Santos Flags ‘Prudent’ Capital Raising After Oil Price Falls

Santos Ltd., set to start output at its $18.5 billion natural gas project in the second half of next year, is studying a sale of hybrid notes in European markets after a slide in oil prices.

“It’s prudent capital management to make sure we have a balance sheet that will take us through all cycles,” Chief Executive Officer David Knox told analysts today on a webcast. The company gave no indication of the size of the possible raising.

A sale of a 50 percent equity/credit issue would be used partly to refinance existing debt. Crude oil has tumbled amid the fastest rate of U.S. output in more than three decades and slowing demand growth.

Rival Origin Energy Ltd. sold 1 billion euros ($1.2 billion) of similar notes in September. The company and ConocoPhillips are building a liquefied natural gas project next to the Santos development in Queensland state.

Santos rose 1.3 percent to close at A$11.98 in Sydney trading. Australia’s benchmark index gained 1.2 percent.

Santos previously said the Gladstone LNG project would begin production at some point in 2015. Starting in the second half of the year is slightly later than Sanford C. Bernstein & Co. expected, according to a report today from the firm.

‘Bold Move’

Santos also plans to expand in Southeast Asia, “a bold move in the current commodity price environment that risks dilution of shareholder returns,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, wrote in the report.

The LNG project’s second unit should be ready to begin by the end of next year, Adelaide-based Santos said today in a statement. The project is 90 percent complete, it said.

The development is one of seven Australian natural gas export ventures under construction to meet increasing Asian demand. The projects put Australia on course to surpass Qatar as the world’s biggest supplier of the fuel this decade.

Santos expects 2015 production of 57 million to 64 million barrels of oil equivalent, it said today. The company narrowed its forecast for this year to 53 million to 55 million barrels.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE