Santos to offload noncore assets to cut costs

Santos Ltd., Adelaide, has flagged its controversial coal seam gas (CSG) project in New South Wales and its Asian business for potential sale as part of its planned disposal of noncore assets into a separate business to cut costs and ease debt.

In the future the company will focus on five long-term growth assets in Australia and Papua New Guinea, including its LNG projects, the Cooper basin and Western Australian divisions, and its northern Australian business.

The noncore assets company will operate those assets at low cost and optimize them to maximise value. This includes potential sales of some of them, such as some projects offshore Western Australia like Barrow Island, Mutineer-Exeter, and Fletcher-Finucane fields.

The idea is to help reduce debt by a hoped-for $1.5 billion to bring it down to less than $3 billion by yearend 2019.

The new standalone business will be based in Sydney under the leadership of former AWE Ltd. Chief Executive Officer Bruce Clement. It follows the announcement earlier this week from Origin Energy Ltd., which intends to float its conventional upstream oil and gas business (OGJ Online, Dec. 6, 2016).

Gallagher said Santos’s new strategy is much more than a “cost-out” story. He said it was one of a high-cost business that is becoming a lean, low-cost business that is cash-flow breakeven throughout the cycle. He added it was also about simplification and growth.

Gallagher also said there were plans to admit third parties to Santos’s gas processing infrastructure in Queensland and Western Australia.

The new strategy was outlined by Santos Chief Executive Officer Kevin Gallagher at an investor presentation in Sydney.

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