Page 11 - AsianOil Week 31 2021

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Petroleum. Woodside owns 73.5% of both the enjoyed a globally competitive cost of supply
Scarborough and North Scarborough fields, as at around $6.8 per mmBtu ($188.09 per 1,000
well as 50% of the Thebe and Jupiter fields. cubic metres) to buyers in Northeast Asia.
Woodside said the cost of the project’s Woodside acting CEO Meg O’Neill described
onshore component, which includes modifying the Scarborough project as “transformational”
the existing liquefaction train at the Pluto LNG and said the updated project costs reflected a
facility to process Scarborough gas as well as roughly 20% increase in offshore processing
building a second train, had climbed by around capacity.
3% to $6.3bn. O’Neill said: “Woodside’s contracting strat-
The expansion of Scarborough’s offshore pro- egy for Scarborough reduces cost risk, with
duction capacity by 20%, meanwhile, has trig- approximately 90% of total project contractor
gered an 8% bump in offshore costs to $5.7bn. spend structured as lump-sum and fixed rate
The field will now underpin 8mn tonnes per year agreements.”
of LNG production instead of 6.5mn tpy as orig- The executive added that the company had
inally planned. commenced the formal processes to sell down
Woodside said it expected the internal rate its stake in Pluto Train 2 and Scarborough.
of return (IRR) of the integrated Scarborough Woodside announced on July 15 that it was look-
and Pluto Train 2 development to be greater ing to divest an up to 49% stake in Pluto’s second
than 12%. The company said the project, which train, while also noting that it was “testing the
anticipates delivering its first cargo in 2026, market” over the sale of equity in the gas field.™

Santos, Oil Search merge to

create new upstream powerhouse

FINANCE & AUSTRALIA-LISTED independents Santos based on both companies’ closing price on July
INVESTMENT and Oil Search’s proposed merger, first revealed 19. This new offer also represents a 16.8% pre-
last month, is back on track after Santos compro- mium to Oil Search’s closing price on the same
mised over ownership stakes. day, addressing the smaller company’s original
The two sides said on August 2 that Oil Search complaint that Santos’ first offer only repre-
had agreed to Santos’ revised proposal, which sented a 6.8% premium on its July 16 closing
would see the former take a 38.5% interest in share price.
what is set to become not just Australia’s largest The deal, which is still subject to regulatory
oil and gas producer but also one of the world’s approval, will create an oil and gas giant with a
top 20 producers. market capitalisation of AUD21bn ($15.53bn),
Santos estimated the new company positioning it in among the ASX’s top-20
would have a combined output of 116mn companies.
barrels of oil equivalent this year, while Santos highlighted its track record of inte-
boasting 4.98bn boe of 2P+2C resources gration, pointing to the recent acquisition of
and enjoying more than $5.5bn of liquid- Quadrant Energy and ConocoPhillips’ Western
ity to self-fund projects. Australian WA and Northern Territory business,
The deal improves on Santos’ original offer on which it said had delivered more than $160mn in
June 25 that would have seen Oil Search’s share- annual synergies.
holders receive a 37% interest in the combined However, Credit Suisse has argued that San-
offer. Oil Search’s board rejected that proposal, tos likely overpaid in order to push the deal over
saying at the time that it failed to reflect fair value the line, warning that significant cost cuts must
for its shareholders. be implemented to justify the new terms.
Oil Search said this week, however, that its “We struggle to see how Santos can cap-
board intended unanimously to recommend ture synergies to justify the approximately 17%
the revised merger proposal, barring a superior premium to Oil Search shareholders, let alone
proposal and subject to an independent expert much more to provide upside room left to San-
concluding that the deal was in its shareholders’ tos shareholders. Over $160mn per annum in
best interests. cost savings would be required to justify the pre-
The revised proposal implies a transaction mium,” The Sydney Morning Herald quoted him
price of AUD4.29 ($2.96) per Oil Search share, as saying.™

Week 31 05•August•2021 www. NEWSBASE .com P11