Santos may spin off oil and gas infrastructure assets

Santos said it would not rush into any sale of assets.

As equity capital markets bankers continue to assess float opportunities for 2022, one on their list is Santos.

The energy giant, which recently completed a $21bn merger with rival Oil Search, could opt to sell about $5bn worth of infrastructure assets attached to its oil and gas projects through an initial public offering.

Sources say this is a possibility that the company has been giving serious consideration to.

Any float would proceed via a dual-track process, where buyer interest can be tested.

Another option for Santos is luring a strategic buyer into the assets in a similar way to global infrastructure fund GIP, which purchased a 49 per cent stake in Woodside Petroleum’s Pluto Train 2 project to strengthen its balance sheet and derisk the project.

Others say the Santos assets are complex and a float may be more straightforward.

Investment bank UBS is working for Santos.

Chief executive Kevin Gallagher has made it clear he is considering a spin-off of the infrastructure.

The assets up for discussion include those from its Quadrant Energy business in Western Australia, which some think are worth about $2bn, its Barossa project in the Northern Territory, worth about $1bn, and its 30 per cent stake in the Gladstone LNG project in Queensland, which is worth about $2bn.

The assets account for about $400m worth of annual revenue.

Mr Gallagher earlier said that Santos would not rush into any sale.

The value of assets depends on the tolling agreement Santos strikes with any buyer.

Meanwhile, Santos is expected to sell down an interest in the PNG LNG project to energy giant Total following the Oil Search merger.

Sources in the market say more consolidation is likely in the oil and gas space, even after the two mega-deals of 2021: the $21bn merger between Santos and Oil Search and Woodside’s $20bn acquisition of BHP’s petroleum unit.