September 13, 2021

Australian Santos Limited and Oil Search Limited incorporated in Papua New Guinea, have entered into a Merger Implementation Deed (MID), under which the two companies will combine via an Oil Search Scheme of Arrangement. This follows both companies successfully completing reciprocal confirmatory due diligence, which commenced on 6 August 2021.
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 across Australia, Timor-Leste, Papua New Guinea and North America with significant growth optionality
• Pro-forma market capitalisation of approximately A$21 billion which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies[1]
• Pro-forma 2021 production of approximately 116 million barrels of oil equivalent[2]
• Pro-forma 2P+2C resource base of 4,867 million barrels of oil equivalent[3]
• Investment grade balance sheet with more than US$5.5 billion[4] of liquidity to self-fund development projects, whilst maintaining further optionality and flexibility to optimise the portfolio
• Target gearing of less than 30 per cent
• 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 Papua New Guinea and North America
• Santos expects the Merger to unlock pre-tax synergies of US$90-115 million per annum (excluding integration and other one-off costs) creating value for both sets of shareholders. Santos has an excellent track record of integration and recently merged Quadrant Energy’s WA and ConocoPhillips’ NT business units into Santos, delivering more than US$160 million in annual synergies
• The Merger is expected to create greater alignment in Papua New Guinea supporting the development of key projects including Papua LNG, delivering new jobs, helping to support the local economy, and continuing to support the development of and investment in PNG
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.”
The combined Santos and Oil Search will be led by Santos Managing Director and Chief Executive Officer Kevin Gallagher, who said: “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 unrivaled growth opportunities over the next decade.”
Following the completion of the Merger, three non-executive directors from Oil Search will join the Santos Board. Santos’ head office will remain in Adelaide.
(Source Santos – Oil Search well sest at Antelope in Papua New Guinea/Oil Search)