SANTOS Ltd and Oil Search PNG Ltd have formalised their merger by entering into a merger implementation deed, according to a market announcement by Santos.
The companies have completed reciprocal confirmatory due diligence which started on Aug 6.
Under the terms of the merger, Oil Search shareholders will receive 0.6275 per cent new Santos shares for each Oil Search share held on the record date of the scheme of arrangement.
Oil Search shareholders will own around 38.5 per cent of the merged entity.
Santos shareholders will own around 61.5 per cent.
The Oil Search board of directors unanimously recommended that Oil Search shareholders vote in favour of the merger.
Each Oil Search director intends to vote all the shares they hold or control in Oil Search in favour of the merger.
According to Santos, the combination of Santos and Oil Search will create a regional champion of size and scale with the following features:
- DIVERSIFIED portfolio of high quality, long-life, low-cost assets in Australia, Timor-Leste, Papua New Guinea and North America with significant growth optionality;
- PRO-forma market capitalisation of around US$21 billion (K53 billion) which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies;
- PRO-forma 2021 production of about 116 million barrels of oil equivalent;
- PRO-forma 2P+2C resource base of 4,867 million barrels of oil equivalent;
- INVESTMENT grade balance sheet with more than US$5.5 billion (about K19 Billion) of liquidity to self-fund development projects, while maintaining further optionality and flexibility to optimise the portfolio;
- TARGET gearing of less than 30 per cent; and,
- STRONG ESG credentials including maintaining Santos’ net-zero emissions target by 2040, focus on carbon capture and storage projects and Oil Search’s social and community investment in PNG and North America .
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 combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities.”
Santos Chairman Keith Spence said: “The merger represents 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.”
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