Offshore staff
ADELAIDE, Australia – Santos and Oil Search have agreed on conditional terms for a full merger.
If approved by the respective shareholders, this would create – according to Santos – a regional champion possessing a diversified portfolio of long-life, low-cost assets across Australia, Timor-Leste, Papua New Guinea, and North America with significant growth opportunities.
The pro-forma market capitalization of A$21 billion ($15.46 billion) would position the merged group as one of the world’s 20 largest global oil and gas companies, with combined 2021 production of around 116 MMboe; 4,983 MMboe of resources; and more than $5.5 billion of liquidity to self-fund development projects, with options for further optimization of the portfolio.
It would also lead to greater alignment in Papua New Guinea that would provide a boost to projects such as Papua LNG.
Citigroup and JB North & Co are acting as financial advisers and Herbert Smith Freehills with Dentons acting as legal advisers to Santos.
Wood Mackenzie research director Andrew Harwood commented that the proposed combination would immediately increase Santos’ production by over one-third to around 290,000 boe/d.
Oil Search’s impact would become more pronounced by the mid-2020s when it could contribute over half of growth to the combined production output.
“At current commodity prices, the combined entity will generate significant free cash flow through 2021 and 2022. A stronger balance sheet will then provide a solid platform from which to invest in new development projects in Australia and PNG.
“Capital reallocation within a larger portfolio, or strategic divestments would be likely to smooth out future outflows. The merged company will be able to proceed with existing farm-down processes at Dorado [offshore Western Australia] and Alaska from a position of strength.
“For Australia’s E&P landscape, this might not be the last transformative deal we see this year, with BHP’s Petroleum business and Woodside strongly rumoured to be in discussion on a similar match-up.”
08/02/2021
