* Santos seeks to cut net debt to $3 bln by 2019
* Focus on PNG and Australian gas assets
* Other offshore assets and ageing oil non-core
(Adds CEO comments)
By Sonali Paul
MELBOURNE, Dec 8 Australia's Santos Ltd
will cut costs and put some assets up for sale in a turnaround
strategy announced on Tuesday, aiming to reduce debt over the
next three years and set itself up to grow as a gas producer.
The push to focus on long-life gas assets comes after the
company has struggled with the debt load for its flagship
Gladstone liquefied natural gas project amid a collapse in oil
and gas prices, forcing a cost-cutting drive to boost cash flow.
"I believe this improved operational performance provides a
strong foundation for us to implement a new strategy for
Santos...where we can focus on growth rather than survival,"
Chief Executive Kevin Gallagher told analysts.
Santos, which counts China's ENN Group as its largest
shareholder, is going to focus on five long-life gas projects in
Australia and Papua New Guinea, while pooling together its
remaining assets, including stakes in Indonesia and Vietnam and
ageing oil fields in Australia, into a separate business.
Gallagher said Santos would sell these assets if it received
a good enough offer.
"Santos will target a US$1.5 billion reduction in net debt
to less than US$3 billion by the end of 2019 through increased
operating cash flow and releasing capital through non-core asset
and infrastructure sales," the company said in a statement.
Gallagher highlighted that the company has already slashed
costs to generate free cash flow at an oil price above $39 a
barrel, down from $47 when he began the job in February.
Santos shares, which have lost two-thirds of their value
since oil prices collapsed in mid-2014, rose as much as 3.2
percent on Thursday, but pared gains on concerns about its flat
production profile over the next few years.
RBC analyst Ben Wilson said the company's guidance for sales
in 2017 of 73-80 million barrels of oil equivalent (mmboe) was
well below his forecast for 85 mmboe.
ENN Group's listed unit ENN Ecological, which
has asked for a board seat, was not immediately available to
comment on the new strategy.
Gallagher flagged that GLNG, which started exporting a year
ago, would increase sales to around 6 million tonnes a year over
its three-year ramp-up, well below its capacity of 7.8 million
tonnes, but would offer the extra space to other producers.
Santos will target growth in Papua New Guinea, where it owns
a stake in the PNG LNG project run by ExxonMobil and
recently bought into another exploration prospect, Muruk.
The Cooper Basin in South Australia will come back into
focus, Gallagher said, while Santos sees its offshore holdings
in the Northern Territory potentially supplying gas to
ConocoPhillips' Darwin LNG plant after 2022.
(Reporting by Sonali Paul; Additional reporting by Tom
Westbrook; Editing by Tom Brown)