The Santos Ltd (ASX: STO) share price is pushing higher on Tuesday morning.
At the time of writing, the energy producer's shares are up 2% to $7.02.
What's going on with the Santos share price today?
Investors have been bidding the Santos share price higher today after a positive announcement offset further weakness in oil prices.
According to the release, Santos has received a binding conditional offer from Kumul Petroleum to acquire a 5% project interest in PNG LNG for an asset value of US$1.4 billion (A$2.2 billion). This includes a proportionate share of project finance debt of approximately US$300 million.
Kumul Petroleum is Papua New Guinea's national oil and gas company and an existing partner in the PNG LNG project.
Should the sale go ahead, it would increase the equity interest of Kumul Petroleum to approximately 22%. This supports the Papua New Guinea's government objectives for the people of Papua New Guinea to have a greater equity interest in the development of their natural resources.
Santos will be left with a 37.5% interest in the project.
What's next?
The offer is conditional on Kumul Petroleum obtaining the waivers of certain pre-emptive rights by all PNG LNG project participants under the project operating agreement. It is also subject to customary conditions including necessary regulatory approvals and Kumul Petroleum securing financing.
If it does complete, the proposed transaction will have an effective date of 31 December 2022. This will mean that Santos retains all 2022 cash flows.
Santos managing director and CEO, Kevin Gallagher, believes the sale represents an opportunity to build strategic alignment for the future development of PNG's natural gas resources. He commented:
PNG LNG is a low-cost and low emissions intensity asset that contributes strong cash flows to the project participants and economic and social benefits to the nation. Following the transaction, Santos would maintain a 37.5 per cent interest in this world-class project. Santos has been a committed partner in PNG for over 40 years, involved in more than 30 different licenses and has significant community partnerships and projects across the nation.
As part of the deal, Santos and Kumul Petroleum will negotiate a heads of agreement to further collaborate on the development of Kumul's regional capacity and capability. This includes carbon emission reduction opportunities to achieve net-zero operations.
