Santos gets a new CEO as it raises $2.5 billion

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Oil and gas giant Santos has appointed a new CEO amid plans to raise $2.5 billion and reduce debt.

Kevin Gallagher, the CEO of engineering services group Clough, will become the new managing director and CEO of Santos.

He will start the new role early 2016, subject to agreement on a release date with Clough.

Santos also announced completion of its strategic review with a $3.5 billion plan to cut net debt.

The review includes a 1 for 1.7 entitlement offer, raising a $2.5 billion at $3.85 a share, a 34.9% discount to Friday’s closing price of $5.91.

Another $520 million will be raised from sale of the company’s interest in Kipper gas field to Mitsui E&P Australia.

And $500 million will come an affiliate of the China-based international private equity firm, Hony Capital through a from a private placement of shares at $6.80 each, a 15% premium to Friday’s closing price of $5.91. Hony Capital will end up with a 7.9% holding in Santos.

“The review has shown that we can further streamline the business and enhance financial discipline and the Board is absolutely committed to pursuing those opportunities,” says Santos executive chairman Peter Coates.

“We are very confident that the steps taken today will drive better returns for shareholders by strengthening the company’s financial position and underscoring the value of its high quality and diverse asset base.”

Santos intends to pay 5 cents a share for the 2015 final dividend.

Gallagher, the incoming CEO, has nearly 25 years experience in managing oil and gas operations in Australia, the US and North and West Africa.

He said: “My career foundations are in oil and gas and I believe the Santos portfolio offers some truly exciting, world class opportunities, irrespective of the current global oil price environment.”

David Knox, the outgoing CEO, announced in August he was stepping down as the oil and gas producer’s share price weakened further, as falling oil commodity prices sucked revenue from the company.

Santos has been cutting costs and shedding staff. Capital expenditure is down by $900 million and 768 jobs have gone. ANd costs to produce a barrel are down 15% to $13.80.

The company’s net profit dropped to $37 million for the half year. The oil and gas producer managed to get just $US60 per barrel in the six months to June compared to $US115 in the previous first half, a 47% fall.

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