The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Hugh Morgan - Deutsche Bank - Analyst: Good afternoon, David, and congratulations on today's news. Just a question, if I may, in relation to the off-take arrangements. Obviously now that FID has been achieved, I wonder if you can give us some sort of indication on the timeline or process for when you intend to convert those binding HOAs into binding sales and purchase agreements.
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: So just to clarify, the FID was the final condition that needed to be met in order to convert those contracts? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: Okay. One more question if I could. Just in the context obviously of the current situation in Queensland, I'm just wondering if you can perhaps give us an update on what impact the flooding has had on the GLNG fields and what the outlook is for those fields over the next few months?
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: Okay. Thank you very much, David.
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Hi, David. Can I just ask, now that you've got FID done, could you sort of describe the upstream field development sequence that you've based FID on, particularly obviously with respect to Fairview? I'm just curious to understand how it's all going to be synchronised with respect to say Origin's participation in the development of Fairview.
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Specifically on that development activity, has there been any sort of notional FID decisions at the Fairview joint venture level? Has there been approvals for all the development expenditure that's a subset of the AUD16 billion?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: That's all signed off on?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: The Fairview joint venture level?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: I suppose the key question is the gas, Origin's share of Fairview gas is going to Origin, none of it's coming into GLNG projects?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: So what does that mean, they've still got an option to take it or to bank it or to sell it to you?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: But all the - I'd spoken with Andrew earlier - but all the numbers that you've given us in terms of internal rate of returns etc for the project, are on the basis of Origin taking their share and fully funding their share of CapEx?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: One other question, if I may, in relation to CapEx - I hope I don't come across as too cute, but you specified CapEx to 2015 on the basis of the FID decision, can you tell us what CapEx for the GLNG joint venture will be in 2016 - just so we understand that there's a complete - you know, what's the CapEx that it ratchets down to?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: is it possible to give us a sense of what the joint venture thinks - a range for possible CapEx will be? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Thanks David.
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: First of all I would like to congratulate everybody on the success of the GLNG project. It was great. Coming back to the actual ramp up of the plant, would you be able to give us an idea how long it would take for each train to actually ramp up to peak production?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: How quick is very quickly? Is it six months or is it a year or 18 months?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Very quickly - one month. ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay.
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, that's great. So when you actually start, and say within that month, would you expect a mix - what would be the mix between CSM ramp-up gas, storage gas and say maybe Cooper Gas?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, so it's possible you could be producing say a third from Cooper, a third from storage and a third from--
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay. On storage - we haven't had much information around storage, are you able to give us an idea on what size storage you might be looking to have? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: And of course the cost of storage, that is in the $16 billion?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Yes, okay.
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, thank you very much.
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Hey David. Just following on from Andrew McGann's question on Fairview - my recollection of Fairview is that there's a certain timeframe which the joint venture other parties have to decide whether they become part of the agreement that you've got for gas or opt to take the gas themselves - what time is left for Santos to make that - for Origin to make that decision?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: So how long do they have to make the final decision on whether they join in the agreement with you? My recollection is there's a certain timeframe on that; it can't be left open for years I would have thought.
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay, so they do have quite a bit of time before they have to decide to back into your sales agreement?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Right. Does that agreement - if they leave it in the ground - still have a, what used to be like a lopsided agreement where if they take it you have to back off. If they leave it in the ground for a while and then they want it all suddenly you've got, you have to supply that to them in preference?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Right and when they want them, they get them all even if that affects your production? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Sure, I understand that. Okay. With your contractors, are there any clauses in the agreement that would case increases to costs due to flow-on impacts from the floods up here in Queensland?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay.
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Do you see any impacts on civil works, particularly civil works you might have to do on Curtis Island from the impacts of the flood in just timing?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Alright, and how much extra capacity are you hoping to sell of the 7.8 million tonnes?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: So, just to be clear, you will sell up to the 7.8 million tonnes at (inaudible)?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay, and do you want to continue holding the pipeline? Thoughts about selling that down once it's complete or some time?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Thanks for your time David.
Answer By: David Knox - Santos Limited - CEO
Question: Ben Wilson - JP Morgan - Analyst: Good day, David and Andrew. Just a quick question on your upstream contracting strategy. I note there was a comment in the S&P ratings report issued this morning that there's been a commitment by Santos to secure what it states is a significant proportion of EPC contract with Fluor as fixed. Do you have any indication of when you might be in a position to lock down much of those upstream contracts with Fluor and with its sub-contractors? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Is that process that Fluor's going through involve it dealing with its sub-contractors or is it more a Fluor head office thing?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Okay, and then can I confirm that you're contracting exclusively with - that GLNG is contracting exclusively with Fluor for upstream? GLNG is not contracting to others outside of Fluor?
Answer By: David Knox - Santos Limited - CEO
Question: Andrew McGann - BeM - Analyst: Okay. That's great. Thanks David.
Answer By: David Knox - Santos Limited - CEO
Question: Alex Mears - Schroders - Analyst: Thank you. Congratulations on FID'ing the project. My only question I think, I suppose Sandra's asked half the question - in terms of the pipeline - I was also thinking the storage - does the GLNG joint venture see themselves as long-term holders of any of those assets and is one more likely to be sold than the other? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Alex Mears - Schroders - Analyst: is there much use for storage once - after the initial ramp-up has passed, is there a (inaudible) for the storage in the LNG project?
Answer By: David Knox - Santos Limited - CEO
Question: Alex Mears - Schroders - Analyst: Okay, no problem. Thank you.
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: Hi David. Just a quick follow-up question if I may in relation to that 0.8 million tonnes. You mentioned that it would be offered to the two buyers on an annual basis, or you may look to sell it short-term to others. Does that mean effectively that the GLNG joint venture is not looking to sign any additional long-term deals over that 0.8 million tonnes at this stage? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: Okay. Just one quick follow-up if I could - are you able to give us an indication - you mentioned today about 5000 jobs will be created - are you able to give a very approximate split of how that 5000 is spread across the upstream pipeline and downstream?
Answer By: David Knox - Santos Limited - CEO
Question: Hugh Morgan - Deutsche Bank - Analyst: Okay, fantastic. Thank you very much David.
Answer By: David Knox - Santos Limited - CEO
Question: Ben Wilson - JP Morgan - Analyst: David, just now that you've gone to FID on the project where do you stand with the prospect of any collaboration on the Curtis Island build? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Ben Wilson - JP Morgan - Analyst: Okay, thanks David.
Question: Johan Hedstrom - Southern Cross - Analyst: Yes, hi David. I was just wondering - a couple of question on CapEx - the $16 billion, is there any split that you can give between upstream, midstream and Curtis Island?
Answer By: David Knox - Santos Limited - CEO
Question: Johan Hedstrom - Southern Cross - Analyst: Yes, and you make the point that starts today, so how much has been spent until today? Have you got a figure for that?
Answer By: David Knox - Santos Limited - CEO
Question: Johan Hedstrom - Southern Cross - Analyst: Yes.
Answer By: David Knox - Santos Limited - CEO
Question: Johan Hedstrom - Southern Cross - Analyst: Okay. Thank you.
Question: Di Brookman - CLSA - Analyst: Hi again, just back on Curtis Island - just asking the question around Bechtel - given that British Gas has already approved their plant and you said they'll have between 1500 and 2000 people on the island, will that be in total for Bechtel working the two plants, or the two trains?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: In other words - sorry?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, so if we look at the start date for the second train at the end of 2015, so it looks like there's about nine months between the start of train one and train two - does that suggest that BG's first train will start nine months before that and it'll move along in nine month segments?
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, so there's no way that the first train for BG can delay the start of your first train? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Okay, thank you.
Answer By: David Knox - Santos Limited - CEO
Question: Di Brookman - CLSA - Analyst: Thank you.
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: David, the start date for the first shipment in 2015 - is that at the start of 2015? So do you expect to get a full year's production in 2015 from the first train?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay. You're very confident on your reserves cover. Can you rule out the need for acquisitions to meet your reserves for this project?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay, and just a side question - how long is the heads of agreement in pages?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Yes, how many pages is it?
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Okay, so it is like a 20, 30--
Answer By: David Knox - Santos Limited - CEO
Question: Sandra McCullagh - Credit Suisse - Analyst: Terrific. Thanks David.
Answer By: David Knox - Santos Limited - CEO
Answer By: David Knox - Santos Limited - CEO
Answer By: David Knox - Santos Limited - CEO
Question: Cameron Hardie - UBS - Analyst: Hi David. I just had a query - just following up on Andrew's question on the CapEx - I was just approaching it from a different angle, if I may - the $16 billion to second train ready to start up at the end of 2015 - how many wells is that; does that include up until that point?
Answer By: David Knox - Santos Limited - CEO
Question: Cameron Hardie - UBS - Analyst: Great. Thank you.
Answer By: David Knox - Santos Limited - CEO
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