PERTH (miningweekly.com) – Oil and gas major Santos has made a $2.15-billion play for Western Australia-focused oil and gas producer Quadrant Energy.

Quadrant holds natural gas and oil production, as well as near- and medium-term development, appraisal and exploration assets across more than 52 000 km² of acreage, predominantly in the Carnarvon basin.

In 2017, the company’s share of production from its assets amounted to 19-million barrels of oil equivalent, with 2P reserves estimated at 22-million barrels of oil equivalent.

Santos on Wednesday told shareholders that the acquisition of Quadrant was fully aligned with the company’s growth strategy to build on existing infrastructure positions around the company’s core assets.

MD and CEO Kevin Gallagher noted that Santos had a long-established relationship with Quadrant, which has operated in its Western Australian natural gas assets for several years, developing a well-deserved reputation as a safe, high reliability and low cost operator.

“This acquisition delivers increased ownership and operatorship of a high quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly, significantly strengthens Santos’ offshore operating capability,” said Gallagher.

“It is materially value accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

“The transaction lowers our proforma 2018 forecast free cash flow breakeven oil price by a further A$4/bl and Quadrant’s stable cash flows provide increased certainty during the upcoming period of major growth project delivery,” said Gallagher.

Under the terms of the agreement, Santos will acquire 100% of Quadrant for an upfront payment of $2.15-billion in cash, and contingent payments linked to the 2C oil/liquids resource certification for the Dorado project, of more than 100-million barrels of oil equivalent and a future final investment decision, as well as royalty over any future Bedout basin project revenue, excluding production from Dorado.

Santos told shareholders that the acquisition would be fully funded from existing cash resources, and $1.2-billion in new committed debt facilities.

The new debt facilities comprise a $600-million five-and-a-half-year bank term loan facility and a $600-million two-year bridge facility, which will be refinanced post the completion of the acquisition.