You are using an outdated browser. Please upgrade your browser to improve your experience.
Skip to content
Barossa Gas Project: Learn more

Santos refers to the Oil Search ASX release this morning and ongoing speculation regarding a possible merger of Oil Search and Santos. In light of this, and in order to keep the market fully informed, Santos confirms that on 25 June 2021 it submitted a confidential, non-binding indicative all-scrip merger proposal to the Oil Search Board (“Merger Proposal”). A copy of the Merger Proposal is attached to this announcement.

The Merger Proposal provides that the transaction would be implemented through a Scheme of Arrangement under which Oil Search shareholders would receive 0.589 new Santos shares for each Oil Search share held. Following approval of the Scheme, Oil Search shareholders would own 37 per cent of the merged group and Santos shareholders would own 63 per cent.

The ownership ratio implied a transaction price of A$4.25 per Oil Search share, based on Santos’ closing price on 24 June 2021. This represented a 12.3 per cent premium to the Oil Search closing price on 24 June 2021 of A$3.78 and a 9.8 per cent premium to the Mubadala block trade sale price of A$3.865.

On 9 July 2021 Santos received a letter from Oil Search which acknowledged the strengths of the combined company and the rationale for the Merger Proposal but noted that the proposal did not offer appropriate value for Oil Search shareholders or a basis on which discussions could be progressed. Santos has subsequently sought to engage the Oil Search board on the transaction rationale and the opportunity for Oil Search shareholders to participate in the value created by the merger.

The potential merger of Santos and Oil Search is a logical combination of two industry leaders to create an unrivalled regional champion of size and scale with the following features:

  • Pro forma market capitalisation of A$22 billion which positions the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies
  • Diversified portfolio of high quality, long-life assets across Australia and Papua New Guinea
  • Robust balance sheet with strong liquidity that can self-fund growth options and an investment grade credit rating
  • Larger portfolio of development assets and opportunities for optimisation
  • Strong ESG credentials providing greater access to debt and equity capital
  • Opportunity to create value on day one from substantial combination synergies and expected re-rating in share prices
  • Santos has an excellent track record of integration and recently merged Quadrant Energy and the ConocoPhillips WA and NT business unit into its low cost operating model

The combination would create greater alignment in Papua New Guinea supporting the development of key projects including Papua LNG, deliver new jobs and help support the local economy.

Santos has put forward the prospect of a genuine merger where the ownership of the merged entity is based on relative contribution and value. Oil Search shareholders continue to participate in the merged entity and retain the opportunity to realise a premium for control as part of the merged entity. The strategic rationale for a merger is clear and offers superior value to Oil Search shareholders rather than continuing on a standalone basis.

Santos continues to believe that the Merger Proposal represents an extremely attractive opportunity to deliver compelling value accretion to both Santos and Oil Search shareholders.

Citigroup and JB North & Co are acting as financial advisers and Herbert Smith Freehills and Dentons are acting as legal advisers to Santos.