Santos and Oil Search have confirmed they will merge to create a $21 billion entity that will sustain both companies in the wake of a low carbon future.
Both companies signed a merger implementation deed, marking the definitive agreement.
Oil Search shareholders will own around 38.5 per cent of the merged company and will receive 0.6275 new Santos shares for each Oil Search share held.
Santos stated the merger creates a “regional champion of size and scale” and will generate pre-tax synergies of $US90 million ($121.8 million) to $US115 million.
Oil Search’s board has unanimously recommended that shareholders vote in favour of the merger.
“Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, ESG (environmental, social and governance) and geographic diversity, and access to capital,” Oil Search chairman Rick Lee said.
“The combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities.”
The merged entity will deliver a diversified folio of assets across Australia, Timor-Leste, Papua New Guinea and North America.
With a market capitalisation of around $21 million, the entity will be positioned in the ASX’s top-20 listed companies, and in the top-20 largest oil and gas companies globally.
Santos managing director and chief executive Kevin Gallagher said the merger will deliver growth and further ability to navigate a reduction in carbon emissions.
“Santos and Oil Search will be stronger together, and will have increased scale and capacity to drive a combined disciplined, low-cost operating model and unrivalled growth opportunities over the next decade,” he said.
“The merger will create a company with a balance sheet and strong cashflows necessary to successfully navigate the transition to a lower carbon future with the combination of Santos’ leading CCS (carbon capture and storage) capability combining with Oil Search’s ESG programs in PNG (Papua New Guinea) and Alaska to provide a strong foundation.”
In August, BHP announced it would be combining its oil and gas portfolio with Woodside Petroleum.