Santos Ltd. rose in Sydney trading after arranging a A$2 billion ($1.7 billion) bank-loan facility that will help Australia’s third-largest oil and gas producer fund a project in Queensland state.
Santos will use the credit line to refinance A$700 million of existing undrawn debt, the Adelaide-based company said in a statement today to the Australian stock exchange. Santos advanced 0.4 percent to A$13.71 at the 4:10 p.m. close in Sydney, compared with a loss of 1.5 percent for the benchmark S&P/ASX 200 Index.
“The market is taking it as a positive because it potentially lowers the risk of a very large equity raising,” John Hirjee, a Melbourne-based analyst at Deutsche Bank, said by phone. The need for a share sale depends on how much Santos potentially receives for selling a stake in the proposed Gladstone liquefied natural gas venture, he said.
The Gladstone project, with two processing units, is expected to cost A$16.4 billion, Hirjee estimated. Santos and BG Group Plc are due this year to make final decisions on whether to proceed with Queensland ventures that will convert gas extracted from coal seams into LNG for export to Asia.
Santos remains in “detailed ongoing discussions with a number of parties in relation to potential LNG sales, equity in the project and collaboration” between Queensland LNG developments, the company said in a July 9 statement. Santos owns 60 percent of the project, and Malaysia’s Petroliam Nasional Bhd., or Petronas, the rest.
Royal Dutch Shell Plc is a potential buyer of a stake in the Santos venture, Di Brookman, an analyst at CLSA Asia-Pacific Markets in Sydney, said in a July 9 report.
With the loan facility offered by nine banks, Santos will have A$6 billion of available funding, including cash and debt, the company said in the statement today.
The refinancing of existing debt “provides significant flexibility to fund Santos’ growth, including GLNG,” Chief Financial Officer Peter Wasow said in the statement.
Australia Environment Minister Peter Garrett has deferred by three months a decision on whether to approve the Santos and BG projects as his department studies their potential impact on the environment. The review is extended now until October.
While the Queensland government cleared the ventures, state Coordinator-General Colin Jensen raised concerns in May and June about the risks posed by the “significant amount” of water extracted from the coal seams.