Santos' A$3 billion rights issue elicits strong response

14 May 2009

In a capital raising spree for its expansion activities, Australia's third largest oil and gas producer Santos has already gathered A$1.75 billion subscription from institutional investors against its rights issue announced on Monday.

The balance portion of A$1.25 billion, which is earmarked for retail investors is fully underwritten and is due for subscription from May 15 to June 9.

Santos said that the institutional part invited huge demand from domestic and international institutions and was heavily oversubscribed.
 
The issue price was fixed at A$12.50, which was at a 27 per cent discount to the share price before trading was halted. The offer promised two equity shares for every five shares held by eligible share holders.
 
Santos chief executive David Knox said they are delighted with the strong support from their institutional shareholders, and the proceeds would provide sufficient capital to meet the company's present requirement.

The amount raised is A$100 million more than the originally envisaged minimum target of A$1.65 billion. The underwriters JP Morgan, Deutsche Bank and Citi are convinced that they can easily sell any part not subscribed by retail share holders.

Santos will use the A$1.75 billion to fund its share of the Papua New Guinea (PNG) Liquefied Natural Gas (LNG) project, including A$600 million set aside for the early redemption of high-cost securities to strengthen the company's balance sheets and maintain the company's credit rating.

The A$21.5 billion ($16.5 billion) project managed by ExxonMobil is planned to export 6.3 million tonnes per annum of LNG from its two processing streams. Santos has a 17.7 per cent stake in the project. The company held a cash reserve of A$1.5 billion before the fund raising.