Santos is pleased to announce it has executed a binding sale agreement to deliver Kumul Petroleum Holdings Limited (Kumul) a 2.6 per cent participating interest in PNG LNG for a total purchase consideration comprising cash of $576 million and the assumption of ca. $160 million of project finance debt (the Sale Agreement).

Completion of the Sale Agreement is not subject to finance and is conditional only on the approval of the PNG competition regulator on or before 31 December 2023. Kumul has paid $80m into escrow with Santos as part payment of the purchase consideration under the Sale Agreement. Kumul has undertaken to make further pre-payments of the purchase consideration into escrow throughout the period up until completion.

In addition, Santos has agreed to grant Kumul a call option to acquire a further 2.4 per cent participating interest in PNG LNG for a cash purchase price of $524 million (plus a proportionate share of project finance debt) (the “Call Option”).

The Call Option must be exercised on or before 30 June 2024 and is subject to completion of the Sale Agreement having occurred and the satisfaction of customary conditions, including necessary regulatory approvals and third-party consents.

On 27 September 2022 Santos announced the receipt of a binding conditional offer from Kumul to acquire a five per cent interest in PNG LNG (refer to ASX release).

This offer and the exclusivity arrangements with Kumul have now expired. The financial terms and effective date (31 December 2022) of the transactions announced today are consistent with the terms of that previous offer inclusive of the transfer of project finance debt.

Santos Managing Director and CEO Kevin Gallagher said:

“I am pleased we’ve reached a binding agreement with Kumul on the sale of up to 5% of PNG LNG. 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,” Mr Gallagher said.

“PNG LNG is a low-cost and low emissions intensity asset that contributes strong cash flows to the project participants and economic and social benefits to the nation.”

PNG Prime Minister James Marape welcomed the Agreement.

“This transaction will increase Kumul’s interest in PNG LNG and supports the PNG government objectives for the people of PNG to have a greater equity interest in the development of their natural resources”, Mr Marape said.

About Santos

Santos is a leading supplier of natural gas, a fuel for the future providing clean energy to improve the lives of people in Australia and Asia.
Santos is already Australia’s biggest domestic gas supplier and aims to be a leading Asia-Pacific LNG supplier. For more than 65 years, Santos has been working in partnership with local communities, providing Australian jobs and business opportunities, safely and sustainably developing Australia’s natural gas resources, and powering Australian industries and households.
With its origins in the Cooper Basin, Santos has one of the largest exploration and production acreages in Australia and extensive infrastructure and is committed to supplying the domestic markets, unlocking resources and driving value and performance.

About Kumul Petroleum

Kumul Petroleum Holdings Limited (KPHL) is Papua New Guinea’s national petroleum and energy company, whose activities are primarily governed by the Kumul Petroleum Holdings Limited Authorisation Act 2015.
Since the company’s inception in 2009, it has operated as a commercial entity, underpinned by its participation in the PNG LNG Project. KPHL manages the State’s 16.57% equity shareholding in this development, making it the third largest shareholder in the US$ 19 billion project. In addition KPHL holds equity positions in a number of other petroleum licences in the country.
As Papua New Guinea’s State nominee, KPHL has a mandated option to take up to 22.5% equity in any operational petroleum project.
Apart from its project and licence area shareholding, KPHL is 100% owner and operator of four petroleum retention licences, has established the Kumul Petroleum Academy for specialist industry training, supports the construction of rural electrification infrastructure, health infrastructure and services (especially cancer and heart disease related), various sporting codes and other worthy community development initiatives.