China's ENN Will Buy $750 Million Stake in LNG Producer Santos

  • Chinese LNG distributor to be top holder in Australian company
  • ENN buys 11.7% stake from private equity firm Hony Capital

China’s ENN Ecological Holdings Co. is buying an 11.7 percent stake in Santos Ltd. for about $750 million, becoming the largest shareholder in the Australian oil producer and LNG exporter.

ENN, one of the country’s largest distributors of liquefied natural gas, will be taking over a stake in Santos now owned by Chinese-based private equity firm Hony Capital, the ENN Group said in a statement Wednesday. The acquisition will give ENN its first exposure to the upstream part of the energy supply chain, it said.

The deal comes months after Hony purchased a stake in Australia’s third-largest oil and gas producer, which had been trying to cut debt after a global plunge in energy prices. Hony in turn will take a stake in ENN’s A-share listed company through a private placement of $380 million of new shares, according to the statement.

“It’s a strategic move for ENN Group,” said Shi Yan, a Shanghai-based analyst at UOB-Kay Hian Ltd. “The timing looks pretty good too, as low crude prices have knocked down energy asset values worldwide."

Global Ambitions

Shares in energy companies plunged in 2015 amid tumbling oil prices caused by global economy slowdown and supply glut. ENN Ecological, which is down 25 percent this year, have been suspended from trading in Shanghai since March 8. Santos shares are up 6.5 percent so far this year in Sydney after plunging almost 50 percent in 2015.

The acquisition will further ENN’s ambitions of becoming a vertically integrated, international natural gas company. The company said Wednesday it sold 11.3 billion cubic meters of natural gas in 2015, supplying more than 12 million households across China. It distributes about 1.88 million tons of LNG annually, or about a fifth of the country’s total LNG trading volume, according to the statement.

ENN is now building an LNG receiving terminal in Zhoushan, in eastern China’s Zhejiang province, to receive imported natural gas. Santos has equity stakes in three liquefied natural gas export projects in Australia and Papua New Guinea. Its most recent development, Gladstone LNG in Queensland, started production last year.

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