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PERTH (miningweekly.com) – The merger between oil and gas major Santos and fellow listed Oil Search has been formalised, following a due diligence by both companies.
Under the terms of the merger, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held on the record date of the Scheme of Arrangement, with Oil Search shareholders owning a 38.5% interest in the merged entity and Santos shareholders owning approximately 61.5%.
The Oil Search board of directors unanimously recommends that shareholders vote in favour of the merger and have announced their intention to each vote all the shares they hold or control in Oil Search in favour of the merger, and in the absence of a superior proposal.
“Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, environmental, social and governance (ESG) and geographic diversity, and access to capital. The combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities,” said Oil Search chairperson Rick Lee.
Santos chairperson Keith Spence said on Friday that the merger represented an attractive combination of two industry leaders to create a regional champion of quality, size and scale with a unique and diversified portfolio of long-life, low-cost oil and gas assets.
“The merged entity will be well positioned for success in the new era of oil and gas, with strong cashflow generation from a diverse range of assets providing a platform to self-fund growth and deliver shareholder returns.
“We look forward to integrating our businesses to create one high performing team – with a vision of becoming a global leader in the energy transition,” Spence said.
The merged entity would have a diversified portfolio of high quality, long-life, low-cost assets across Australia, Timor-Leste, Papua New Guinea (PNG) and North America, and would have a pro-forma market capitalisation of some A$21-billion and a production of 116-million barrels of oil equivalent for 2021.
“We see significant benefits for our shareholders in this merger, not least in the access that Santos brings to a broader range of more liquid global debt capital markets to fund growth projects,” said Oil Search acting CEO Peter Fredricson.
The combined Santos and Oil Search will be led by Santos MD and CEO Kevin Gallagher, who said on Friday that the two comapnies would be stronger together and would have increased scale and capacity to drive a combined, disciplined, low-cost operating model and unrivaled growth opportunities over the next decade.
“The merger will create a company with a balance sheet and strong cashflows necessary to successfully navigate the transition to a lower carbon future with the combination of Santos’ leading carbon capture and storage capability combining with Oil Search’s ESG programmes in PNG and Alaska to provide a strong foundation,” Gallagher said.
Following the completion of the merger, three nonexecutive directors from Oil Search will join the Santos board. Santos’ head office will remain in Adelaide.
The merger will remain subject to an independent expert concluding that it is in the best interests of Oil Search shareholders, as well as Oil Search shareholder approval, and customary regulatory approvals. Approvals from the PNG courts will also be sought.