Santos Offers The Best Leverage To A 2015 Oil Price Recovery
Da Shi Research
Da Shi Research
Santos Limited: Riding High On Exxon Mobil's Extremely Successful Papua New Guinea LNG Project
Michael Fitzsimmons • 18 Comments
Michael Fitzsimmons • 18 Comments
Thu, Mar. 24, 10:32 AM
- Chinese gas distributor ENN will become the top shareholder in Australian gas producer Santos (OTCPK:STOSF) after agreeing to buy an 11.7% stake for ~$750M, as it seeks to ease its dependence on China's state-owned giants for supply.
- ENN is effectively paying A$4.84/share, based on yesterday's exchange rate, a 23% premium to Santos' last close.
- Santos is one of the many companies that have been under pressure to shore up their balance sheets in response to lower energy prices, and the transaction could be a prelude to a takeover, Bernstein analyst Neil Beveridge says.
Fri, Feb. 19, 9:55 AM
- New Santos (OTCPK:STOSF) CEO Kevin Gallagher promises more cost cuts after the Australian oil and gas producer posted a FY 2015 net loss of A$2.7B (US$1.93B), compared with a loss of A$935M a year earlier; excluding one-time items, profit fell 91% to A$50M from A$533M the previous year.
- The result includes A$2.76B in impairment charges, largely against the carrying value on its books of gas-producing assets in Australia’s Cooper Basin but also for the just-recently operational Gladstone LNG plant on Australia’s east coast.
- Santos says it continues to target production of 57M-63M barrels for 2016, but cuts planned capital spending on exploration and other areas by 34% to A$1.1B after spending A$1.66B last year.
- Santos also cuts its proved and probable reserves by 24%, which a Goldman Sachs analyst calls a "major concern” that may show the start of a “deck-clearing" phase from the new CEO.
- Earlier: Woodside Petroleum's full-year net profit plunges by 99% (Feb. 17)
Fri, Jan. 22, 8:59 AM
- Australian energy company Santos (OTCPK:STOSF), whose shares are at 23-year lows, says it is looking for more ways to cut costs to help overcome weak crude oil prices after cutting capital spending more than expected in 2015.
- Santos says its moves to raise A$3.5B (US$2.5B) by selling assets and new shares have strengthened its balance sheet, despite investor concerns that its dividend may be at risk if oil prices do not rebound soon.
- Santos says it spent A$1.66B on existing projects and new developments in 2015, lower than its reduced annual capex target of A$1.8B and 54% lower than a year earlier.
- Santos says FY 2015 sales revenue fell 20% Y/Y to A$3.2B, slightly below analysts' forecasts at A$3.3B.
Dec. 7, 2015, 10:27 PM
- Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) says it is abandoning its A$11.64B (US$8.46B) offer for Oil Search (OTCPK:OISHF), sending shares in the latter tumbling as much as 18% in Sydney trading.
- Woodside CEO Peter Coleman had sought a stake in Papua New Guinea’s liquefied natural gas industry, as projects there are seen as less costly than developments elsewhere and economically viable even after the oil price plunge.
- “Given the fall-off in crude pricing, it’s difficult to see Woodside raising the offer in this environment," Bernstein's Neil Beveridge tells Bloomberg. “M&A will come when companies are confident we’re at the bottom of the cycle. This signals that Woodside isn’t confident that we’re quite there yet.”
- Oil Search, which owns 29% of Exxon’s PNG LNG project, reiterates that Woodside proposal “grossly undervalued” the company; shares of Santos (OTCPK:STOSF), which also has a stake in PNG LNG, falls as much as 15% in Sydney.
Nov. 9, 2015, 8:42 AM
- Australian energy company Santos (OTCPK:STOSF) says it will sell a stake in a gas field, issue new shares and bring on board Chinese P-E firm Hony Capital as a key investor as part of efforts to raise A$3.5B (US$2.46 billion).
- Santos also says Kevin Gallagher, CEO of Australian engineering contractor Clough Ltd., will succeed David Knox as its new CEO and managing director.
- The initiative aims to raise money to bring down Santos' net debt to ~40% of equity from 89% as of June, WSJ reports, but more asset sales might be worthwhile; by holding on to more properties, Santos is making a risky bet that oil prices will recover.
- Earlier: Bloomberg: Santos gets $1.1B offer for Australian gas fields (Oct. 27)
Oct. 27, 2015, 8:17 AM
- Santos (OTCPK:STOSF), which last week rejected a US$5.15B takeover offer, has received a ~US$1.1B bid (A$1.5B) from Quadrant Energy for oil and gas fields in Western Australia that the companies jointly own, Bloomberg reports.
- Santos’ Western Australian assets, located in the Carnarvon Basin, accounted for 24% of its production last year.
- Separately, Japanese trading house Marubeni (OTC:MARUF) is in talks to buy 3.6% of Exxon Mobil's (NYSE:XOM) Papua New Guinea liquefied natural gas plant from Santos for more than A$1B, according to the same report.
- Santos owns 13.5% of the $19B PNG LNG plant, while XOM holds 33.2% and Oil Search Ltd. 29%.
Oct. 22, 2015, 9:42 AM
- Santos (OTCPK:STOSF) rejects as too low a A$7.14B (US$5.15B) takeover offer from a P-E firm backed by sovereign investors and wealthy members of Asian and Gulf-based ruling families, saying the bid was opportunistic and did not reflect the oil and gas company’s value.
- Santos has been under pressure from lower oil prices and mounting debts associated with its 30% stake in the $22B GLNG project in Gladstone state; the project, which is the key growth asset in Santos' portfolio, made its first shipment to Asia last week.
- Santos other major asset is its 13.5% stake, worth ~$7B, in the PNG LNG project in Papua New Guinea operated by Oil Search (OTCPK:OISHF), which recently rejected its own takeover offer from Woodside Petroleum.
Oct. 16, 2015, 9:16 AM
- Total (NYSE:TOT) says the first shipment of liquefied natural gas from the Gladstone LNG project in Queensland, Australia, has been loaded and is on its way to South Korea.
- The plant at Curtis Island will produce 7.2M tons/year of LNG once at full capacity, and all production will be sold under long-term contracts to Asian buyers.
- TOT owns a 27.5% stake in the project, Santos (OTCPK:STOSF) holds 30%, Petronas 27.5% and KOGAS 15%.
Feb. 20, 2015, 10:51 AM
- ConocoPhillips (COP -1.1%) and Origin Energy (OTC:OGFGF) reportedly are in talks with investment banks including Macquarie on the potential sale of a pipeline to their Australia Pacific LNG natural gas export project.
- The pipeline connects inland gas fields to the A$24.7B ($19.3B) liquefied natural gas plant in Queensland state.
- A potential sale would follow BG Group’s deal in December to sell the pipeline supplying its LNG project for ~$5B; Santos (OTCPK:STOSF) today named Goldman Sachs as an adviser to help sell the pipeline at its Gladstone LNG venture.
Jan. 12, 2015, 2:56 PM
- Apache (NYSE:APA) appears to have gone cold on the $3B sale of its remaining West Australian gas and oil assets as oil prices plunge and potential buyers struggle, The Australian reports.
- Sales talks with potential buyers are said to have been held up in the wake of sliding prices and high Western Australia gas prices amid falling international oil prices and U.S. gas prices that could make a deal look less appealing.
- At the same time, last month’s $2.75B sale of its Wheatstone LNG stake in Australia and in the yet-to-be approved Kitimat venture in British Columbia may have eased the pressure from activist shareholders who were pushing APA to focus on the U.S.
- Among potential buyers, Santos (OTCPK:STOSF) is APA’s partner in some Australian fields but is now in conservation mode following the oil price slide, Origin Energy (OTC:OGFGF) is facing a downgrade of its credit rating if oil prices fall and will not want to weaken its balance sheet, and even BHP - APA’s partner in the Macedon gas plant - is facing challenges maintaining its A-grade credit rating.
Dec. 11, 2014, 10:45 AM
- Investors in giant gas export terminals from Australia to Canada are facing the prospect of losing nearly $250B plowed into the projects during the past seven years, as weaker oil prices threaten to wipe out returns.
- Oil-linked pricing means LNG producers stand to get much less revenue than expected on delivery of their first shipments, and oil prices have fallen so low that U.S. shale gas producers with plans to export the usually cheaper fuel to Asia suddenly find themselves facing a much tougher competitive environment.
- LNG prices in Asia have sunk below $10/MMBtu, while most Australian LNG projects would need to sell the commodity for at least $12-$14 to break even; for example, the breakeven point for the $54B Gorgon project under construction by Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (RDS.A, RDS.B), is ~$17.7/MMBtu.
- Other relevant tickers: LNG, TOT, COP, CEO, FCG, GASL, OTCPK:BRGXF, OTCQX:BRGYY, OTCPK:STOSF
Jul. 28, 2014, 8:27 AM
- Exxon Mobil (NYSE:XOM) says its $19B PNG LNG project in Papua New Guinea is producing at full capacity after shipments started ahead of schedule in May.
- The first stage has a capacity of 6.9M metric tons/year of liquefied natural gas: XOM and partners including Oil Search (OTCPK:OISHF) and Santos (OTCPK:STOSF) are considering an expansion of the development.
- The project is set to start loading its 15th LNG cargo, XOM says.
Jul. 18, 2014, 8:33 AM
- Bechtel, the contractor building more than $60B of natural gas export projects in Australia for companies including BG Group (OTCQX:BRGYY, OTCPK:BRGXF), faces a dispute with unions that is raising concerns about startup delays.
- Credit Suisse views the discord as potentially "really material" for BG's Queensland Curtis LNG development project, which the analysts doubt will start in Q4 of this year as planned.
- Santos (OTCPK:STOSF) and a venture between ConocoPhillips (NYSE:COP) and Origin Energy also are building liquefied natural gas projects in Queensland state to tap rising Asian demand.
Jul. 11, 2014, 5:59 PM
- As much as ~$700B oil companies have in their capital spending pipeline may no longer be needed, as the big discoveries of shale oil in recent years have added ~66B barrels of crude oil resources, enough to meet demand growth in the coming years, according to Goldman Sachs' head of European energy research Michele della Vigna.
- New projects that require oil prices to be above $80-$85/bbl to break even ought to be delayed or canceled - which could include big investments considered in Canadian heavy oil or in deep waters off shore - della Vigna says.
- It's also potentially bad news for the oil service companies that make money helping oil companies with their big projects; the winners are likely to be companies with the best roster of low-cost investments: SNP, BRGXF, BRGYY, AFRNF, STOSF.
Jun. 19, 2014, 8:15 AM
- GDF Suez (GDFZY) and Santos (STOSF) decide to back away from a multibillion-dollar plan to develop natural gas fields offshore Australia using untested technology that can convert gas to a liquid at sea.
- The thinking behind the technology is that it removes the need to build pipelines to the coast, but the cost of designing a liquefaction and storage system that can withstand the ocean has proven prohibitive.
Jun. 7, 2013, 6:01 PMBetter get your story straight: Murphy Oil (MUR) says an exploration well drilled in the Browse basin off Western Australia will be plugged and abandoned after failing to find commercial amounts of gas, and expects to expense the well in Q2. Australian partner Santos (STOSF.PK) had said a few hours earlier that it considered the well a discovery. Total (TOT) holds a 50% interest in the well, Santos 30%, MUR 20%. | Jun. 7, 2013, 6:01 PM | 1 Comment
Santos and its subsidiaries are engaged in petroleum exploration; the production, treatment and marketing of natural gas, crude oil, condensate, naphtha and liquid petroleum gas; and the transportation by pipeline of crude oil.
Sector: Basic Materials
Industry: Major Integrated Oil & Gas
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