The Kipper field, located in the Gippsland Basin, has been plagued by cost increases and schedule delays but is now ready to start up in 2016. We value Santos' interest in Kipper at US$374 million. The deal comes as part of a broader US$2.5 billion capital initiative. The combined measures allow Santos to stabilise its financial position without selling any of its core assets, such as its 13.5% stake in PNG LNG. We forecast Santos' gearing will fall to 28%, from 47% in Q2 2015.