Santos cancels EU debt issue on tumbling oil prices

Australian oil and gas company Santos has cancelled its plans to raise funds through a European hybrid issue.

The company had revealed its plans of a possible 50% equity credit European hybrid issue, depending on acceptable market conditions, during its Investors Seminar last week. During the presentation, Santos said that new funds would enable it to refinance existing debt, and improve liquidity.

However, in a statement issued today, Santos said that since its November presentation, the oil market has experienced substantial volatility following OPEC’s announcement that it would maintain existing production levels. Crude oil prices fell around 40 percent since June.

As a response, Santos has chosen to suspend any hybrid issuance “until market conditions are more conducive to issuing such instruments.”

According to the Business Spectator, which described the company’s decision as a wise one, Santos was looking to raise around $700 million.

Andrew Seaton, Santos Chief Financial Officer, said the potential hybrid issuance was always about proactive capital management and the company had flexibility in the timing of any issue.

“Santos has a robust existing funding position, including approximately A$2 billion in available liquidity,” Seaton said.

In its investor presentation in November, Santos said that the expenditure forecast for 2014 remained unchanged at $3.5 billion, but added that the 2015 would decrease to 2.7 billion as LNG projects are completed.

In today’s announcement Seaton said: “In addition, given the current oil price environment, it is prudent for the company to review its spending plans for 2015 and we expect to significantly reduce capital and operating expenditure.“

Offshore Energy Today Staff