OIL Search and Santos have agreed to a revised merger proposal put forward by Santos to acquire shares in Oil Search.
The deal is worth AU$21 billion (about K53billion).
Under the revised proposal, Oil Search shareholders will own 38.5 per cent of the merged group.
Santos shareholders will own 61.5 per cent.
A statement from Oil Search said: “The revised proposal implies a transaction price of AU$4.52 (K11.38) per Oil Search share, based on the closing price of Santos shares on June 24, 2021 (being the day prior to when Santos submitted its first proposal).
This represents a 19.7 per cent premium to the closing price of Oil Search’s shares on that date.
“The Oil Search board has considered the revised proposal and has determined to grant due diligence access to Santos, subject to the parties entering into an acceptable confidentiality agreement.
“It is expected that due diligence will take approximately four weeks.
“The Oil Search board intends to unanimously recommend that shareholders vote in favour of the revised proposal.”
Santos, in a market release, said the merger of Santos and Oil Search would create a regional champion of size and scale.
The features are a:
- DIVERSIFED portfolio of high quality, long-life, low-cost assets across Australia, Timor-Leste, Papua New Guinea and North America with significant growth optionality;
- PRO-forma market capitalisation of AU$21 billion (K52.87bil) which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies;
- COMBINED 2021 production of approximately 116 million barrels of oil equivalent;
- COMBINED 2P+2C resource base of 4,983 million barrels of oil equivalent;
- INVESTMENT grade balance sheet with more than US$5.5 billion (about K18.86bil) of liquidity to self-fund development projects, whilst maintaining further optionality and flexibility to optimise the portfolio; and,
- STRONG environmental, social, and corporate governance credentials including maintaining Oil Search’s social and community investment in PNG and North America, including the Oil Search Foundation.
Santos managing director and chief executive officer Kevin Gallagher said the potential merger was consistent with Santos’ disciplined strategy to grow around our core assets.
“It represents a compelling combination of two industry leaders to create an unrivalled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets,” he said.
“The merged company would have strong cash generation from a diverse range of assets which provides a strong platform for sustainable growth and continued shareholder returns.”