Energy company, Santos, has secured control of a portfolio of long-life natural gas assets and strategic LNG infrastructure in Northern Australia and Timor-Leste as part of a major deal announced today.
Santos has completed the acquisition of ConocoPhillips's assets for a reduced purchase price of $1.265 billion USD plus an increased contingent payment of $200 million USD subject to Final Investment Decision (FID) on Barossa.
Due to recent market volatility and the deferral of Barossa FID, Santos and ConocoPhillips agreed to decrease the previously announced $1.39 billion USD upfront payment at completion to $1.265 billion USD and increase the contingent payment on Barossa FID from $75 million USD to $200 million USD.
At completion, the net settlement amount was $655 million USD, lower than the previously forecast amount of $800 million USD, comprising the revised firm purchase price of $1.265 billion USD less cash in the acquired business from the effective date of 1 January 2019 to completion with customary adjustments. The net settlement amount is before any sell-downs of interests owned by Santos in the acquired assets.
Santos’ interest in Bayu-Undan and Darwin LNG increases to 68.4 per cent at completion and will provide a significant boost to 2020 production and cash flows. Santos’ interest in the Barossa project to backfill Darwin LNG increases to 62.5 per cent.
Santos Managing Director and Chief Executive Officer, Kevin Gallagher, said he was pleased to complete the acquisition which is fully-aligned with Santos’ strategy to build on existing infrastructure positions around Santos’ core assets.
“As a foundation partner in Bayu-Undan and Darwin LNG, and an existing partner in Barossa, we know these assets well," said Gallagher.
"We are delighted to assume operatorship and continue to progress the Barossa project so that a final investment decision can be made when market conditions permit.
“We welcome the ConocoPhillips’ Australia-West employees to Santos and look forward to getting on with the process of integrating our two businesses to create one high performing team," he said.
The purchase price at completion was fully-funded from available cash together with $750 million USD of new two-year acquisition debt. The reduced purchase price on completion has a favourable impact on net debt and gearing, with net debt at completion estimated at $3.75 billion USD and gearing at approximately 32 per cent. Post-completion, Santos’ balance sheet remains in a strong position with liquidity of $3.1 billion USD, comprising cash of $1.2 billion USD and committed undrawn debt facilities of $1.9 billion USD.
Santos has previously announced an agreement to sell a 25 per cent interest in Darwin LNG and Bayu-Undan to SK E&S for $390 million USD and the signing of a letter of intent to sell a 12.5 per cent interest in Barossa to JERA.
“Santos continues to build alignment between the Darwin LNG and Barossa joint ventures," said Gallagher.
"Following completion of the previously announced sell-downs to SK E&S and JERA, Santos will hold a 43.4 per cent interest in Darwin LNG and a 50 per cent interest in Barossa.
“We are continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with our previously stated target ownership level of around 40 per cent to achieve increased partner alignment and prudent future allocation of growth capital.
"We are also in discussions with buyers for Barossa LNG volumes," he said.
The sale of interests in Bayu-Undan and Darwin LNG to SK E&S, and in Barossa to JERA, are subject to third-party consents, regulatory approvals and an FID decision on Barossa.
(Image: Santos Managing Director and CEO, Kevin Gallagher.)