Page 12 - AsianOil Week 12

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Santos said it generated $186mn in free cash flow in the first two months of this year, resulting in cash on hand of $1.2bn at the end of the period. In addition, the company can access $1.9bn in committed undrawn debt facilities with matur- ities that predominantly range from two to five years. Net debt stood at $3.1bn as of February 28.
The company’s fixed-price gas sales con- tracts are anticipated to account for around 35% of its sales volumes this year. Santos highlighted a new 12-year domestic supply contract in Western Australia that will start in the middle year and see it initially supply 120 terajoules (3.13mn cubic metres) per day, or 1.14bn cubic metres per year.
In addition to these fixed price sales volumes, Santos said it had 6.2mn barrels of oil production hedged in 2020 at a floor price of $54 per barrel.
Santos said that despite the spending cuts it should still be able to maintain production levels and meet its production guidance of 79-87mn barrels of oil equivalent (boe) for this year.
Gallagher said: “Whilst the current oil price dynamic is challenging, the eventual recovery will create opportunities for companies posi- tioned to act on them. Our strategy to lever- age existing assets and infrastructure remains unchanged, and we expect to pursue these excit- ing opportunities when conditions permit.”
The company’s positioning in the face of sub-$30 oil has seen S&P Global Ratings (S&P) reaffirm Santos’ BBB- credit rating with stable outlook. S&P said not only did Santos enjoy a solid buffer to withstand current oil prices, but it had the financial capability to acquire Cono- coPhillips’ assets.™
Warrego trims the fat, rejects takeover bid
FINANCE & INVESTMENT
AUSTRALIAN independent Warrego Energy announced plans this week to reduce its over- heads after revealing that it had rejected a takeo- ver offer from Strike Energy.
The company said on March 24 that the board had decided to halve executive directors and senior executives’ salaries as well as non-ex- ecutive directors’ fees from April 1. It said it would review the situation in the new financial year, which starts on July 1.
Warrego described the action as “prudent” and said it would help reduce overheads and conserve funds during a period of “energy mar- ket uncertainty”.
In addition to the salary cuts, the company said Duncan MacNiven had decided to step down as executive director effective immedi- ately. The board will now comprise five directors.
Warrego announced on March 23 that it had rejected a recently received takeover offer from Strike Energy, saying that the offer undervalued Warrego and its assets.
Strike had proposed acquiring all of Warre- go’s shares for an all-scrip consideration of 1.2 Strike shares for each Warrego share. The pro- posal was subject to a number of conditions, including: completion of due diligence to Strike’s satisfaction; no material asset sales, divestments or similar transactions; no issuance of new equity or changes to Warrego’s capital structure, and receipt of a unanimous recommendation by Warrego’s board.
Explaining why it had declined the offer, Warrego said: “The proposal, if it were imple- mented, would result in Warrego sharehold- ers owning approximately 31% of the merged
entity, whereas Strike and Warrego each hold a 50% interest in the EP469 Joint Venture, which includes the West Erregulla tenements. The pro- posal also undervalues Warrego’s other valuable assets, including its Tesorillo project in Spain.”
It noted, however, that it remained open to future offers, whether from Strike or any third party, provided those proposals represented “compelling value for Warrego shareholders”.
Alongside the company’s 50% stake in the 224-square km EP469, Warrego also holds the application for the 8,700-square km STP- EPA-0127 permit. Both acreages are located in the North Perth Basin.
The company also owns an 85% stake in the Tesorillo Project in Spain, though AIM-listed Prospex Oil and Gas has secured the right to increase its stake there from 15% up to 49.9%.™
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w w w . N E W S B A S E . c o m Week 12 26•March•2020