DETERMINATION OF THE FINANCIAL MANAGEMENT POLICIES AND DECISION-MAKING OF SANTOS LIMITED

This research project requires the evaluation and analysis of the 2014 Annual Report (Preliminary) documentation, and other potentially relevant information, for SANTOS LIMITED (STO) to ascertain the nature of their overall financial management policy choice and decision-making, and to identify the potential determinants of this financial management policy structure and its impact on firm valuation. The focus of this task should be on using relevant information provided in the most recent Annual Report and the Shareholder Review documents to identify, illustrate and explain the financial management policies adopted by Santos Limited, and to demonstrate the association between the various policies adopted by the company and how they integrate to determine the accounting and share performance outcomes for Santos Limited. The final component of the research project is an application based on the incorporation of the effects of a major business transaction by Santos Limited on these policy and decision-making components.

Being an Australian energy pioneer since 1954, Santos is a leading oil and gas producer, supplying Australian and Asian customers. With its origins in the Cooper Basin, Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position in Australia of any company. Santos has also developed major oil and liquids businesses in Australia and operates in all mainland Australian states and the Northern Territory. The company also has an exploration-led Asian portfolio, with a focus on three core countries: Indonesia, Vietnam and Papua New Guinea. With over 3,000 employees across Australia and Asia, Santos’ foundations are based on safe, sustainable operations and working in partnership with host communities, governments, business partners and shareholders

Santos Limited (STO) operates in the exploration, development, production, transportation and marketing of hydrocarbons. Santos produces natural gas to Australian, Indonesian and other Asian markets, and develops oil and liquids businesses in Australia, Indonesia and Vietnam. Santos also focuses on transformational liquefied natural gas (LNG) strategy and has interests in four LNG projects in Australia. The company has interests in three main areas, including Eastern Australia, WA and NT, and Asia Pacific. Eastern Australia includes Cooper Basin, Southern Australia, Queensland CSG, Queensland Conventional, and New South Wales CSG; WA and NT include Carnarvon, Bonaparte and Amadeus; and Asia Pacific includes Papua New Guinea, Indonesia and Vietnam.

Detailed overall summary, structural and performance information can be obtained from the 2014 Annual Report (Preliminary) document for Santos Limited. This annual report document is available on the subject LMS (Moodle) site, and 2014 and prior year annual report documents can also be obtained from the Santos Limited web-site (www.Santos.com.au) or from the DatAnalysis Premium database available through

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the Electronic Databases link on the University Library web-site. Other relevant financial information relating to Santos Limited or the wider corporate sector is as follows:

  • Santos Limited’s most recent share price is $7.21 per share.
  • Santos Limited is a part of the Energy Sector, based on the Global Industry Classification Standards (GICS) Sector Groupings, focusing on Oil, Gas & Consumable Fuels market
  • Santos Limited’s beta coefficient is 1.38, compared to the beta coefficient for the overall Materials industry sector of 1.19.
  • The 90-day Australian Dealer Bill interest rate is set at 2.50% per annum, and the ASX All Ordinaries Index has provided an average annual return of 3.5% over the last ten years.

The required tasks associated with this research project are, based on using the information within the annual report documentation and any other documentation or sources of information considered to be relevant, to identify and outline the following aspects of Santos Limited’s financial management policy:

The nature of any association or relationship between these various financial management policies employed by the firm, and how this may relate to the firm’s share and/or accounting performance outcomes

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