Santos completes US$1.3bn Australia LNG acquisition

Australian upstream operator Santos has completed the acquisition of ConocoPhillips’ northern Australia and Timor-Leste LNG assets for a reduced purchase price of US$1.265 billion and an increased contingent payment of US$200 million subject to a final investment decision (FID) on Barossa.

Due to recent market volatility and the deferral of Barossa final investment decision (FID), Santos and ConocoPhillips agreed to decrease the previously announced US$1.39 billion upfront payment at completion to US$1.265 billion and increase the contingent payment on Barossa FID from US$75 million to US$200 million.

At completion, the net settlement amount was US$655 million, lower than the previously forecast amount of US$800 million, comprising the revised firm purchase price of US$1.265 billion 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.

The acquisition delivers operatorship and control of a high-quality portfolio of low-cost, long-life natural gas assets and strategic LNG infrastructure. Santos’ interest in Bayu-Undan and Darwin LNG increases to 68.4% 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%.

The purchase price at completion was fully-funded from available cash together with US$750 million of new two-year acquisition debt. The reduced purchase price on completion has a favorable impact on net debt and gearing, with net debt at completion estimated at US$3.75 billion and gearing at approximately 32%. Post-completion, Santos’ balance sheet remains in a strong position with the liquidity of US$3.1 billion, comprising cash of US$1.2 billion and committed undrawn debt facilities of US$1.9 billion.

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.

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.

Credit Suisse (Australia) Limited and J.B. North & Co. acted as financial advisors to Santos and Allens acted as legal advisor to Santos.