Santos agrees an initial sale of 2.6% of PNG LNG to Kumul for $736mn

Australian energy company Santos on September 1 announced the successful initial sale of a 2.6% stake in the PNG LNG project to Papua New Guinea (PNG) state-owned Kumul Petroleum for a sum of $736mn. The deal involves a cash component of $576mn, along with the assumption of approximately $160mn in project finance debt.

Santos had in September last year received a binding conditional offer from Kumul for the acquisition of a 5% interest in the PNG LNG project for a total asset value of $1.4bn. This valuation included a proportionate share of the PNG LNG project finance debt, estimated at around $300mn.

Santos CEO Kevin Gallagher expressed satisfaction with the outcome, stating, "This re-structured transaction is a pragmatic solution that provides a clear pathway to completion and builds our strategic alignment with Kumul and our long friendship with PNG, where Santos has been a committed corporate citizen for over 40 years."

Kumul, in a separate statement, disclosed that it has been granted a call option to further acquire a 2.4% stake in the project for $524mn. This option includes a share of project debt worth $145mn and must be exercised on or before June 30, 2024.

Wapu Sonk, managing director of Kumul, said, "Kumul Petroleum has ensured that entering into financing arrangements to acquire additional equity in the PNG LNG project will not affect its financial capability to take up the state's full 22.5% equity entitlement in the forthcoming Papua LNG project and also continue to pay annual dividends to the State, in line with our annual operating plans."

PNG prime pinister James Marape welcomed the transaction, highlighting its significance in aligning with the government's objectives for greater equity participation by the people of PNG in the development of natural resources.

The PNG LNG joint venture comprises operator ExxonMobil (33.2%), Santos (42.5%), Kumul Petroleum (16.8%), JX Nippon Oil (4.7%) and the PNG landowner company MRDC (2.8%). Santos became the largest shareholder in PNG LNG with its takeover of Oil Search.