3rd UPDATE: Santos To Raise Up To A$3 Billion For LNG Growth Drive
May 11 2009 - 1:00AM
Dow Jones News
Santos Ltd. (STO.AU) said Monday it plans to raise up to A$3
billion from a deeply discounted equity raising and may sell a
stake in its Gladstone liquefied natural gas project to help fund
its gas export strategy.
Santos is already in a strong cash position, having sold 40% of
its planned LNG processing plant at Gladstone in Queensland state
to Malaysia's Petroliam Nasional Bhd. (PET.YY), or Petronas, in May
last year for up to US$2.51 billion.
But a steep fall in the oil price is putting pressure on energy
company's balance sheets and Santos also has to help fund the
construction of the US$16 billion-plus Exxon Mobil Corp.-led (XOM)
PNG LNG project in Papua New Guinea.
The Adelaide-based oil and gas producer said it will raise a
minimum A$1.65 billion from an underwritten institutional component
of an equity raising, and may raise up to A$1.35 billion from a
non-underwritten retail component. Shares are being issued at
A$12.50 per share, which is a 27% discount to Friday's close at
A$17.09.
An analyst from a large international investment bank, who
wished to remain anonymous, said that the larger-than-expected
discount will increase the size of the raising's take-up, and could
be designed to prevent Santos from having to return to the equity
market for funding.
The raising also follows a two-month rally in Australian shares,
fueled by hopes the global economy has bottomed, that has prompted
other companies like real estate investment trust GPT Group
(GPT.AU) to tap the market for capital.
Santos' raising, however, has much to do with meeting imminent
capital-intensive commitments and the company is fortunate that its
stock has risen to the occasion.
Non-recourse project financing for PNG LNG is currently about
70% complete at US$11.5 billion and Santos has to guarantee its
US$1.6 billion share while maintaining a BBB+ credit rating, all by
the fourth quarter of this year when a final investment decision is
due to be made on the project.
PNG LNG, in which Santos currently has a 17.7% stake, will get
A$1.05 billion of the raised funds, while another A$600 million
will go towards redeeming some hybrid securities, called FUELS, by
a Sept. 30 deadline.
The up to A$1.35 billion left over will be used to fund "other
growth projects", including the multibillion dollar Gladstone LNG
project, Santos said.
Santos said it's on track to make a final investment decision on
Gladstone LNG in the first half of next year and is currently
trying to find LNG customers. Analysts say it could have a tough
time, given that the LNG market is still suffering despite
tentative signs of global economic recovery.
In a positive sign, Santos said Monday that marketing
discussions are "at a reasonably advanced stage."
"Santos may, in combination with an offtake agreement, sell a
further minority interest in the project," it said.
Chief Executive David Knox said in February that Santos could
sell up to 9% of Gladstone LNG without permission from partner
Petronas and Citigroup analysts have already flagged that they
expect a further equity sale.
The PNG LNG and Gladstone LNG projects are two of nearly a dozen
planned LNG facilities in the Asia Pacific region. Their
construction is premised on supplying fuel-strapped Asian customers
nearby with gas. PNG LNG is making better progress, having already
agreed to an offtake deal with a large Chinese customer, and is
considered by most analysts as a frontrunner alongside the Chevron
Corp.-operated (CVX) Gorgon LNG project offshore Western Australia
state.
Santos on Monday also reiterated its 2009 production guidance of
53 million-56 million barrels of oil equivalent and said it intends
to maintain its 2009 per-share dividend in line with 2008 which was
42 cents.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
ross.kelly@dowjones.com
Oil Search (ASX:OSH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Oil Search (ASX:OSH)
Historical Stock Chart
From Jul 2023 to Jul 2024