Santos is making its exit offshore Victoria after entering a deal with Cooper Energy to sell its South Australian natural gas assets for US$62.5 million (AU$82 million).
 |
|
Image from Santos. |
The agreeement is subject to regulatory approvals and is expected to clsoe in early 2017.
Cooper will receive 50% interest in the Casino-Henry gas project; 50% interest in the Sole gas field and the Orbost gas plant; 10% interest in the Minerva gas field and gas plant; and 100% interest in the Patricia-Baleen gas field.
Santos’ share of production from these assets in 1H 2016 was 5.2 PJ of gas sales.
The total cash consideration comprises of $47 million (AU$62 million) at completion and $15 million (AU$20 million) upon the final investment decision (FID) on the Sole gas project.
The sale is in line with Santos’ objective to rationalize and shape asset portfolio in order to become a low cost, reliable and high performance business, new CEO Kevin Gallagher said.
In March 2016, Santos completed the sale of its 35% non-operated interest in the Kipper gas field in the Gippsland Basin, offshore Victoria to Mitsui E&P Australia for $396 million (AU$520 million). The firm announced a heavy 1H 2016 loss of $1.1 billion in August, driven by impairment charge on its liquefied natural gas facility in Queensland.
Value-adding step for Cooper
Completion of the acquisition will give Cooper substantial uplift in its production, reserves and establish a multi-basin gas supply business in southeast Australia, consistent with the company’s gas strategy.
It will become a supplier to the southeast Australia gas market and diversify revenue mix away from its historical reliance on oil. Gas produced from the Victorian gas assets sold under long term contracts generating stable cash flows is expected to account for the majority of the company’s annual production.
It will increase the group’s Australian production by a multiple of 3.9 times in FY17 to 1 MMboe, and result in an increase in Australian 2P reserves from 1.3-11.6 MMboe.
Cooper will acquire an equity share of 45 PJ of uncontracted gas 2P reserves in the Casino Henry gas project, which is currently producing and connected to the SEA Gas pipeline via the Iona gas plant.
Acquisition of the remaining 50% of Sole will add a further 121 PJ of gas 2C contingent resources. In total, it is expected to result in Cooper having total gas 2P reserves of 54 PJ and 2C contingent resources of 381 PJ in the Otway and Gippsland basins.
“The acquisition of Santos’ Victorian gas assets is a logical and value-adding step to accelerate our gas strategy” said David Maxwell, managing director, Cooper. “The transaction will transform Cooper by substantially increasing our production, further enhancing our gas reserves and resources for supply to southeast Australia and adding proven technical and project expertise.
“In the near term, Cooper will be repositioned within the oil and gas sector with a fourfold lift in its Australian production and nine-fold increase in Australian 2P reserves. Cooper will shift to over 85% of total production being sourced from gas sold under stable long term contracts,” he added.
The company will continue to offer employment to Santos employees who currently operate the Victorian gas assets. This includes the engineering and project staff who have managed the Sole gas project front end engineering and design work, and who are assisting Cooper reach FID for the project.
Cooper said it will approach the Casino-Henry joint venture partners, AWE and Mitsui, for their approval to be the operator of the Casino-Henry project. Additionally, it will approach relevant regulators for approval to become the operator of the Casino-Henry, Sole and Patricia Baleen projects where Santos is the operator currently.
Subscribe
