Accounting Essay Example

3Santos Limited Analysis


Company Analysis: Santos Limited

BACC001 Assignment

  1. Company Information


  2. ASX Code: STO

  3. Address: : Ground Floor Santos Centre, 60 Flinders Street, ADELAIDE, SA, AUSTRALIA, 5000

  4. Website:

  5. GICs Industry group: Energy

Reference:, company information for Santos limited (STO)

2 News Article: Carbon tax hits Santos limited.

Dated: 16 August 2013

Summary: the earnings of Santos limited were affected by high cost of carbon tax; this pushed its tax bill high of $192 million the previous year of $180 million. The component of income tax also rising to $156 million from the previous year amount of $136 million.

The decrease in total output was offset by increased product prices. The net profit increased to $271million from the previous year amount of $262million. Revenue also increased to $1.53billion up from $1.49 billion.

The 4% decrease ofbarrelsofoil will recover in the second half to reach 52-55 million in full year. Owing to declined underlying net profitamounting $251 million from the previous $283 million. 15 cents per share interim dividends have been declared.

The project for gas export with an estimated cost of $US18.5billion is 60% the next three years; cash flow is estimated to double.

The first gas is due to flow in the final quarter of 2013. Once commissioned, higher dividends will be considered by the company.

3 Statement of Comprehensive Income

  1. Net profit margin ratio measures what the company keeps as its earning out of sales per dollar. It is a profitability ratio

  2. 2012 net profit margin ratio is $518/$458=1.13 or 113%

2011 net profit margin ratio is $751/$720=1.04 or 104%

  1. The ratio has increased by 9% in the year 2012. This is good for the company since it translates into more revenue. The increased revenue is due to increased product price as mentioned in the news article.

Reference: Santos limited Annual Report 2012 page 79: Statement of Comprehensive Income

Reference: Santos limited Annual Report page 79: Statement of comprehensive Income

4 Statement of Financial Position

  1. The largest asset of SANTOS LIMITED for the current year is oil and gas assets that are placed at $ 11,675,000,000

  2. Retained earnings balance for the year is $3,174,000,000

  3. Retained earnings increased by $248,000,000. This is because dividends were not yet paid to the existing shareholders.

Reference: Santos Limited Annual Report page 80: Statement of Financial Position

5 Consolidated Statement of Cash flows

  1. Cash flows from operating activities inflow of $1,658,000,000

  2. Cash flows from investing activities outflow of $3,198,000,000

  3. Cash flows from financing activities inflow of $366,000,000

  4. Cash flow generated from operating activities of ( $1658m) and issue of shares ($88m) was used to repay borrowings (-$190m)

Reference: Santos Annual Report 2012 page 81: consolidated statement of cash flows.

6 Notes to the Consolidated Financial Statements

  1. From the financial statements presented, Santos limited is the uses the policy of historical cost in its consolidated financial statements except for derivative financial instruments, notes with fixed rates and available for sale financial assets that are stated at fair value.

Reference: Santos limited Annual Report 2012 page 83: Note B

  1. Note number 9 depicts an analysis of what comprises inventory at net cost and the lower realizable value .This are both petroleum products and stock from drilling and maintenance activities.

Reference: Santos Annual Report 2012 page 107: Note 9

  1. The amount paid to auditors for audit services offered is $1,901,000

Reference: Santos Annual report 2012 page 149: Note 33

7 Santos Limited Sustainability Report

Santos limited believes that sustainability is not an issue to just only talk about, but to continuously strive and improve their performance and make real sustainable gains in areas concerning climate change, management of water ant the wellbeing of the community.

Sustainability indicators for Santos limited are as follows:

The sustainability issues covered only touches on matters considered material to Santos Limited. Consequently, the sustainability scorecard outlines presentation graphically measuring its annual performance. There are clear performance demands tailored to every single indicator outlining the improvements required for the system in order to attain a required goal. The indicator owners drive set performance targets by managing and monitoring outcomes against the set performance targets. Review of improved targets is done annually but performance is always reported quarterly to the environment, the health, safety and the sustainability committee.

In measuring performance, the year 2012 saw a consolidation of achievement from performance. Given the evolving expectation from all the stakeholders concerning the environmental and other social concerns, Santos limited has continued to improve its performance. Activities that were regarded as good practice are currently deemed necessary. These include auditing for greenhouse emissions and its reporting. Therefore, there is the need to increase performance in order to maintain sustainability of the company.

Reference: Santos limited 2012 annual sustainability report page 8

Within the past two years, Santos limited was able to reduce the gap between high performance indicators and those requiring immense improvements. This was possible due to improvements manifested in data capture and use of improved systems that enabled Santos Limited to understand better the likely impact hence preparing for its eventuality.

The community support projects in the year 2012 brought about a high sustainability for the organization’s social infrastructural indicators. The services improved the wellbeing of the community in terms of health services, education and training and affordable houses.

Given the present trend of development and increased activities and a new set of employees, achieving the organization’s objective was deemed challenging.

The organization did not achieve its safety target. The rate of injury increased though its severity decreased.

It should be noted that majority of the set targets were achieved and the focus has since then been shifted to the long term goals. Santos Limited is boastful of its achievements and it is looking forward for a much better performance in the year 2013.