Santos, Oil Search agree to revised merger proposal

Santos Ltd. and Oil Search Ltd. have agreed to a revised merger proposal. The combine would have a market capitalization of $21 billion (Aus.) and 2021 production of about 116 MMboe, making it one of Australia’s largest natural gas producers.

Oil Search had previously rejected a confidential proposal made June 25 by Santos under which Oil Search shareholders would receive 0.589 Santos shares for each Oil Search share held valuing the target at around $8.8 billion (Aus.) (OGJ Online, July 20, 2021). Oil Search shareholders would hold 37% of the combined group with Santos shareholders holding 63%.

Under the revised merger proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held via a scheme of arrangement. Following approval, Oil Search shareholders would own 38.5% of the merged group and Santos shareholders would own 61.5%.

The Oil Search board said, subject to completion of due diligence and agreement of a binding agreement, it intends to unanimously recommend the revised proposal, in the absence of a superior one, and subject to an independent expert concluding the arrangement is in the best interests of Oil Search shareholders.

The combined company would have a portfolio of high quality, long-life and low-cost assets, a combined 2P+2C resource base of 4,983 MMboe, and a US $5.5-billion balance sheet to fund development projects in Alaska, PNG, and Australia without the need for sell-downs or additional equity financing.

Santos is a joint venture partner with Oil Search in the PNG LNG project in Papua New Guinea.

Santos and Oil Search have committed to conduct best endeavors due diligence subject to appropriate confidentiality arrangements over a period of 4 weeks with the aim of entering into a merger implementation agreement, which would contain conditions to completion of the merger such as regulatory approvals.