SANTOS has agreed to sell its Victorian assets to Cooper Energy for cash consideration of up to $82 million.

The sale will result in Santos completely exiting from offshore Victoria after it completed a sale of its interest in the Kipper gas field for A$520 million in March this year.

The assets sold to Cooper Energy include:

  • 50% interest in the Casino-Henry gas project;
  • 50% interest in the Sole gas field and the Orbost gas plant;
  • 10% interest in the Minerva gas field and gas plant;
  • 100% interest in the Patricia-Baleen gas field.

Santos’ share of production from these assets in the first half of 2016 was 5.2 petajoules of sales gas.

The total cash consideration is A$82 million, comprised of A$62 million at completion and a further milestone payment of A$20 million upon the earlier of a final investment decision on the Sole gas project or the receipt of cash proceeds from any sell-down by Cooper Energy of any of its interest in the sale assets.

“This sale is in line with our stated objective to rationalise and shape our asset portfolio in order to become a low cost, reliable and high performance business,” Santos managing director and CEDO Kevin Gallagher said:

Completion is expected in early 2017 and is subject to customary consents and regulatory approvals.

Cooper said it will fund the acquisition via a fully underwritten accelerated non-renounceable entitlement offer to raise approximately $62.6 million and a combination of existing cash and the drawdown (if required) of debt facilities.

The consideration includes Cooper Energy assuming abandonment liabilities for the respective assets, most of which are long dated.

The company said it will offer employment to relevant Santos employees who currently operate the Victorian Gas Assets. This includes the engineering and project staff who have managed the Sole Gas Project front end engineering and design work, and who are assisting Cooper Energy reach its final investment decision (FID) for the Sole Gas Project. Cooper Energy will alsoapproach the Casino-Henry joint venture partners (AWE & Mitsui) for their approval to be the operator of the Casino-Henry project. Additionally, Cooper Energy will approach relevant regulators for approval to become the operator of the Casino-Henry, Sole and Patricia Baleen projects where Santos is the operator currently.

“The acquisition of Santos’ Victorian Gas Assets is a logical and value-adding step to accelerate our gas strategy” said Mr David Maxwell, Managing Director, Cooper Energy.

“The Transaction will transform Cooper Energy by substantially increasing our production, further enhancing our gas reserves and resources for supply to south-east Australia and adding proven technical and project expertise. Our position as a gas supplier to the south-east Australia gas market will be strengthened considerably.”

“The assets acquired align with our gas strategy, and offer immediate and long term benefits in the interests of our shareholders.”

“In the near term, Cooper Energy will be repositioned within the oil and gas sector with a four-fold lift in its Australian production and nine-fold increase in Australian 2P reserves.

Cooper Energy will shift to over 85% of total production being sourced from gas sold under stable long term contracts”.

“Looking to the long term, we now have more gas to market at a time when supply is being keenly sought in south-east Australia.

“We are delighted at the opportunity to move to 100% of Sole which we have identified as a very attractive growth opportunity for our company. Acquisition of a 100% equity position will enable Cooper Energy to drive the commercialisation of Sole, which has strong support from gas customers and interest from potential joint venture partners and financiers.

“The step-change in production, revenue generation, resourcing capabilities and future opportunities enabled by this Transaction are transformational,” he said.