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September 10, 2021updated 26 Nov 2021 12:03pm

Santos agrees $6bn merger with Papua New Guinea’s Oil Search

Australian oil and gas company Santos and Papua New Guinea’s Oil Search have agreed a $6bn (A$8bn) merger.

By Matt Farmer

Australian oil and gas company Santos and Papua New Guinea’s Oil Search have agreed a $6bn (A$8bn) merger.

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The companies announced a definitive, all-stock merger agreement on Friday. Oil Search and its shareholders will take ownership of 38.5% of the merged company, with Santos taking the rest. The merger pushes Santos’ value up to $21bn.

A statement by Santos said that the merger would mean “pre-tax synergies of $90-115m per annum”. The merged companies’ annual production would rise to the equivalent of 116 million barrels of oil equivalent per year.

Oil Search operates assets throughout Papua New Guinea, as well as in Alaska, US. Meanwhile, Santos operates throughout Australia, Papua New Guinea, and offshore Timor-Leste.

The merger leaves Santos in the unusual position of having the largest stake in a field it does not operate. The merged companies will have a 42.5% stake in the PNG LNG project, operated by ExxonMobil with a 33.2% stake.

The deal must still pass shareholder votes at both companies and receive regulatory approval. The companies would also require an independent expert to determine that the merger lies in the interests of both parties. After receiving these, the merger would take effect from 16 December.

Papua New Guinea’s deputy prime minister Samuel Basil has said that the deal could harm the country’s interests. Basil warned of potential job losses and the risks of an Australian company owning most of Papua New Guinea’s reserves. Oil Search comprises 31% of the country’s stock market, and Basil warned that its delisting could destabilise trading.

Shareholders reacted positively to the news, causing chares in both companies to rally.

Santos CEO and managing director Kevin Gallagher will lead the combined company, with three Oil Search directors joining Santos’ board. Gallagher said: “Santos and Oil Search will together have increased scale and capacity to drive a combined disciplined, low-cost operating model.

“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 CCS capability and Oil Search’s ESG programs in PNG and Alaska to provide a strong foundation.”

Oil Search Chairman Rick Lee said: “Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, ESG and geographic diversity, and access to capital.”

The news follows reports of a merger between Santos’ Australian rival Woodside and BHP’s oil and gas division.

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Free Report
img

2022: So far In Venture Capital

Global investment in 2022 has been majorly dominated by North America, Europe, and Asia Pacific, whereas the Middle East, and South and Central America have recorded low investments comparatively. In light of this, Europe and North America have been identified as the major destinations for Private Equity and Venture Capital (PE/VC) investments.   GlobalData’s whitepaper analyzes which sectors PE/VC firms have been investing in, looking at Technology, Media, and Telecom, with these sectors recording $356 billion and a deal volume of over 10,000 deals in 2022. Healthcare, Financial Services, Business & Consumer Services, and Construction sectors have also seen high investment activity by PE/VC firms, recording a deal value of over $70 billion each.   But what can this mean for you?   Understand how the Deals Database on GlobalData Explorer can be leveraged to:  
  • Track the Aggregate Investment Volumes in PE/VC-Stage firms across geographies and sectors, in addition to viewing the specific deals that drove these volumes
  • Identify the top investors already active in any sector-Geography combinations
  • Assess the Performance of Financial and Legal Advisors, supporting the Dealmaking in any segment of choice (Customizable League tables)
  • Understand what is driving the PE/VC fundraising (Deal Rationale)
  Consult our full report here and optimize your business strategy.
by GlobalData
Enter your details here to receive your free Report.

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