Page 11 - GLNG Week 31 2021
P. 11
GLNG AUSTRAL ASIA GLNG
The combined
company’s stake in the
PNG LNG terminal in
Papua New Guinea will
rise to 42.5%.
Santos, Oil Search merger to create
new upstream powerhouse
INVESTMENT AUSTRALIA-LISTED independents Santos the revised merger proposal, barring a superior
and Oil Search’s proposed merger, first revealed proposal and subject to an independent expert
last month, is back on track after Santos compro- concluding that the deal was in its shareholders’
mised over ownership stakes. best interests.
The two sides said on August 2 that Oil Search The revised proposal implies a transaction
had agreed to Santos’ revised proposal, which price of AUD4.29 ($2.96) per Oil Search share,
would see the former take a 38.5% interest in based on both companies’ closing price on July
what is set to become not just Australia’s largest 19. This new offer also represents a 16.8% pre-
oil and gas producer but also one of the world’s mium to Oil Search’s closing price on the same
top 20 producers. day, addressing the smaller company’s original
Santos estimated the new company would complaint that Santos’ first offer only repre-
have a combined output of 116mn barrels of oil sented a 6.8% premium on its July 16 closing
equivalent this year, while boasting 4.98bn boe of share price.
2P+2C resources and enjoying more than $5.5bn The deal, which is still subject to regulatory Analysts expect
of liquidity to self-fund projects. approval, will create an oil and gas giant with a
The combined company’s stake in the PNG market capitalisation of AUD21bn ($15.53bn), that Santos could
LNG terminal in Papua New Guinea will rise to positioning it in among the ASX’s top-20
42.5%, overtaking operator ExxonMobil’s 33.2% companies. try to sell down
interest in the project. Oil Search also owns a Santos highlighted its track record of inte-
stake in the separate Papua LNG project that gration, pointing to the recent acquisition of some of its PNG
would share facilities with PNG LNG. Quadrant Energy and ConocoPhillips’ Western LNG stake to
Analysts expect that Santos could try to sell Australian WA and Northern Territory business,
down some of its PNG LNG stake to TotalEn- which it said had delivered more than $160mn in TotalEnergies.
ergies, the operator of Papua LNG. This comes annual synergies.
after Santos said in the merger announcement However, Credit Suisse has argued that San-
that there was a “potential opportunity to fur- tos likely overpaid in order to push the deal over
ther optimise ownership across PNG LNG and the line, warning that significant cost cuts must
Papua LNG”. be implemented to justify the new terms.
The merger deal improves on Santos’ original “We struggle to see how Santos can capture
offer on June 25 that would have seen Oil Search’s synergies to justify the approximately 17%
shareholders receive a 37% interest in the com- premium to Oil Search shareholders, let alone
bined offer. Oil Search’s board rejected that pro- much more to provide upside room left to San-
posal, saying at the time that it failed to reflect tos shareholders. Over $160mn per annum in
fair value for its shareholders. cost savings would be required to justify the
Oil Search said this week, however, that its premium,” The Sydney Morning Herald quoted
board intended unanimously to recommend him as saying.
Week 31 06•August•2021 www. NEWSBASE .com P11
