Santos Limited (ASX: STO) completed its strategic review today and announced taking capital initiatives to reduce its debt by $3.5 billion. It has also appointed Mr. Kevin Gallagher as the new Managing Director and CEO.
The strategic review that started in August this year has taken a range of initiatives to strengthen its balance sheet. It will sell its stake on Kipper gas field and has entered into a private placement with a Chinese investing firm. The company is also set to raise $2.5 billion capital through a 1 for 1.7 pro-rata renounceable entitlement offer.
According to the Executive Chairman, Mr Peter Coates: “The $3.5 billion of capital initiatives reinforce the Santos balance sheet and mark a significant step towards restoring long term value for shareholders. The review has shown that we can further stream line the business and enhance financial discipline and the Board is absolutely committed to pursuing those opportunities.”
Santos has reached an agreement to sell its 35% non-operated interest in the Kipper gas fields in offshore Victoria to E&P Australia Pty Ltd (Mitsui). The sale is expected to be completed in the first quarter of 2016 and earn $520 million in cash revenue. The company has also entered into a binding share subscription agreement with an affiliate of Hony Capital. The global financial investor will subscribe for approximately 73 million share at $5.91, reflecting a 15% premium on its closing price on 6 November 2015.
The company continues to keep its focus on delivering return on capital and enhancing its operational efficiency. The board has decided to set the future dividends as a payout ratio of earnings and it is expected to be a minimum of 40% of underlying NPAT. The FY15 final dividend is set at 5 cents per share on the expanded capital base.
Santos has also appointed Mr Kevin Gallagher as the new Managing Director and CEO who is set to commence duties in early 2016. He is currently the CEO of Clough Limited, an engineering services group and has nearly 25 years of experience in managing oil and gas operations in Australia, the USA and North and West Africa.
Author: Simon Herrmann
Nov 09, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.