santos in asset disposal mode 2112332015
Investors worry that Santos may have to sell a family jewel like its PNG LNG stake
Oil and gas producer Santos Ltd (ASX:STO) is going full ahead with plans to jettison assets and thereby try to avoid a fresh issue of capital that would damage its already weak share price. The company is now setting up data rooms to cater to potential suitors, said to be both domestic and offshore, looking for bargains among its oil and gas assets.
The company’s shares are down to 15-year low prices and have lost approximately AU$10 billion in value over the last year.
The relentless haemorrhage in the share price finally drove executive chairman Peter Coates to look for a replacement for chief executive David Knox, and to personally steer a drive to restore share values, even resorting to asset sales if necessary.
According to The Australian, Santos has received serious indications of interest for assets worth over AU$1 billion, and is looking to announce one or more deals by the end of the month. There is flexibility over the transactions – these could range from taking on board a strategic investor, a hybrid capital issue or even mezzanine financing.
An equity rights issue is said to be the course of last resort, according to the AFR.
Potential suitors are said to be eyeing Santos’ assets in Papua New Guinea (PNG), McArthur Basin or the Cooper Basin, while Deutsche Bank and Lazard are providing evaluation and sales management support.
Santos’ stake in the highly successful Exxon-operated PNG LNG plant is said to be one of its most attractive assets, while buyers are still interested in its West Australian and Northern Territory assets.
Meanwhile, pressure is mounting on the Santos management as crude oil prices resumed their downward trend yesterday and Brent crude fell US$1.46 to US$48.15 a barrel at 4:13 p.m. on the London-based ICE Futures Europe Exchange. Overhanging supply from the North Sea and additional output from Nigeria will dampen prices, according to Bloomberg.
Santos Ltd (ASX:STO) last traded at AU$4.19 yesterday, down 4.34 per cent.
