The Australian Santos Ltd. has entered into a binding agreement to sell a 2.6 percent stake in PNG LNG to Kumul Petroleum Holdings Ltd. of Papua New Guinea for $576 million in cash and the assumption of approximately $160 million in project finance debt, the two companies said. .
Completion of the deal is not subject to funding and is subject to approval by PNG’s competition regulator on or before December 31, Santos said in a press release. Kumul has paid $80 million in escrow as partial payment and made further prepayments of the escrow consideration throughout the period until completion, Santos said.
After the sale is completed, Kumul also has a call option to acquire a further 2.4% stake in PNG LNG for $524 million in cash plus $145 million in project finance debt, Kumul said. The purchase option must be exercised by June 30, 2024 and is subject to customary conditions, including necessary regulatory approvals and third party consents, according to the statement.
“I am pleased to have reached a binding agreement with Kumul on the sale of up to five percent of PNG LNG. This restructured transaction is a pragmatic solution that provides a clear path to completion and builds on our strategic alignment with Kumul and our long-standing friendship with PNG, where Santos has been an engaged corporate citizen for more than 40 years,” Kevin, Managing Director and CEO of Santos. Gallagher said.
“PNG LNG is a low-cost, low-emissions asset that delivers strong cash flows to project participants and economic and social benefits to the nation,” Gallagher added.
“This transaction is the culmination of many months of discussions that have taken place with national and international financiers since the NEC [National Executive Council] gave his initial approval for KPHL [Kumul] to acquire additional equity in the PNG LNG project in September 2022,” said Kumul CEO Wapu Sonk. “The PNG LNG project is a mature, profitable and de-risked oil project that has consistently performed above its rated capacity and that it has many more years of commercial life left as additional gas fields come on stream.”
“Kumul Petroleum has ensured that entering into financing agreements to acquire additional equity in the PNG LNG project will not affect its financial ability to assume the state’s full 22.5 percent equity right in the coming Papua LNG project and also continue to pay annual dividends to the company State, in line with our annual operating plans,” Sonk added.
“Kumul Petroleum, as a national oil and energy company, is fulfilling its vision statement, which is to build the nation through its energy resources. We need to balance long-term commercial investments and consequent revenue streams sustainable with our ability to support the national government in achieving its development priorities as outlined in the Medium-Term Development Strategy and Vision 2050 plans,” said Sonk.
“This transaction will increase Kumul’s interest in PNG LNG and support the PNG government’s objectives for the people of PNG to have a greater interest in the development of their natural resources,” said Papua New Guinea Prime Minister James Marape, in Santos’ statement.
According to Santos’ website, PNG LNG is an integrated development comprising gas production and processing facilities stretching from Hela, Southern Highlands, Western and Gulf provinces to Port Moresby. The facilities are connected by more than 435 miles (700 kilometers) of onshore and offshore pipelines and include a gas conditioning plant at Hides and a two-train liquefaction and storage facility near Port Moresby. Since producing LNG in April 2014, PNG LNG has been supplying LNG to four major long-term customers in Asia, according to the company.
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