Santos beats chest on ‘robust’ future

SANTOS has reassured investors that its financial position is ”very robust”, notwithstanding a review of its hybrid securities by credit rating agency Standard & Poor’s.
Nanjing Night Net

Santos has €1 billion ($A1.2 billion) in subordinated notes on issue but chief financial officer Andrew Seaton said even S&P, which is reviewing equity credit assigned to hybrid securities, considered them ”unique”.

Analysts were concerned that Santos’ investment-grade credit rating could be downgraded as a result of the S&P review. But Santos said none of its loans had credit rating clauses that would trigger a refinancing.

Mr Seaton said Santos had $6.1 billion in funding at the end of September, including $2.4 billion in cash and $3.7 billion in loans, with ”no meaningful maturities during our period of peak construction”.

Mr Seaton said Santos would not need to raise capital in the next three years, despite forecast capital expenditure in 2013 of $4 billion, which included the recent cost blowout at the ExxonMobil-led PNG LNG project, and the peak year for spending on the $18.5 billion Gladstone LNG project in Queensland, plus exploration expenditure of $325 million.

Under reasonable scenarios, Santos had $2.9 billion of undrawn facilities and cash available in 2013-15 if oil prices return to $US100 a barrel and $1.9 billion if they were low at $US75 a barrel.

Santos defended its high-risk transformation into an LNG exporter at an investor briefing on Thursday, saying the demand outlook for gas remained strong, and talking up the company’s recent exploration successes.

Santos expects to gain about 20 per cent of its earnings from LNG sales to Asia, from three fully contracted LNG projects – Darwin, PNG and Gladstone.

Chief executive David Knox said Santos’ share of these projects would amount to 3.3 million tonnes a year of LNG – sold under long-term, oil-linked contracts to customers including Tepco, Tokyo Gas, Kogas and Petronas – and highlighted this was a ”very strong profile to have for a company of our size”.

Mr Knox said this week’s successful Crown-1 gas well in the Browse Basin off Western Australia was a ”very significant and exciting discovery”. On the start of shale gas production at the Mooba-1 well in the Cooper Basin, he said: ”We did not expect this well to come on and flow as it’s done. The key thing with that well is, can we replicate it? That could be something which would ultimately revolutionise the long-term future of the Cooper Basin.”

On its Gladstone LNG project, Santos said it would have 1100 terajoules a day of gas available to supply its first and second trains as they came online from the end of 2015, including from compression, storage and third-party gas contracts.

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