Australian, PNG Energy Groups Agree Merger

Australian, PNG energy groups agree merger

Sydney, Sept 10 (UrduPoint / Pakistan Point News - 10th Sep, 2021 ) :Australian natural gas group Santos and Papua New Guinea's Oil Search agreed Friday on a merger to create a Aus$21 billion (US$15 billion) group with the financial heft to better compete in a low-carbon future.

The deal, which still needs approval from Oil Search shareholders, comes as energy groups worldwide confront rising challenges to the sale of fossil fuels blamed for excessive heating of the planet.

In a no-cash deal financed entirely by shares, Adelaide-based Santos would end up with 61.5 percent of the combined company, leaving Oil Search shareholders with the rest.

The merged group would have a combined capitalisation of Aus$21 billion, making it one of the 20 largest oil and gas companies in the world, the two energy firms said in a joint statement.

Santos chief executive Kevin Gallagher, who will lead the merged group, said they would be stronger together, enjoying large scale, low operating costs and "unrivalled growth opportunities" for the next decade.

"The merger will create a company with a balance sheet and strong cashflows necessary to successfully navigate the transition to a lower carbon future," he said in the statement.

Santos said it expected the merger to lead to pre-tax savings of US$90-115 million a year.

The deal is financed by a share swap in which shareholders in Oil Search get 0.6275 new Santos shares for each of their existing Oil Search shares.

The Oil Search board has unanimously approved the deal and recommended it to shareholders, who are expected to meet around November 29.

Among other conditions, the merger also needs the approval of the Papua New Guinea courts.

In an "indicative timetable", the two companies said the merger may be effective by December 16.

In early afternoon trade on the Australian stock exchange, Santos shares were up 1.16 percent at Aus$6.10. Shares in Oil Search, which is listed on the stock markets in both Australia and Papua New Guinea, rose 2.74 percent to Aus$3.75.