Financial and Economic Interpretation of Santos Limited Annual Report FY2018

FINANCIAL AND
ECONOMIC
INTERPRETATION
STUDENT ID:
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The selected company for this task is Santos Limited and the requisite annual report which
has been used is for FY2018.
Executive Summary
The objective of the underlying report is to discuss the performance of Santos Lrd for
FY2018 and compare the same with FY2017. In this regards, both financial and non-financial
indicators have been used. On account of improved price realisations from oil and LNG, the
company has shown significant improvement in profitability in FY2018 as compared to
FY2017. In relation to non-financial performance indicators, the key factor is the proven
reserves which have increased thereby implying sustainability of earnings. The only potential
concern for the company is the increasing debt equity which needs to be kept in check owing
to cyclical nature of business.
Analysis
With regards to financial performance indicators, the product sales for the company has
witnessed a growth of 18% in FY2018. The EBITAX (Earnings before Interest ,Tax,
Depreciation & Amortisation, Exploration & Evaluation) for the company witnessed a
significant jump of 51% in FY2018. In FY2017, the company has posted a loss of USD 315
million as EBITDA and USD 360 million as loss after tax. In comparison, the company
posted a profit of USD 1,334 million as EBITDA and USD 630 million as PAT. Another
pivotal aspect visible from the balance sheet is the increase in liabilities leading to
deterioration of debt equity ratio from about 0.9 at the end of FY2017 to 1.2 at the end of
FY2018 (Santos, 2018).
A key non- financial performance parameter is the proved reserves which have increased by
25% from FY2017 to FY2018. If proved and probable reserves are combined, then it is
evident that from FY2017, an increase of 20% is observed during FY2018. The production
volume of the company has witnessed a decline of 1% in FY2018 when compared to
FY2017. Further, the sales volume for the company has dropped by 6% in FY2018 on a y-o-y
basis (Santos, 2018).
Interpretation
In the section, the various choice of requisite financial and non-financial indicators would be
justified coupled with highlighting the precise reasons fot the changes in these parameters