Australia’s Santos plans non-core asset sales to cut debt by $1.5 billion

Australian LNG player Santos on Thursday revealed a plan that involves selling off its non-core assets as it is aiming to cut net debt by US$ 1.5 billion within three years.

Santos said it will focus on five core, long-life natural gas assets including its GLNG project in Queensland, Papua New Guinea, Cooper Basin, Northern Australia and Western Australia Gas.

The remaining assets, including stakes in Indonesia and Vietnam, will be packaged and run separately as a standalone business.

Santos has appointed Bruce Clement, previously CEO of AWE Limited, as vice president to run the new business.

Santos announcement comes just days after Australia’s Origin Energy revealed plans to divest its conventional oil and gas assets via initial public offering to cut debt.

“Santos will target a US$1.5 billion reduction in net debt to less than US$3 billion by the end of 2019 through increased operating cash flow and releasing capital through non-core asset and infrastructure sales,” the company said in its statement.

Kevin Gallagher, who started as new managing director and CEO of Santos in February, said that the company has already reduced costs to generate free cash flow at an oil price of $39 per barrel, down from US$47 per barrel at the start of the year.

“Capital expenditure and upstream unit production costs have been reduced by 53% and 17% respectively, headcount has been reduced by more than 500 positions, and the business has been free cash flow positive for each of the last seven months.”

Gallaher also said that 2016 sales volumes are expected to be at the top end of the 81-83 mmboe guidance range and upstream unit production costs below $9/boe. Production is expected to
be in the top half of the 60-62 mmboe guidance range.

LNG World News Staff