Santos' joint venture partner Comet Ridge Ltd (ASX: COI) announced it has increased its ownership of the project and Santos will likely be able to do the same.
The Mahalo gas project is located near Gladstone in Queensland. The companies hope it will supply gas to the east coast of Australia in the future.
Right now, the Santos share price is $6.45, 0.62% lower than its previous close. At one point it was down as much as 0.93%, but also edged into the green during morning trade.
Let's take a closer look at today's news from Santos.
Santos might up its Mahalo holding
The Santos share price is slipping despite news it will be providing a loan to Comet Ridge in exchange for the option to increase its hold in the Mahalo project to 42.86% pro rata.
Comet Ridge will use a $13.5 million loan from Santos to acquire Australia Pacific LNG Pty Ltd's 30% share of the project, increasing its stake to 70%.
Santos will then have the option to negotiate with Comet Ridge to increase its stake up to a holding of 50%.
It will also be able to negotiate to acquire 50% of Comet Ridge's Mahalo North and Mahalo East assets.
The companies plan for Comet to drive it to a final investment decision, after which Santos will take over as the project's development operator.
The Mahalo project encompasses the shallow portion of the project. The deep portion of the area is owned in equal parts by Santos and Australia Pacific LNG.
The project's development has been slowed by COVID-19 and the price of oil declining during the pandemic.
Commentary from management
Santos' managing director and CEO Kevin Gallagher commented on the news that could be driving the Santos share price today. He said:
Santos is keen to continue to develop our Queensland resources and this transaction provides another option for additional gas reserves. We look forward to working collaboratively with Comet Ridge to assess the potential of the Mahalo gas project.
Santos share price snapshot
The Santos share price is in the green by the skin of its teeth.
Right now, it's about 2% higher than it was at the start of the year. Fortunately, it's gained about 21% since this time last year.