S&P affirms Santos

Standard & Poor's said it affirmed its BBB+/A-2 corporate credit ratings on Santos Ltd. and removed the ratings from CreditWatch with negative implications, where they were placed Oct. 6.

The outlook is stable.

The affirmation follows Santos' decision not to proceed with an acquisition of Queensland Gas Company Ltd. following the Australian Competition and Consumer Commission's rejection of the deal.

The view of the commission may limit Santos' future acquisition and domestic growth opportunities in upstream gas interests along Australia's eastern seaboard, S&P said. The company also is focusing on opportunities in southeast Asia and divesting its U.S. interests. A significant exposure to southeast Asia could impact its current credit ratings because of higher sovereign, development and operating risks, the agency said. Other concerns include volatile oil prices, the company's poor historic reserve-replacement record and risks associated with the changing asset profile, the agency said.

The potential risks associated with the company's growth initiatives are tempered by Santos' reliable contracted gas cash flows and moderate-to-conservative financial policy, S&P added.

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