OTTAWA: Santos is understood to have drafted in Royal Bank of Canada to sell the company’s oil and gas assets in Asia, sources say. In the region, Santos owns a suite of non-core assets that caught the eye of a number of suitors almost two years ago when it embarked on a strategic review of its portfolio. Santos risked collapse in 2015 if it did not raise more equity and drive down debt, and it worked with Deutsche and Lazard to find a solution. It came out with a $3 billion equity raising following the review and sold a 7.9 per cent stake to Hony Capital. ENN and Hony now own 15.1 per cent of Santos and some bet that stake may be increased to as much as 19.9 per cent.
After the review, Santos also sold its Kipper offshore gas field in Victoria for $520 million. But while the Adelaide-based oil and gas producer opted to retain its Asian assets, they were popular among suitors like Blackstone’s Tamarind Energy, and the price range for the portfolio at the time was mooted at between $500m and $700m. In the portfolio is an oil and gas project off the coast of Indonesia, an exploration asset in Malaysia known as the Bestari oilfield and its Vietnam Chim Sao oilfield. The assets are among those that have since been placed in a separate non-core division under the watch of former AWE boss Bruce Clement. Santos’ oil producing assets in Western Australia also form part of that division, which has 23 non-core assets.
When the move was announced in December, chief executive Kevin Gallagher indicated it was part of a strategy to focus on the company’s five largest assets. The plan at the time was to squeeze extra value out of those if they were not instead sold. Santos is a shareholder in the Gladstone Liquefied Natural Gas plant in Queensland, which sources gas from a range of suppliers, including Santos’s Horizon contract. Some have questioned whether Santos has faced pressure to meet its Horizon gas contract commitments to GLNG. The company has been forced to defend itself to politicians in Canberra over its gas exports as the rising gas price has triggered higher domestic electricity costs.