Oz Santos Closes Conoco Deal at Reduced Upfront Price
Santos has completed the acquisition of ConocoPhillips' northern Australia and Timor-Leste assets for a reduced purchase price of US$1.265bn plus an increased contingent payment of US$200mn subject to a final investment decision (FID) on Barossa, it said on May 28.
“Due to recent market volatility and the deferral of Barossa FID, Santos and ConocoPhillips agreed to decrease the previously announced US$1.39bn upfront payment at completion to US$1.265bn and increase the contingent payment on Barossa FID from US$75mn to US$200mn,” Santos said.
At completion, the net settlement amount was US$655mn, lower than the previously forecast amount of US$800mn comprising the revised firm purchase price of US$1.265bn less cash in the acquired business from the effective date of 1 January 2019 to completion with customary adjustments, Santos. The net settlement amount is before any sell-downs of interests owned by Santos in the acquired assets.
With the acquisition, Santos' interest in Bayu-Undan and Darwin LNG now increases to 68.4% at completion. Santos' interest in the Barossa project to backfill Darwin LNG increases to 62.5%.
"As a foundation partner in Bayu-Undan and Darwin LNG, and an existing partner in Barossa, we know these assets well. 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," Santos CEO Kevin Gallagher said.
The purchase price at completion was fully-funded from available cash together with US$750mn 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 US$3.75bn and gearing at approximately 32%. Post-completion, Santos' balance sheet remains in a strong position with liquidity of US$3.1bn, comprising cash of US$1.2bn and committed undrawn debt facilities of US$1.9bn,” the company said.
Santos has previously announced an agreement to sell a 25% interest in Darwin LNG and Bayu-Undan to SK E&S for US$390 million and the signing of a letter of intent to sell a 12.5% interest in Barossa to Jera.
"Santos continues to build alignment between the Darwin LNG and Barossa joint ventures. Following completion of the previously announced sell-downs to SK E&S and Jera, Santos will hold a 43.4% interest in Darwin LNG and a 50% interest in Barossa," Gallagher said.
Santos is continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with its previously stated target ownership level of around 40% to achieve increased partner alignment and prudent future allocation of growth capital. “We are also in discussions with buyers for Barossa LNG volumes,” Gallagher 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.