Santos launches $1.2b bond deal; banks mandated
Oil and gas heavyweight Santos is in the market with a 10-year US dollar bond to fund future capital expenditure directed to growth projects, Street Talk understands.
Santos’ Barossa gas project has faced opposition from traditional owners, including those on the Tiwi Islands.
A message sent to potential backers on Monday said four banks had been mandated – Citi, Deutsche Bank, Mizuho and RBC – for the bond issued by Santos, primarily targeting investors in the United States. The issue size is expected to be $US750 million ($1.2 billion).
Initial price guidance for the bond, rated Baa3 by Moody’s and BBB- by S&P, is about 300 basis points over the 10-year US treasury yield, which sits at 4.3 per cent. Proceeds will be used for general corporate purposes, according to a transaction sheet seen by Street Talk. However, management told investors funds would be mainly used for growth capex in the next two years, citing the $5.8 billion Barossa gas project in the Timor Sea.
“That is, the Barossa Project (Santos holds a 50 per cent stake) with attributable project capex of around $US1.8 billion excluding Darwin Pipeline Duplication, Pikka Phase 1 (51 per cent stake) with attributable capex of around $US1.3 billion and Moomba CCS (66.7 per cent stake) with attributable capex of about $US145-150 million,” Nomura credit desk said.
“These growth projects’ first oil/completion dates are expected between 2024-2026.”
The issue comes after Santos posted a 32 per cent slump in first-half profit due to softer production and lower commodity prices.
Net profit at Santos dropped to $US790 million in the six months ended June 30, from $US1.17 billion in the first half last year. Underlying profit dived 37 per cent to $US801 million, broadly
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