Photo: Barossa field; Source: ConocoPhillips

ConocoPhillips closes sale of northern Australia assets to Santos

ConocoPhillips has completed the sale of its subsidiaries that hold its northern Australia and Timor-Leste assets and operations to Santos.

The two energy giants entered into an agreement for the sale of ConocoPhillips’ assets for $1.39 billion-plus contingent payments in October 2019.

The deal included operating interests in Darwin LNG, Bayu-Undan field, and Barossa and Poseidon projects.

Apart from the $1.39 billion to be paid, it was also agreed that Santos might also pay a $75 million contingent payment subject to FID on the Barossa development.

Announcing the completion of the acquisition on Wednesday, ConocoPhillips said that the total consideration for the sale was unchanged.

However, in connection with the closing, ConocoPhillips and Santos agreed to restructure the payments such that $125 million of the originally announced $1.39 billion upfront cash payment would be allocated toward a payment due upon final investment decision of the proposed Barossa development project.

This brings the total due to ConocoPhillips upon a final investment decision to $200 million.

ConocoPhillips said it has received net cash proceeds of approximately $765 million in the current quarter, which are expected to be used for general corporate purposes.

Production associated with the assets being sold averaged approximately 46 thousand barrels of oil equivalent per day (MBOED) for the first three months of 2020 and proved reserves were approximately 17 million barrels of oil equivalent (BOE) at year-end 2019.

Barossa FID deferral

In a separate statement on Wednesday, Santos explained that the increase of the contingent payment on Barossa FID from $75 million to $200 million was made due to recent market volatility and the deferral of Barossa FID.

Namely, Santos back in March deferred the FID on Barossa “until business conditions improve” due to the uncertain economic impact of COVID-19 combined with the lower oil price.

Santos has previously announced an agreement to sell a 25 per cent interest in Darwin LNG and Bayu-Undan to SK E&S for $390 million and the signing of a letter of intent to sell a 12.5 per cent interest in Barossa to JERA.

Following the completion of these deals, Santos will hold a 43.4 per cent interest in Darwin LNG and a 50 per cent interest in Barossa.

Santos Managing Director and Chief Executive Officer, Kevin Gallagher, said: “We are continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with our previously stated target ownership level of around 40 per cent to achieve increased partner alignment and prudent future allocation of growth capital. We are also in discussions with buyers for Barossa LNG volumes“.