PERTH (miningweekly.com) – Oil and gas major Santos has completed its $2.15-billion buy of Quadrant Energy, with ASX-listed Wesfarmers selling its 13.2% stake in the company for $170-million.
Santos in August launched a bid for Western Australia-focused Quadrant Energy, which 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.
On completion of the transaction, Santos paid $1.93-billion, comprising the purchase price less completion adjustments and cash acquired. The completion amount was fully funded from the company’s existing cash resources and $1.2-billion of new debt facilities.
“The acquisition of Quadrant is value accretive for Santos shareholders and it is consistent with our strategy to build and grow our core assets around existing infrastructure and become Australia’s leading domestic natural gas supplier,” said Santos MD and CEO Kevin Gallagher.
“Santos has now increased its ownership and become the operator of a high quality portfolio of low cost, long-life conventional Western Australia natural gas assets with stable cash flows.”
Gallagher said that a key benefit of the transaction was the diversification of Santos' revenue base to include strong operating cash flow from long-term CPI-linked gas supply contracts, at a time when the oil price continues to be volatile.
“The Quadrant acquisition lowers our forecast 2018 proforma free cash flow breakeven oil price to around A$32/ barrel,” Gallagher said.
He added that the acquisition also strengthened the company’s ability to fund its growth activities in Western Australia, northern Australia and Papua New Guinea, as well as a sustainable dividend throughout the cycle.