Santos to raise approximately A$1.5 billion via an Institutional Placement and Share Purchase Plan

NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES This announcement has been prepared for publication in Australia and may not be released or distributed in the United States. This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any security or financial product and neither this announcement nor anything attached to this announcement shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or the solicitation of an offer to buy, securities in the United States or any other jurisdiction in which such an offer would be illegal. Any securities described in this announcement have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state or jurisdiction of the United States. Accordingly, the securities may not be offered or sold, directly or indirectly, in the United States unless they have been registered under the U.S. Securities Act (which Santos has no obligation to do or procure), or are offered and sold in a transaction exempt from, or not subject to, the registration of the U.S. Securities Act and any other applicable United States state securities laws.

Santos today announced a fully underwritten institutional share placement to raise A$1,040 million (“Institutional Placement”). The Institutional Placement will be followed by an offer to all existing eligible Australian and New Zealand shareholders to participate in a Share Purchase Plan (“SPP”). The SPP is expected to raise up to A$500 million and is not underwritten.

The proceeds from the Institutional Placement and SPP will strengthen the Santos balance sheet and provide Santos with financial flexibility to take advantage of growth opportunities that are aligned to its core business and recently announced new strategic plan. Following the Institutional Placement, Santos will have a gearing ratio of approximately 32%1 and is expected to be below 30% following the SPP. The additional capital removes potential uncertainty around the ability of Santos to build and grow a sustainable business in a low oil price environment.

On 8 December 2016, Santos announced its new strategy at its Investor Day and provided sales volumes, production and capital expenditure guidance for 2017.

Santos will implement a disciplined, three-phase strategy to drive shareholder value.

  • Transform: Simplify the business to focus on five core, long-life natural gas assets: Cooper Basin; GLNG; PNG; Northern Australia, and Western Australia Gas. The remaining assets will be packaged and run separately for value as a standalone business.
  • Build: Progress growth opportunities across higher margin conventional assets and maximise production across operated assets. Open infrastructure and facilities to increase throughput and drive down unit costs.
  • Grow: Develop focused exploration strategy and capability, and identify additional gas supply to drive long-term value from the five core, long-life natural gas assets.

A copy of the Investor Day presentation is available at www.asx.com.au and from Santos’ website at www.santos.com

Santos Chairman Peter Coates AO said: “Santos is now operating under a new CEO and management team, a lower cost operating model and a well-defined strategic plan. The equity raising is a key step in ensuring that Santos now has a solid platform for growth. The SPP will enable retail shareholders to participate in and benefit from a stronger Santos.”

Santos Managing Director and Chief Executive Officer Kevin Gallagher said: "We reiterate our aim to drive sustainable shareholder value by becoming a low cost, reliable and high performance business. This capital raising provides the opportunity for existing and new institutional investors to support a stronger Santos with improved operating performance through the transformation of the business and the focus on five core long-life natural gas assets. It will remove the constraints around growing the business in a low oil price environment. Our goal remains to target debt reduction through maximising operating cash flow, sales of non-core assets and releasing capital from infrastructure.”