Santos to snare oil field stake

Santos (STO) will buy a 50% stake in an undeveloped offshore oil field in Indonesia up to $US188 million ($209 million) from AWE (AWE), as part of its growth strategy in Asia. 

The oil giant inked the deal to buy a half share of the Northwest Natuna production sharing contract (PSC) – wholly owned by AWE – which covers the Ande Ande Lumut oil field.

It would also see Santos take control as operator of the project.

Under the sale and purchase agreement struck with AWE, Santos will make an initial payment of $US100 million on completion of the deal, which is subject to Indonesian regulatory approval.

After a final investment decision is made next year, a capital carry of up to $US88 million will also be made. 

The field, discovered in 2000, has estimated gross reserves of 100 million barrels of oil.

AWE bought the contract in early 2012 for $US139 million and the sale is expected to generate a profit of $60 million.

Santos vice president Asia Pacific Martyn Eames said "the acquisition was consistent with Santos’ strategy of focused growth in its core countries in Asia" (see Santos' cash pipeline).

Under the terms of the PSC, an Indonesian national company was able to acquire a 10% undivided interest in it, which if pursued would reduce Santos’ and AWE’s interests pro-rata.

Santos has fallen 1.3% to $14.40 at 1409 AEST, while AWE has surged 9% to $1.39.