Santos prepares to pounce if Conoco sells out
Santos will consider buying the controlling stake in Darwin LNG and the Barossa field if ConocoPhillips sells out.
Santos will consider buying the controlling stake in Darwin LNG and the Barossa field amid speculation operator ConocoPhillips may look to offload its share of the plant ahead of a final investment decision next year.
The South Australian energy producer owns 11.5 per cent of the gas export facility and 25 per cent of the Barossa field, which has the exclusive rights to strike a supply deal with the Darwin plant as supplies from the Bayu-Undan field dry up.
US giant Conoco owns a 57 per cent stake in the LNG project and 37.5 per cent of the Barossa venture giving Santos a potential new avenue for growth should its venture partner decide to sell out.
“If they ever decided to sell out of Darwin we see a lot of growth in that region and we would be interested as a joint venture partner in assets we know very well,” Santos managing director Kevin Gallagher told The Australian after delivering its half-year results. “Of course we’d be interested to talk to them if that was occurring.”
Conoco sold its 30 per cent stake in the Sunrise gas field in the Timor Sea last year raising speculation about its intentions for both Barossa, 300km north of Darwin, and the LNG plant. Conoco declined to comment.
A call on sanctioning Barossa will be made early next year, Mr Gallagher confirmed.
“The thing that differentiates Barossa is that we don’t need to build an LNG plant. It’s already built. We’ll be tying it in to the existing Bayu-Undan pipeline following the end of field life there, so this is a very low risk project in that regard.”
Santos is also among companies waiting for clarity on proposals to expand LNG production in Papua New Guinea through its stake in the P’nyang venture.
Before talks start on that agreement, the PNG government wants to rework the Papua LNG pact, following a stalemate during talks this week in Singapore.
Santos yesterday delivered a tripling in first half net profit on higher output and LNG prices and the integration of gas producer Quadrant Energy.
Net profit rose to $US388 million ($571m) for the first six months to June 30 — beating a $US367m forecast from RBC — and compared to $US104m in the same period last year. Underlying profit rose 89 per cent to $US411m underpinned by a 18 per cent lift in product sales to $US1.97bn.
The interim dividend payout also jumped 71 per cent to US6c per share from US3.5c per share with net debt falling to $US3.35bn.
RBC said the company’s earnings diversity marked it out against rivals Woodside Petroleum and Oil Search.
“Diversity and flexibility of portfolio is paying off for Santos in the current environment with relative outperformance versus its peers — Woodside, Oil Search — that are fighting concentration risk in a struggling LNG market, and in some cases hamstrung by sovereign risk,” RBC analyst Ben Wilson said.
Santos shares rose 3.5 per cent to $7.10.