PERTH (miningweekly.com) – Australian oil and gas major Santos on Monday announced plans to reduce its debt by some A$3.5-billion through a range of initiatives, including the A$520-million sale of its interest in the Kipper gasfield, offshore Victoria.

Santos said the company had reached agreement with Mitsui E&P Australia to divest of its 35% nonoperated interest in the Kipper gasfield, subject to regulatory approvals.

“The sale of Kipper realises good value for this asset despite difficult oil and gas market conditions in recent times,” said executive chairperson Peter Coates.

In addition to the sale of the Kipper gasfield interest, Santos also announced a A$500-million private placement and a A$2.5-billion fully underwritten accelerated pro rata renounceable entitlement offer with retail entitlement trading.

Santos has entered into a binding share subscription agreement with an affiliate of Hony Capital, which would subscribe for more than 73.5-million shares in Santos, priced at A$6.80 each.

The sales price reflected a premium of 15% to the company’s last closing price on November 6 and a 76.6% premium to the price of shares on offer under the entitlement offer.

The entitlement issue would be conducted on a 1-for-1.7 basis, and was expected to raise A$2.5-billion. The entitlement offer price had been set at A$3.85 a share, which represented a 34.9% discount to Santos’s closing price on November 6.

Eligible institutional and retail shareholders would also be invited to participate in separate institutional entitlement and retail entitlement offers, which would also be priced at A$3.85 a share.

Coates said that while the capital initiatives meant that Santos was under no pressure to sell further assets, a recently completed strategic review had attracted significant interest from substantial oil and gas industry operators and investors.

“We expect inbound interest may continue and we will respond accordingly in the normal course. We will only sell assets where there is a compelling value case for our shareholders and it is consistent with the company’s strategy,” he added.

Santos recently received an offer from Malaysian-listed Sona Petroleum to acquire its stake in the Stag oilfield, in the Carnavaron basin. Sona was offering Santos and its joint venture partner Quadrant Energy a combined $50-million for their respective interests in the project.

Reports have also emerged that Quadrant was hoping to acquire Santos’s 45% interest in their jointly operated gas business in a deal valued at A$1.5-billion. However, neither Santos nor Quadrant have confirmed the speculation.

In addition, Coates said on Monday that the company review had also identified that Santos could streamline its business and enhance its financial discipline, adding that the board was now pursuing these opportunities.

Already, Santos had reduced its 2015 capital guidance by some A$200-million to A$1.8-billion, in addition to the A$700-million in capital savings already announced.

The company would also revise its dividend framework to better reflect Santos’s exposure to the oil-linked liquefied natural gas pricing and the cyclical characteristics of the global oil markets.

Meanwhile, Santos on Monday also announced the appointment of Clough CEO Kevin Gallagher as MD and CEO.

Gallagher, who had nearly 25 years experience in managing oil and gas operations in Australia, the US and North and West Africa, will replace David Knox, who had agreed to work with Coates to set up a smooth transition for Gallaghar into his new role.

Gallagher would assume his duties in early 2016, subject to agreement on a release date with Clough.