Santos to get US$1.1b offer for Australian gas fields

[MELBOURNE] Santos Ltd, which last week rejected a US$5.2 billion takeover offer, has received a binding bid from Quadrant Energy Pty for Australian oil and gas fields the companies jointly own, people with knowledge of the matter said.

Santos is considering the offer of about A$1.5 billion (US$1.1 billion) for its stakes in the fields in Western Australia state as part of a broader review of its assets, according to the people. Japanese trading house Marubeni Corp is separately in talks to buy 3.6 per cent of Exxon Mobil Corp's Papua New Guinea liquefied natural gas plant from Santos for more than A$1 billion, the people said, asking not to be identified as the details are private.

The Australian energy producer is speaking to a number of parties about different sets of assets, according to the people. Santos hasn't made a final decision on which parts of its portfolio to sell or whether it needs to raise equity in addition to the divestments, the people said. Santos said in August it's considering strategic options and that Chief Executive Officer David Knox will step down as the rout in commodity prices triggered concerns that the company has too much debt. The company last week rejected a A$6.88-per- share takeover offer from Scepter Partners, an investment firm backed by Asian and Middle Eastern royalty, saying it was too low and "opportunistic."

The Australian Financial Review reported earlier that Marubeni had expressed interest in part of Santos's stake in the Papua New Guinea project and could reach a deal as soon as this week, without saying where it got the information. A spokesman for Quadrant said the company is "regularly approached" about its interest in various projects and declined to comment further. A representative for Marubeni said the company can't comment at this time.

"The strategic review is ongoing, and will continue to consider all proposals which deliver appropriate value and certainty for shareholders," Rob Malinauskas, a spokesman for Santos, said by e-mail.

Santos's Western Australian assets, located in the Carnarvon Basin, accounted for 24 per cent of its production last year, according to the company's website. It owns 45 per cent of the Reindeer, John Brookes and Spar gas fields there, while Quadrant owns the rest and is the operator. Santos also owns 37.5 per cent of the Fletcher Finucane oil field in the region and is the operator.

Perth-based Quadrant Energy was formed after a group led by Macquarie Group Ltd. and Brookfield Asset Management Inc agreed in April to buy Apache Corp's Australian assets for US$2.1 billion. Macquarie has since sold part of its holding to other investors including Wesfarmers Ltd and Western Australia businesswoman Angela Bennett's family investment firm.

Santos owns 13.5 per cent of the US$19 billion PNG LNG plant, while Exxon Mobil holds 33.2 per cent and Oil Search Ltd 29 per cent. Separately, both Santos and Quadrant are seeking buyers for the Stag oil field off the Western Australian coast, people familiar with the matter said in September. Santos owns 66.7 per cent of the field, while Quadrant owns the rest and is the operator.

BLOOMBERG