Santos finally comes clean on Barossa guidance

The Australasian Centre for Corporate Responsibility​ (ACCR)  is commenting on the release today of Santos Ltd’s fourth quarter report, for the period ending December 31 2023.

Commenting on the results, Alex Hillman, Lead Analyst of the Australasian Centre for Corporate Responsibility (ACCR) said:

“After over a year of market speculation, Santos has finally come clean and disclosed an increase of up to $300 million to its guidance for the Barossa project.

“Santos’ drilling for this project ground to a halt in September 2022, after a successful challenge to the Federal Court (Santos v Tipakalippa) by Tiwi Islanders over a lack of consultation.

“It is important to note that the majority of cost overruns are due to Santos’ own inability to comply with regulatory requirements deemed workable by the full Federal Court in the Tipakalippa decision.

“The more recent Federal Court decision, (Munkara v Santos), related to the pipe lay. In this case the judge ruled in favour of Santos, though the time for the applicants in that case to consider filing an appeal is still running.

“When considering the schedule impact of these two cases, it’s clear the drilling program was delayed longer than the pipelay program, suggesting that even without the Munkara decision, Barossa start up was unlikely to meet the disclosed schedule.

“This project was going to have cost and schedule overruns regardless of the Munkara decision.

“Kevin Gallagher remains under significant pressure to pull a rabbit out of a hat over Santos’ poor share price performance, whilst acknowledging that there is “no certainty” that the merger talks with Woodside will progress to a transaction.”

Background

ACCR estimates:

• Santos’ failures with regard to Tiwi Islander consultation for the Barossa drilling program have cost the company $450 million due to the drill rig being on standby; and
• The delays from the pipelay legal challenge (Munkara v Santos) cost the company $350 million.

These costs are calculated based upon a combination of public statements and court affidavits provided by Santos, independent financial analysis and local media reporting.