14/10/2019 - 10:01

Santos buys out Conoco in northern Aus for $2.1bn

14/10/2019 - 10:01

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Santos has struck a deal to pay up to $US1.44 billion ($A2.12 billion) for ConocoPhillips' interests in northern Australia, including its majority stake in the Darwin LNG plant and its interest in three major gas fields off the coast of Western Australia and the Northern Territory.

Santos buys out Conoco in northern Aus for $2.1bn
Kevin Gallagher says Santos will sell down equity in Darwin LNG and Barossa to between 40 and 50 per cent.

Santos has struck a deal to pay up to $US1.44 billion ($A2.12 billion) for ConocoPhillips' interests in northern Australia, including its majority stake in the Darwin LNG plant and its interest in three major gas fields off the coast of Western Australia and the Northern Territory.

The assets it has acquired have reserves of around 39 million barrels of oil equivalent.

Santos said it would pay $US1.39 billion up front for Conoco’s operating interests in the Darwin LNG, Bayu-Undan, Barossa and Poseidon gas assets, with a further $75 million contingent on a final investment decision on Barossa.

A final investment decision on developing Barossa is expected in early 2020, according to Santos.

ConocoPhillips currently holds a 56.9 per cent stake in Darwin LNG, with the other participants in the joint venture being Santos (11.5 per cent), INPEX (11.4 per cent), Eni (11.0 per cent), JERA (6.1 per cent) and Tokyo Gas (3.1 per cent).

ConocoPhillips has a 37.5 per cent stake in the Barossa Project, with South Korea's SK E&S Australia also holding a 37.5 per cent share and Santos possessing the remaining 25 per cent stake.

The deal is set for completion by January.

Santos managing director Kevin Gallagher said the acquisitions continued its strategy to strengthen its offshore operating and development expertise and capabilities to drive growth in offshore NT and WA.

He said Santos would sell down equity in Darwin LNG and Barossa to between 40 and 50 per cent, to create alignment between joint venture participants as well as by optimising equity levels in the company's WA assets.

“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,” Mr Gallagher said.

Wood Mackenzie senior analyst David Low it was a logical and attractive transaction for a number of reasons.

"It consolidates existing equity participation across the Barossa, Bayu-Undan and Darwin LNG assets," he said.

"The deal will now act as a catalyst for further alignment of equity across the three projects. South Korea’s SK E&S is expected to make the first move and acquire 25% in Bayu-Undan and Darwin LNG.

"Gaining equity alignment across the Barossa project and the Darwin LNG plant would remove a key hurdle for taking FID on the Barossa project."

The sale covers current production of 50,000 barrels of oil equivalent a day and proven reserves of 39 million BOE.

Santos was one of the best performers on the ASX 200 following the news, up 6.5 per cent to trade at $7.91 each at noon AEST.

 

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