Energy producer Santos has announced its second big acquisition in just over a year with the news yesterday that it will acquire ConocoPhillips’ Northern Australia assets for $US1.39 billion ($A2.05 billion).
The deal will see Santos acquire ConocoPhillips’ interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon. Santos said the deal will be fully funded from existing cash resources and a new committed debt facility.
The market gave the deal the thumbs up, sending Santos shares up 5.6% to $7.85, helped as well by the solid rise in global oil prices on Friday.
Investors liked the news that there would be no further share issues to help fund this latest deal.
“These assets are well known to Santos,” Mr. Gallagher said. “It also continues to strengthen our offshore operating and development expertise and capabilities to drive growth in offshore northern and Western Australia.”
The deal comes 15 months after it paid around $A2.9 billion for Quadrant Energy which allowed Santos to buy control of the huge Dorado oil and gas discovery on the Northwest Shelf of WA, the biggest oil strike in this country for two decades.
“Santos was a founding partner with ConocoPhillips in Darwin LNG, which has been operating since 2006. The acquisition of these assets fully aligns with Santos’ growth strategy to build on existing infrastructure positions while advancing our aim to be a leading regional LNG supplier,” Santos CEO, Kevin Gallagher said in yesterday’s statement.
The deal is expected to settle by the start of 2020 and will end market talk that the company was stalking Oil Search, which is a partner with Santos in the huge $20 billion PNG LNG project in Papua New Guinea.
Santos told the ASX that the acquisition will have an effective date of January 1, 2019.
“Santos will have the benefit of cash flows generated by the acquired business from the effective date with customary adjustments,” the company said.
Mr. Gallagher said Santos would sell down equity in Darwin LNG and Barossa to around 40% to 50% “to create alignment between joint venture participants as well as by optimising equity levels in our Western Australia assets.”
ConocoPhillips currently holds a 56.9% stake in Darwin LNG, with the other participants in the joint venture being Santos (11.5%), INPEX of Japan (11.4%), Eni of Italy (11.0%), JERA of Japan (6.1%) and Tokyo Gas (3.1%).
ConocoPhillips currently holds 37.5% of the Barossa Project, a gas and light condensate field located about 300 kilometres north of Darwin, with South Korea’s SK E&S Australia also holding a 37.5% share and Santos possessing the remaining 25% stake.
A final investment decision on developing Barossa is expected in early 2020, but analysts point out that the company would not have bought into the project and a controlling interest if the project was not heading for the green light.
