Santos (ASX:STO) aquires ConocoPhillips' northern Australia assets

Santos (ASX:STO) aquires ConocoPhillips' northern Australia assets

Santos (ASX:STO) aquires ConocoPhillips' northern Australia assets

ConocoPhillips (NYSE:COP) said it will sell most of its Australia business, including gas fields, and processing plant in north Australia for $1.4 billion to the Australian firm Santos Ltd (OTCMKTS:SSLZY) as the Houston oil and gas producer continues to shift its focus back to North America.

In addition to this, ConocoPhillips claims that it will also receive a payment of $75 million upon the final investment decision (FID) for the Barossa development project.

As part of the sale, Santos will majority owner and operator of the Darwin LNG facility, located in Darwin Harbor in the Northern Territory, as well as the Bayu-Undan gas field in the Timor Sea, 500 km (310.6 mi) northwest of the Darwin facility, and the subsea Bayu-Darwin pipeline that connects the field to the facility.

ConocoPhillips now holds 37.5% of the Barossa Project, a gas and light condensate field located about 300 kilometres north of Darwin, with South Korea's SK E&S Australia also holding a 37.5% share and Santos possessing the remaining 25% stake.

Bloomberg reported that Santos and Conoco's northern Australia assets produced about 94 million barrels of oil equivalent previous year, compared to Woodside Petroleum Ltd's (OTCMKTS:WOPEY) 91.4 million.

Santos, which posted its biggest share gain this year, said it would fund the acquisition from existing cash and $750 million in new two-year debt.

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"As we have demonstrated following the acquisition and integration of Quadrant Energy into our offshore business, Santos' low-priced operating model is creating opportunities for disciplined growth across Australia". Conoco completed the sale of its stake in the Greater Sunrise field to Timor-Leste's government for $350 million earlier this year, and the Santos deal will free up capital to invest in US shale and return cash to shareholders, two of its priorities in recent years.

The company is also in talks with the facility's joint venture partners, which include Inpex Corp, Tokyo Gas Co. Santos will target ownership stakes in both the assets of 40%-50%.

ConocoPhillips now holds a 56.9% stake in Darwin LNG, with the other participants in the joint venture being Santos (11.5%), INPEX of Japan (11.4%), Eni of Italy (11.0%), JERA of Japan (6.1%) and Tokyo Gas (3.1%).

"What we're seeking is alignment", said Gallagher on a media call. Santos said it is in discussions with existing Darwin LNG joint venture partners to sell equity in Barossa and further equity in Darwin, having already reached a preliminary agreement to sell down a 25% stake in Darwin LNG to Barossa partner SK E&S. Plans are in place to increase that capacity to 10 mtpa.

The market gave the deal the thumbs up, sending Santos shares up 5.6% to $7.85, helped as well by the solid rise in global oil prices on Friday. Darwin, which came on stream in 2006, produces 3.7 mtpa of LNG and is the second-oldest of Australia's 10 LNG plants.

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