UPDATE: Santos Says Likely Not Doing Another Equity Raising
01 June 2009 - 6:27PM
Dow Jones News
Santos Ltd. (STO.AU) Chief Executive David Knox said Monday
there's a "sporting chance" the oil and gas producer won't have to
conduct another equity raising to fund the construction of its
liquefied natural gas joint venture at Gladstone in Queensland
state.
His comments may cool some investor concerns that Santos would
have to sell more new shares at a discount to fund the project
before it's due to start shipping gas in 2014.
Knox also said offtake negotiations with potential customers for
its LNG are progressing well, although talks with Japanese
customers are "really tough".
"The negotiations with customers, frankly, are going quite well
for us," Knox told reporters at an industry conference in
Darwin.
"(But) ultimately the proof is when we announce heads of
agreement and we haven't done that yet."
Santos recently raised A$3 billion by issuing new shares in the
company at a considerable discount to their prior market price to
help fund Gladstone LNG, pay off some hybrid securities and fund
its share of the Papua New Guinea LNG liquefied natural gas
project.
"We've got probably a sporting chance of getting right the way
through to the end of 2014 without having to come back (to market
to raise capital)," Knox said.
"There are low price scenarios where we would need to come back
again and there are other scenarios where we definitely don't."
Knox said Adelaide-based Santos and its Gladstone LNG partner,
Malaysia's Petroliam Nasional Berhard (PET.YY), are still aiming to
make a final investment decision on their project by the first half
of 2010, with first gas targeted for 2014.
The affirmation comes amid concerns by analysts that a current
slump in LNG demand and increased projected supply will disrupt LNG
offtake negotiations.
Knox said BG Group PLC's (BG.LN) recent announcement that it has
agreed to sell LNG from its proposed Gladstone project to China
National Offshore Oil Corp. was helpful for other coal seam
gas-to-LNG players.
But he said talks with Japanese customers are proving
difficult.
"Certainly in Japan right now it's very tough with the Japanese
buyers, they're going through really tough economic times," Knox
said.
Also on Monday, Ryan Lance, senior vice president of exploration
and production, international at ConocoPhillips (COP) - which plans
to build an LNG plant at Gladstone with Origin Energy Ltd. (ORG.AU)
- reiterated the venture's construction timetable and said LNG
demand is expected to be strong once the global economy
recovers.
Australia's Energy and Resources Minister Martin Ferguson,
however, said plant consolidation is likely to occur.
"I think there's going to be a smaller number at final
investment decision time," Ferguson told reporters.
Knox and Lance reiterated that they are both open to project
collaboration at Gladstone, such as sharing infrastructure or
upstream gas resources.
Fereidun Fesharaki, the chairman of global energy consultancy
FACTS Global Energy, said he expects rationalization to occur at
Gladstone.
"I think one or two will happen, they will take some action, but
they are very sensitive to the price of oil," Fesharaki told
reporters.
"At US$80 (a barrel) oil everything works, at US$40 nothing
works."
-By Ross Kelly, Dow Jones Newswires;
61-2-8272-4692; ross.kelly@dowjones.com