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Copy of A Comparison of Financial Statements

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Tessa Poot

on 17 December 2014

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Transcript of Copy of A Comparison of Financial Statements

Balance Sheet
Structure:
Overall Summary and Future Recommendations
Presentation Overview
By Tessa Poot, Stephanie Butler, Justine Laing and Rebecca Jones
Company Overview - Woodside
Woodside was incorporated in 1954
30 years of domestic gas production and 25 years of LNG exports
3786 people employed
Number one supplier of LNG in Australia
Company Overview Bradken Ltd
Today's Presentation Task
Considering the finite resources that are available in the future, when considering a triple bottom line, which company would you choose to invest in?

Discussion
Who would you choose to invest in?
Both companies present their balance sheets complying with GAAP in the narrative format, listing assets, liabilities and equity vertically. They also provide comparative information from the previous years.
Santos
Balance Sheet - Key Differences

Current Assets:
Cash decline 2011 - 2012 & steep decline 2012 - 2013
restructuring
Non-Current Assets:
Steady increase due to exploration and evaluation assets
Current Liabilities:
Significant decline in borrowings in 2012
New management cost cutting
Budget blow-out!
Equity:
Foreign operations returns gains in reserves
Balance Sheet - Methods of Measurement
Both companies are very similar in their methods of measuring assets and liabilities.
Balance Sheet
Strengths and Weaknesses of Financial Position

Key Findings - Horizontal Analysis
Income Statement
Structure:
As both companies present their income statements in accordance with the GAAP, they are constructed almost identically.
Income Statement - Key Differences
Income Statement - Methods of Measurement
Both companies are similar in their methods of measuring income.
Key Elements
Income Statement
Strengths and Weaknesses of Financial Performance

Key Findings - Vertical Analysis
Woodside
Current Assets:
Major growth in 2012, followed by slight decline in 2013 with upgrades to North Rankin Project
Non-current assets:
Deferred tax assets
Expected future decline in revenue?
Current Liabilities:
Increase in interest bearing long-term borrowings
Maturing and owing
Acquired bonds from the US
Equity:
Shares reserved for employee share plans over all three years
Due to increased employee poaching over Gorgon Project
Statement of Cashflows
Strengths and Weaknesses of Cash Flow Position

Key Findings - Cashflow Ratios
Woodside
Santos
Trend Analysis
Trend Analysis
1. Company Overview
2. Today's task
3. Balance Sheet
4. Income Statement
5. Statement of Cash Flow
6. Class discussion
7. Summary and Recommendations

Founded in 1954
Acronym stands for South Australian Northern Territory Oil Search
Employs 3502 people excluding contractors
Australia’s largest supplier of coal seam gas
Main supplier of Natural Gas to Eastern Australia

Cash and cash equivalents
Trade and Other Receivables
Trade and Other Payables
Inventory
Oil and Gas assets/property
Intangible Assets
Provisions

Expense recognition
Income recognition
Cost of goods sold
Income Tax expense
Listing of profit attributions

A Comparison of Financial Statements:
Woodside vs Santos

Key Elements

Revenue:
Peaked 2012
Decline in 2013 due to price of LNG
Large Contribution in 2011 due to disposal of oil and gas assets
Expenses:
Third party expenses due to outsourcing contractors

Revenue:
Product sales increasing over 3 year period
Decrease in profit margins
excessive COS
Expenses:
Increase cost of CSG production
Product Comparison
Woodside
Santos
Year
Year
Natural Gas (CSG)
Liquefied Natural Gas (LNG)
Ethane
Liquid Petroleum Gas
Condensate and Crude Oil
SUSTAINABILITY - WOODSIDE
SUSTAINABILITY - SANTOS
- $100 Billion for overseas market
- 18, 000 jobs
FRACKING
- Health and community
complications
- Not asking permission to use peoples land

The Future of Liquefied Natural Gas
What is liquefied natural gas (LNG)?
created by cooling natural gas to -162°C, which transforms it into a liquid.
can be transported more easily as is takes up 600 times less space.
enables transport to customers worldwide
- Natural gas will be the 2nd leading fossil fuel by 2035
- Increasing demand from Europe and Asia
- Expected that the portion of natural gas contributed by LNG will increase to meet global demands
Reference list
Statement of Cashflows - Key Differences
Woodside
Santos
Operating activities:
Receipts from customers increasing
Largest expense is payment to suppliers/employees
Increased net cash
Investing Activities:
Oil & gas assets is largest investment in fracking
Increased acquisition and disposals of eqipment
Net cash deficits increased significantly
Financial Activities:
Drawdown of borrowings increased
Decrease in repayments of borrowings
Combination of both caused net cash increase
Cash at end of period declined
Natural Gas
Liquefied Natural Gas (LNG)
Floating Liquefied Natural Gas (FLNG)
Dry Gas
Concentrates and Oil
Arsov, I., Shanahan, B., & Williams, T. "Funding the Australian Resources Investment Boom."
Bulletin
, March 6.

Australian Government.
Petroleum Resource Rent Tax Assessment Amendment Act 2012
. ComLaw. http://www.comlaw.gov.au/Details/C2012A00018/Repeals

Bishop, J., Kent, C., Plumb, M., & Rayner, V. 2013. " Resources Boom and the Australian Economy: A sectorial Analysis."
The Bulletin,
March 5. http://www.rba.gov.au/publications/bulletin/2013/Mar/5.html

EY. 2013. "Global Oil and Gas Capital Expenditures Rise Despite Decline in Profits." October 31. http://www.ey.com/GL/en/Newroom/News-releases

Filloon, M. 2014. "Key Ratios for Analysing Oil and Gas Stocks: Measuring Performanc."
Investopedia
. http://www.investopedia.com/university/

Gleeson-White, J. 2014. "Can Accountants Save the Planet?"
Financial Review,
October 25. http://www.afr.com/p/national/professional_services

Macdonald-Smith, A. 2014. "Woodside Pins Dividend hopes on Unexpected Tax Beneits."
Sydney Morning Herald
, January 17. http://www.smh.com.au/business

Meates, M. 2013. "Woodside supports chair for LNG Plant Construction Technology."
Curtin University,
February 26. http://news.curtin.edu.au/media-releases

Origin Energy. 2011. "The Journey of CSG to LNG." Youtube video, 2:52, November 8.

Page, A. 2011. "Financial Reporting in the Oil and Gas Industry: International Financial Reporting Standards."
Global Energy
, Utilities and Mining Leader, September. http://www.pwc.com/energy

Rennie, J., & Johnson, P. 2011. "Increasing Prevalance in Bond Insurance by the Mining Sector."
Frehills
, June 17. http://www.herbetsmithfreehills.com/-/media

Roddam, M. 2014. "Six Santos Dirctors Buy Company Stocks."
Business Spectator,
December 12. http://www.businessspectator.com.au/news/12/12/resources-and-
energy

Santos. 2014.
About Coal Seam Gas.
http://www.santos.com/coal-seam-gas/about-coal-seam-gas.aspx

Santos. 2014.
Sustainability Report 2013
. http://www.santos.com/library/Sustainability_Report_2013.pdf

Santos. 2014.
Annual Report 2013
. http://www.santos.com/library/Annual_Report_2013.pdf

Santos. 2012.
Annual Report 2011
. http://www.santos.com/library/Annual_Report_2011.pdf

Total. 2014.
Context/Overview
. http://www.total.com/en/energies-expertise/oil-gas/exploration-production/strategic-sectors/liquefied-natural-gas/challenges/contextoverview?%FFbw=kludge1%FF

Woodside. 2014.
Annual Report 2013
. http://www.woodside.com.au/Investors-Media/Announcements/Documents/19.02.14%20Annual%20Report%202013.pdf

Woodsied. 2012.
Annual Report 2011
. http://www.woodside.com.au/Investors-Media/Annual-Reports/Documents/Woodside%20Annual%20Report%202011.pdf

Woodside. 2014.
Sustainable Development Report 2013
. http://www.woodside.com.au/Our-Approach/Sustainable-Development/Documents/2013%20Sustainable%20Development%20Report.pdf

Weijermars, R. 2011. "Credit Ratings and Cash-Flow Analysis of Oil and Gas Companies: Competitive Disadvantage in Financing Cost for Smaller Companies in Tight Capital Markets."
SPE Economics & Management
, April 54 - 67. http://www.alboran.com/files/2013/07/EC-1


Operating activities:
Receipts from customers showed 50% increase in 2012 due to Pluto operations
Large loss due to disposal of oil and gas property
Net cash increase from 2011 - 2012 then relatively unchanged
Investing Activities:
Capital and exploration expenditure higher in 2011 due to Pluto project
2012 sale of Browse Joint Venture to Japanese (16%)
Financing Activities
Saw decline in 2013 due to dividend payment
Cash at end increased from end of 2011 due to Pluto project
Santos
Woodside
Social:
$20 million development fund - early childhood development.
Indigenous employment - 2.6% of the workforce.
Increased new contract awards with Indigenous enterprises.
Graduate recruitment- females 36% technical and 48% overall for 2014.
Women in management, graduate recruitment programs - 27% workforce.
$10 million worth of social
investment to host communities.

SUSTAINABILITY - WOODSIDE
Environment:
4 environment incidents in 2013
Paid $36 million for carbon emissions
2013 introduced a target zero flaring system for reduction of carbon emission
Secured access to spill response equipment
$100 million offset project - planted 25 million trees in NSW and WA
SUSTAINABILITY - WOODSIDE
Economic:
80% of 2013 annual capital spent on exploration, materials, goods and services was invested in Australia businesses and communities.
$1.5 billion royalties, excise and taxes to mostly Australian Government.
Full transcript