject to a final investment decision, negotiation and execution of a definitive gas supply agreement and approvals by each party.

Santos also has a non-binding Narrabri gas supply agreement in place with Perdaman for a proposed new fertiliser plant at Narrabri, creating a new local industry.

Weston Energy CEO, Garbis Simonian, said this is an important step
towards a better energy future for New South Wales.

“This agreement provides a simple pathway for new sources of gas to readily supply NSW businesses,” he said. “It will increase competition and security of gas supply for NSW manufacturers and gas users.”

Santos Managing Director and CEO, Kevin Gallagher, said manufacturers
on the east coast are crying out for more gas supply and more competition which will put downward pressure on gas prices.

“We have committed 100 per cent of Narrabri gas to the domestic market, enough to supply up to half of NSW’s needs and help support about 300,000 jobs in NSW that rely on natural gas,” said Gallagher.

“In Sydney and throughout regional NSW, customers understand the benefits of a local, reliable, competitively-priced natural gas supply just a few hundred kilometres away in Narrabri.

“Narrabri gas will be very competitively-priced because we will bring to Narrabri the safe, low cost operating model that we have successfully implemented in Queensland.

“Gas from Narrabri will always be cheaper than gas imported from other states or from overseas,” he said.

Santos has spent more than $500 million on the Narrabri Gas Project since acquiring Eastern Star in 2011 according to Gallagher.

Santos is reportedly on-track to supply more than 70 petajoules per year of natural gas to the east coast domestic gas market this year, approximately 14 per cent of total demand.

At Santos’ 2019 AGM, Gallagher was delighted to report on the energy company’s strong operational performance and record 2018 financial results.

He confirmed that there was a 129 per cent increase in underlying net profit after tax to a record $727 million; a 51 per cent rise in EBITDAX to a record $2.2 billion; an 18 per cent increase in sales revenue to a record $3.7 billion; underlying production costs were down six per cent to $7.62 per barrel of oil equivalent; and a 63 per cent increase in free cash flow to a record of more than $1 billion.

In November 2018, the Australian Competition & Consumer Commission (ACCC) decided not to oppose Santos’ proposed acquisition of oil and gas company, Quadrant Energy.

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