Australian energy company Santos has executed a binding sale agreement to deliver Papua New Guinea’s Kumul Petroleum Holdings a 2.6% participating interest in PNG LNG for a total purchase consideration comprising cash of $576 million and the assumption of ca. $160 million of project finance debt (the sale agreement).
Santos said the completion of the sale agreement is not subject to finance and is conditional only on the approval of the PNG competition regulator on or before 31 December 2023.
It further informed that Kumul has paid $80 million into escrow with Santos as part payment of the purchase consideration under the sale agreement and it has undertaken to make further pre-payments of the purchase consideration into escrow throughout the period up until completion.
Santos has also agreed to grant Kumul a call option to acquire a further 2.4% participating interest in PNG LNG for a cash purchase price of $524 million, plus a proportionate share of project finance debt. The call option must be exercised on or before 30 June 2024 and is subject to the completion of the sale agreement having occurred and the satisfaction of customary conditions, including necessary regulatory approvals and third-party consents, Santos noted.
Santos Managing Director and CEO Kevin Gallagher commented: “I am pleased we’ve reached a binding agreement with Kumul on the sale of up to 5% of PNG LNG. This re-structured transaction is a pragmatic solution that provides a clear pathway to completion and builds our strategic alignment with Kumul and our long friendship with PNG, where Santos has been a committed corporate citizen for over 40 years. PNG LNG is a low-cost and low emissions intensity asset that contributes strong cash flows to the project participants and economic and social benefits to the nation.”
Papua New Guinea’s Prime Minister James Marape said: “This transaction will increase Kumul’s interest in PNG LNG and supports the PNG government objectives for the people of PNG to have a greater equity interest in the development of their natural resources.”
To remind, the initial offer for a stake in PNG LNG was made in September 2022 and was extended a few times.