Santos’ coal seam gas LNG project is now valued at $4.3 billion after the decision yesterday to sell 15% to French oil major Total.
Santos revealed the deal after trading in its shares was briefly halted to allow the statement to be made.
At the same time the other partner, Petronas, the Malaysian national oil group, sold a separate 5% to Total, giving the French group a total stake of 20% in the big Queensland project.
Petronas will hold a 35% stake and Santos will hold a 45% stake after the stake sales.
Total has also committed to taking 1.5 million tonnes (mpta) of Gladstone LNG’s (GLNG) output a year for 20 years from 2014, while Santos and Petronas have also renegotiated their deal, with Petronas committing to taking 3.5 mtpa.
All up, the Santos project now has off-take agreements for 5 mtpa, or about 70% of the output from a two-train (production) project.
The estimated cost of this project is around $7.7 billion, meaning Santos will be up for around $3.5 billion for its share.
It also has to cover the 13.5% cost of the $US15 billion PNG LNG project now starting up (Oil Search has a 29% stake in the project as well, which is being led by Exxon Mobil).
The market’s initial response to the announcement was to push Santos’ share price down almost 6% because Petronas bought 40% for around $2.6 billion, which gives the project a value of well over $6 billion.
Santos’ shares fell 5.8%, or 80c, to $12.95.
As Santos will also no longer receive extra payments from Petronas if and when a final investment decision to approve expansion to the project is made, there’s a feeling in the market that Santos might have to raise a further $1 billion or more in new capital.
It already raised $3 billion in a huge equity issue in 2009.
Santos said that it will use the proceeds of the Total deal to fund growth projects and for general corporate purposes.
GLNG will produce LNG using coal seam gas sources from the Bowen and Surat Basins fields in Queensland and first production from the project is expected in 2014.
Santos managing director David Knox said the deal with Total was a landmark agreement for the Australian LNG industry.
"We are pleased to welcome Total into the GLNG project as a fully integrated joint venture partner," Mr Knox said in yesterday’s statement.
Total is one of the world’s largest LNG producers with interests in eight producing LNG projects and one under construction.
It also has an interest in the Inpex-led Icthys LNG project offshore in Western Australia’s Browse Basin.
Santos said that the GLNG joint venture remained "in detailed ongoing discussions with a number of Asian parties in relation to further potential LNG sales and equity in the project".
"These parties include KOGAS (Korea Gas), the world’s largest LNG buyer," Santos said.
Santos said it will retain its current role as GLNG upstream operator of the coal seam gas fields.
"The existing GLNG joint operating company will continue to operate the pipeline and LNG plant. Total will have the opportunity to second staff into the GLNG project," the statement said.
Media reports have speculated that Korea Gas, Royal Dutch Shell and China’s Sinopec were interested in buying a stake in GLNG.
And another mid-tier Australian resources company is being snapped up by a North American miner.
Anatolia Minerals Development has agreed to buy Avoca Resources Ltd for $C1.01 billion in an all share deal.
The deal was announced to the ASX yesterday.
It failed to win over investors with Avoca shares easing 6c, or 1.8% to $3.28, in a market that was up on the day.
Anatolia has a gold mine in Turkey, and is based in the US state of Colorado, but is listed on the Toronto Stock Exchange.
The move follows the agreed $A3.8 billion cash offer from Goldcorp of Canada for Andean Resources, an Australian-Canadian listed stock run from the US.
Andean shares continued to fall yesterday, losing another 15c or 2.3% to $6.36.
In a joint statement, Anatolia and Avoca said the combined company would be called Alacer Gold Corp and have a combined market capitalisation of about $US2 billion or $A2.2 billion.
Both boards said they would be recommending the proposed merger to their shareholders, in the absence of a superior proposal. Anatolia has its main operations in Turkey.
Avoca’s managing director Rohan Williams said shareholders would benefit from greater access to capital and increased liquidity.
"This merger clearly offers value creation and return potential exceeding that offered by Avoca and Anatolia as individual companies," he said.
Anatolia will pay 0.4453 of a share for each Avoca share.
The bid is about 9% more than Avoca’s closing price in Sydney on Wednesday of $3.34, so it’s a skinny premium.
The companies say their combined gold production will be 600,000 ounces in 2013 and 800,000 ounces in 2015.
Total gold reserves will be 3.5 million ounces and gold resources will be almost 15 million ounces.
Pala Investments Holdings, the largest shareholder of Avoca
