Origin, Santos Extend Debt, Slash Costs as Oil Prices Sink
MELBOURNE, Dec 11 (Reuters) - Origin Energy Ltd and Santos Ltd took steps on Thursday to shore themselves up against a 50 percent slide in oil prices as they both race to complete huge gas projects in Australia in 2015.
Origin, on track to start exporting liquefied natural gas (LNG) from the Australia Pacific LNG project in mid-2015, took on more debt, increasing its loan facilities to A$7.4 billion ($6.2 billion), but extended repayment deadlines to 2018 and 2019 and cut its interest rate margin by 0.3 percent.
"Given the attractive funding costs we saw it as prudent to take the opportunity to add to the existing facilities, further supporting a conservative liquidity buffer through start up of Australia Pacific LNG's first and second train," Origin finance director Karen Moses said in a statement.
At the same time, Santos said it would cut planned capital spending in 2015 by a quarter to A$2 billion and was continuing to consider selling some assets, but only at the right price, after abandoning plans for a hybrid debt sale last week.
Santos said it had no need to sell new shares to raise money, defying some analysts' views that it should, in light of weak oil prices, its debt burden and funding needs to complete the Gladstone LNG project, due to start exporting in the second half of 2015.
"The company has no present need or intention to raise equity," Chief Executive David Knox said in a statement, three days after ratings agency Standard & Poor's cut its credit rating and warned a further downgrade was possible.
The companies have come under pressure following a six-month slide in oil prices to five-year lows, but both say they are being conservative and proactive in heading off trouble.
Santos' shares have lost half their value this year, hitting 10-year lows, while Origin's shares have dropped around 25 percent, hitting a two-year low of A$10.42 on Thursday.
Both companies are now rated 'BBB' by S&P with a negative outlook. Further downgrades could be possible as S&P's oil price assumption for 2015 is well above current oil prices.
($1 = 1.2015 Australian dollars) (Reporting by Sonali Paul; Editing by Stephen Coates)
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