The Santos Ltd (ASX: STO) share price is ending the week on a positive note.
In morning trade, the energy producer's shares are up 1.5% to $7.79.
Why is the Santos share price rising?
There have been a couple of catalysts for the rise in the Santos share price on Friday.
The first has been a strong rise in oil prices overnight amid optimism that OPEC will extend its production cuts through to the end of the year.
Also giving the company's shares a boost is news that it has sold a small stake in the PNG LNG operation.
According to the release, Santos has executed a binding sale agreement to deliver Kumul Petroleum a 2.6% participating interest in PNG LNG for a total purchase consideration comprising cash of US$576 million and the assumption of US$160 million of project finance debt.
Completion of the sale agreement is not subject to finance and is conditional only on the approval of the PNG competition regulator before the end of the year.
Kumul Petroleum has paid US$80 million into escrow with Santos as part payment of the purchase consideration under the sale agreement. It also plans to make further pre-payments of the purchase consideration into escrow throughout the period up until completion.
But it may not stop there. Santos has agreed to grant Kumul Petroleum a call option to acquire a further 2.4% participating interest for a cash purchase price of US$524 million (plus a proportionate share of project finance debt). Kumul Petroleum must exercise its option on or before 30 June 2024.
Santos' managing director and CEO, Kevin Gallagher, said:
I am pleased we've reached a binding agreement with Kumul on the sale of up to 5% of PNG LNG. This re-structured transaction is a pragmatic solution that provides a clear pathway to completion and builds our strategic alignment with Kumul and our long friendship with PNG, where Santos has been a committed corporate citizen for over 40 years. 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.