PERTH (miningweekly.com) – Oil and gas major Santos has revealed plans to spin off its noncore assets into a standalone low-cost business as it targets a $1.5-billion debt reduction by the end of 2019.

The assets to be spun out include those in Indonesia, Vietnam, Malaysia and Bangladesh, as well as in the Narrabri and Mereenie basins, in Australia, and some of the offshore Australian assets, including Mutineer Exeter, Barrow and Thevenard.

MD and CEO Kevin Gallagher said in Sydney on Thursday that the noncore assets would be continually optimised to maximise value, including sweating or exiting the assets, and re-phasing capital investment.

He said that Santos would implement a disciplined, three-phase strategy to drive shareholder value, which included transformation, building and growth.

Santos would simplify its business to focus on its five core, long-life natural gas assets, including the Cooper basin, the Gladstone liquefied natural gas (GLNG) project, its assets in Papua New Guinea, as well as Northern Australia and Western Australia.

The company would also progress growth opportunities across higher margin conventional assets, while maximising production across its operated assets. It would also open infrastructure and facilities to increase throughput and drive down unit costs.

The third tier of the new strategy would focus on developing a focused exploration strategy and capability, while identifying additional gas supply to drive long-term value from its core assets.

Gallagher said that the strategy would be underpinned by disciplined capital management, with Santos aiming to reduce its debt to less than $3-billion by the end of 2019 through increased cash flow and releasing capital through noncore asset and infrastructure sales.

“We have reduced the free cash flow break-even oil price to $39/bl, down from $47/bl at the start of the year.

“Capital expenditure and upstream unit production costs have been reduced by 53% and 17% respectively, headcount has been reduced by more than 500 positions, and the business has been free cash flow positive for each of the last seven months,” said Gallagher.