Shares in Santos have tumbled by more than seven per cent after the energy giant said it will slash spending and postpone a capital raising following falls in global oil prices.
Chief Financial Andrew Seaton said the potential hybrid European issuance was always about proactive capital management and the company had flexibility in the timing of any issue.
“Given the current oil price environment, it is prudent for the company to review its spending plans for 2015 and we expect to significantly reduce capital and operating expenditure,” Mr Seaton said.
The company said it would update the market on its spending review and plans to reduce expenditure “as appropriate”.
In response, Santos shares fell 76 cents, or 8.4 per cent, to $8.33 at 1100 AEDT on Thursday.
Last month Santos said it was considering a potential European hybrid issue, subject to acceptable market conditions.
But since the November 26 announcement, the oil market has suffered considerable volatility.
In response to a change in market conditions, Santos has decided to defer any hybrid issuance until market conditions improved, the company said in a statement on Thursday.
Santos said it has a robust existing funding position, including approximately $2 billion in available liquidity, and had “no current intention” to undertake an equity raising.
IG markets analyst Evan Lucas said the company’s shares were heavily sold off in early trade with the postponement of the debt issuance.
“If they can’t go to the debt market and raise capital in Europe, the market theory is that they would have to do an equity raising,” Mr Lucas said.
He said volatility in the oil price was putting pressure on Santos in relation to their balance sheet, but he expects a steep fall in the company’s capital expenditure next year as its Gladstone (GLNG) project comes online.
“It was a bit of an overreaction this morning,” he said.
“It was pretty savage but anything in the oil space has been completely savaged this week.”