Santos Mulls European Debt Issue as GLNG Startup Approaches

   By David Winning 
 

SYDNEY--Santos Ltd. (STO.AU) could become the latest Australian energy company to tap European debt markets for funding, as it nears the startup of a US$18.5 billion gas-export plant in the eastern state of Queensland that will fuel a step-change in its output.

Santos said it is considering a "50% equity credit European hybrid issue" that would enable it to refinance existing debt and strengthen its balance sheet at a time when global oil prices have fallen sharply. The Adelaide-based company didn't say how much it would look to raise.

It comes two months after Origin Energy Ltd. (ORG.AU) raised 1.4 billion Australian dollars (US$1.2 billion) through a euro-denominated hybrid debt issue.

Santos is transforming itself from an oil producer into a company that makes most of its revenues and profits from selling natural gas as a clean fuel to Asian customers. The company owns a minority stake in the US$19 billion PNG LNG export facility in Papua New Guinea, and is targeting first production of liquefied natural gas from the GLNG plant in Queensland in the second half of 2015.

At an investor day Wednesday, Chief Financial Officer Andrew Seaton said the startup of the GLNG facility and cargoes shipped from PNG LNG would push up Santos's production to between 57 million and 64 million barrels of oil equivalent in 2015.

Santos also narrowed its production target for 2014 to 53 million to 55 million barrels of oil equivalent, from previous guidance for 52 million to 57 million.

-Write to David Winning at [e-mail]

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