(Bloomberg) -- Santos Ltd. is seeking to raise A$3 billion ($2.3 billion) from a share sale to fund its portion of Exxon Mobil Corp.’s liquefied natural gas venture in Papua New Guinea, the largest investment in the Pacific nation.
Santos is offering investors two shares for every five they own at A$12.50 apiece, 27 percent below the last traded price of A$17.09, the Adelaide-based company said in a statement to the Australian stock exchange today. It would be the country’s largest share sale since National Australia Bank Ltd. raised A$3 billion in November.
Australia’s third-biggest oil and gas producer will use A$1.05 billion of the sale proceeds to fund spending at the $12.5 billion Exxon-led project. Santos expects a “step- change” in production in 2014 once the Papua New Guinea venture and a proposed gas-export project in Queensland with Petroliam Nasional Bhd. come online, it said May 6.
“Exxon putting their horsepower behind it makes this a very good project to be involved in,” said Peter Arden, a Melbourne-based analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. “It will be a stepping stone for Santos; it will help get them a lot of credibility.”
Of the stock on offer, A$1.65 billion for sale to institutional investors is fully underwritten. The A$1.35 billion retail portion of the sale isn’t underwritten, Santos said. Caliburn is advising Santos, while JPMorgan, Citigroup and Deutsche Bank are managing the sale, the Australian Financial Review reported earlier.
Queensland Project
Additional capital raised would fund other growth projects, which include a proposed LNG venture at Gladstone in Queensland with Petronas, as Kuala Lumpur-based Petroliam Nasional is known. Their A$7.7 billion venture is due to deliver its first LNG cargoes in 2014, Santos said today. It is one of five rival projects planning to convert gas extracted from coal seams into LNG for export to Asia.
“I think Gladstone is really going to stretch Santos funding-wise,” Arden of Ord Minnett said. “It is also a bit of a crowded space there, and it might be that not everyone gets their project up.”
Santos has gained 25 percent in the past six months in Sydney, compared with the 0.5 percent decline in the local benchmark index.
LNG is natural gas that has been chilled to liquid form for transportation by ship to destinations not connected by pipeline.
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