Santos set to pull pin on Evans Shoal sale
Santos is considering axing the $200 million sale of its stake in the Evans Shoal gas field in the Timor Sea amid mounting concern the Russian-backed US suitor is struggling to raise the necessary cash.
Having already extended the original settlement date by one month, Santos is understood to be considering pulling the deal if Magellan Petroleum does not pay $85.45 million by Monday.
Sources said Magellan, although committed to the deal, might struggle to secure the cash by Monday.
The deal was announced in March last year and was part of Santos' efforts to rationalise its interests in the Timor Sea.
The sale terms included a $15 million deposit followed by the second payment for a total consideration of $100 million on settlement.
Magellan had also agreed to pay Santos $50 million once a final investment decision for Evans Shoal's development was made, followed by a final $50 million instalment on first gas production.
New York-based Magellan did not respond to queries while a Santos spokesman would only say "we are in discussions with Magellan about the future of the transaction".
Santos owns 40 per cent of Evans Shoal, 300km north of Darwin, and is the permit's operator. Its partners are Malaysia's Petronas (25 per cent), Royal Dutch Shell (25 per cent) and Osaka Gas (10 per cent).
The field contains 6.6 trillion cubic feet of gas and 30 million barrels of condensate, but has been stranded because of its isolation and high levels of contaminating carbon dioxide.
Although the sale of Evans Shoal is not crucial for Santos, which is focused on expanding its WA domestic gas business and developing the $16 billion Gladstone coal seam LNG project in Queensland, the company is thought to be growing increasingly frustrated by Magellan's failure to settle,
It comes despite Magellan telling investors only last week that its biggest shareholder, a Luxembourg-based group called Young Energy Prize and run by Russian tycoon Nikolay Bogachev, remained committed to providing the funds for the Evans Shoal deal.
The commitment, Magellan said, would be as a Young Energy loan convertible into Magellan equity.
Acquiring the Evans Shoal stake would significantly increase Magellan's presence in Australia. Its erstwhile focus has been in the Northern Territory where Magellan and Santos are partners in gas and oil-producing ventures.
It is not clear what Santos would do with its Evans Shoal stake if it decided to axe the Magellan transaction. There has been no indication that the other Evans Shoal partners want to pick it up.
Evans Shoal is near the Barossa-Caldita fields in which Santos has a 40 per cent stake. ConocoPhillips tried to sell its 60 per cent stake in Barossa-Caldita but a deal with a European major fell over just before Christmas because of a disagreement over the field's development options.
