Asset A&D

Santos Closes Acquisition of ConocoPhillips’ Northern Australian Assets

By Deepak Sharma
May 29, 2020
2 minutes read
Bayu-Undan to Darwin Gas Export Pipeline Map

Australian oil & gas company Santos Ltd. has announced that it has completed the acquisition of ConocoPhillips’ Northern Australian business for a reduced upfront consideration.

Under the terms of the revised deal, Santos has agreed to pay US$1.265 billion upfront, along with an increased contingent payment of US$200 million subject to a Final Investment Decision (FID) on the Barossa gas field. In October last year, Santos signed an agreement to acquire ConocoPhillips’ operating interests in the Darwin LNG Project and the Bayu-Undan, Barossa and Poseidon fields, for a cash payment of US$1.39 billion, plus a US$75 million contingent payment subject to FID on the Barossa project.

“Due to recent market volatility and the deferral of Barossa FID, Santos and ConocoPhillips agreed to decrease the previously announced US$1.39 billion upfront payment at completion to US$1.265 billion and increase the contingent payment on Barossa FID from US$75 million to US$200 million,” Santos said in a release.

Located at Wickham Point, Darwin LNG Plant is a single train liquefaction and storage facility that commenced production in 2006. The Bayu-Undan field is located approximately 500 km north-west of Darwin LNG in the Timor Sea, and supplies gas to the plant via a 26-inch subsea pipeline. The Barossa gas field is located approximately 300 km north of Darwin LNG and will be a source of gas to backfill the plant when the Bayu-Undan field ceases production.

According to ConocoPhillips, production from the assets averaged approximately 46,000 barrels of oil equivalent per day (boe/d) during Q1 2020. Associated proved reserves stood at approximately 17 million boe (MMboe) as of year-end 2019.

Santos stated that following the completion of the acquisition, its interest in Bayu-Undan and Darwin LNG has increased to 68.4%, which will provide a significant boost to its 2020 production and cash flows.

“As a founding partner in Bayu-Undan and Darwin LNG, and an existing partner in Barossa, we know these assets well,” said Santos CEO Kevin Gallagher. “We are delighted to assume operatorship and continue to progress the Barossa project so that a final investment decision can be made when market conditions permit,” he added.

In March this year, Santos sold a 25% interest in Darwin LNG and Bayu-Undan to South Korean group SK E&S Company Ltd., for a total consideration of US$390 million. Subsequently in April, Santos also signed a letter of intent to sell a 12.5% interest in the Barossa Project to JERA Company Inc., a 50:50 joint venture between TEPCO Fuel & Power Inc. and Chubu Electric Power Company Inc.

Credit Suisse (Australia) and JB North & Co. acted as financial advisors to Santos on the deal.

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