Santos' PNG LNG carve-out moves forward

The news: Papua New Guinea's national oil company Kumul Petroleum Holdings has satisfied the funding conditions to buy a 2.6% stake in PNG LNG from Santos. The deal has also secured approval from Papua New Guinea's competition and consumer watchdog, the only other hurdle for the purchase.

The numbers: Kumul has deposited roughly USD250 million ($366.3 million) into escrow as part payment for the carve-out. The total comprises $576 million in cash and an assumption of around $160 million in project finance debt. Under the agreement announced in August, Santos will grant Kumul a call option to acquire a further 2.4% stake in PNG LNG for $524 million in cash and further project debt.

The context: The deal is part of the arrangement agreed with the Papua New Guinea Government when Santos bought ASX-listed rival Oil Search in 2021. The PNG LNG project is operated by ExxonMobil. On completion, Santos’ stake will drop to 37.5% but it will remain the largest investor. The PNG state will own 22% of the project.