Santos pays $612m for major CBM field

AUSTRALIA’S third-largest oil and gas company, Santos, has paid US$466 million (A$612m) for US-listed Tipperary Corporation, giving Santos control of the huge Fairview coalbed methane field.
Santos pays $612m for major CBM field Santos pays $612m for major CBM field Santos pays $612m for major CBM field Santos pays $612m for major CBM field Santos pays $612m for major CBM field

The move will make Santos the largest CBM producer in Australia, overtaking Origin Energy.

The acquisition gives Santos operatorship and a 75% operated working interest of Fairview, located north of Roma in southern Queensland, said managing director John Ellice-Flint.

“The long life and stable cash flows generated by this asset complement our strategy of enhancing our base Australian business, whilst continuing to grow our international exploration and production operations," he said.

The deal will also give Santos CBM blocks in the US.

The acquisition will do much to offset declining production from Santos' Cooper/Eromanga Basin gas fields.

Fairview is one of the largest and highest quality CBM assets in Australia, with field properties similar to those found in the highly productive San Juan Basin in the USA.

The Fairview net revenue interest Proven (1P) reserves were 578 billion cubic feet as at December 31 2004, according to a reserves estimate prepared on behalf of Tipperary Corporation by Schlumberger Technology Corporation for its SEC reporting requirements.

Fairview is currently producing at the facility limit of about 38 terajoules per day from 53 producing wells, with well capacity of up to 48TJ per day.

“As a result of this acquisition, Santos’ overall production is expected to increase by approximately 12PJ (2 million barrels of oil equivalent) in 2006, with further incremental increases thereafter,” the company said.

The acquisition will also give Santos more than 4,000 square kilometres of additional exploration acreage in the Comet Ridge area of the Bowen Basin. Combined with Santos’ existing Surat Basin acreage, the company will hold significant strategic positions close to existing infrastructure in both of Queensland’s key CBM producing regions.

Ellice-Flint said Fairview field was a world-class CBM asset with material reserves and production, a demonstrated low cost operating history, and high-quality, long-term gas sales contracts.

“The acquisition of Fairview represents a unique opportunity to become one of the largest participants in Australia’s emerging coal seam methane industry,” he said.

“Together with Santos’ existing coal seam methane field at Scotia and conventional gas interests in the Cooper, Surat, Otway and Gippsland Basins and in Papua New Guinea, the company is well positioned in all the current and potential supply regions to the growing eastern Australian gas markets.”

Santos intends to initially finance the acquisition using its internal resources. The company said its financial ratios were expected to remain within target levels.

The cash consideration for the acquisition including the assumption of $US140m in debt. The transaction is to be effected by way of a merger and is subject to Tipperary Corporation shareholder approval which is expected early in the fourth quarter, and other customary conditions to completion.

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