Santos shares are being destroyed

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Santos was hammered when the energy company came out of a trading halt today after completing the first round of a capital raising.

Its shares ended the day at $4.30, down more than 27% but still ahead of the $3.85 price on the share entitlement offer.

The energy group says it completed the institutional component of its $2.5 billion equity capital raising, part of a plan to cut debt by $3.5 billion.

The institutional component raised $1.17 billion with about 86% of entitlements taken up.

The shortfall then went to existing shareholders and other institutional investors, clearing at $4.60, a premium of $0.75 above the offer price of $3.85.

Executive chairman Peter Coates says the successful uptake of the offer is a clear sign of confidence in the package of capital initiatives Santos announced this week to strengthen the balance sheet.

The retail component of the offer is expected to raise another $1.35 billion. Retail shareholders will be able to subscribe for 1 new share at $3.85 each for every 1.7 ordinary shares held.

Santos has been cutting costs and shedding staff in a bid to catch falling prices for oil. 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 is also getting a new CEO, Kevin Gallagher, the CEO of engineering services group Clough. He will start the new role early 2016, subject to agreement on a release date with Clough.

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

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