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Santos CEO: ‘We need to live within our means’

The new CEO of Adelaide-based oil and gas giant Santos has told shareholders his focus will be on “discipline”, including making sure the company lives within its means.

May 04, 2016, updated May 04, 2016
Santos CEO Kevin Gallagher.

Santos CEO Kevin Gallagher.

Kevin Gallagher, appointed this year, told the Santos AGM today that the company had to become sustainable in an environment of low oil prices.

Santos has been severely buffeted by plummeting oil prices, recording an overall loss of $2.7 billion in 2015.

Gallagher said the disappointing result “shows the stark reality that our business must be sustainable in a low oil price environment”.

He outlined a three step strategy: stabilising the business, reducing debt, and putting in place a framework to become a “lost cost, reliable and high performance business”.

“This will put Santos in the position where it has the flexibility to take advantage of future opportunities,” he said. “However, we must be careful not to over-extend ourselves in terms of debt.”

The board had acted “decisively” to strengthen the company’s balance sheet and create a buffer against market volatility.

“We must now ensure that we live within our means and fund our activities through operating cash flow.

“Our aim is to be cash flow break-even at between US$35-40 per barrel on a portfolio basis.

“My overall objective is therefore to deliver shareholder value. This will require a highly disciplined approach to everything we do.”

Gallagher’s discipline mantra extended to safety and reliability, technical capabilities, and allocation of capital to make better investment decisions.

He also pushed a return to Santos’s past values and approach.

He was committed to “recapturing the values of our pioneering past: the drive, the focus and the self-belief that saw Santos develop the Cooper Basin”.

“It is essential that Santos rebuilds its exploration capability to find new reserves to provide future growth.

“This includes an assessment of targets in the Northern Territory and Queensland, and near-field exploration to deliver additional gas.”

Earlier, chairman Peter Coates revealed the company would give at least 40 per cent of its underlying net profit back to shareholders as dividends despite the tough operating environment.

He said the move was “the most appropriate way to deliver short-term returns to shareholders”.

“This is consistent with our objective to manage through low oil price environments,” he said.

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