Santos, Oil Search To Merge Into Regional Champion

Santos, Oil Search To Merge Into Regional Champion
Santos and Oil Search enter a merger agreement to create top-20 ASX-listed companies and the 20 largest global oil and gas companies.

Australian energy giant Santos and Oil Search have entered into a definitive agreement to merge the two companies in a deal valued at about $16 billion.

Santos said on Friday that the merger would create an entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies.

The two entered a merger implementation deed, under which the two companies will combine via an Oil Search Scheme of Arrangement.

Under the terms of the merger, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share. Upon completion of the merger, Oil Search shareholders will own approximately 38.5 percent of the merged entity while Santos’ shareholders will own approximately 61.5 percent.

The Oil Search board of directors unanimously recommends that the company’s shareholders vote in favor of the merger and each director intends to vote all the shares they hold or control in Oil Search in favor as well.

According to Santos, the combination of the two companies will create a ‘regional champion’ which will have a diversified portfolio of high quality, long-life, low-cost assets across Australia, Timor-Leste, Papua New Guinea, and North America with significant growth optionality.

The entity would have 2021 production of approximately 116 million barrels of oil equivalent, a 2P+2C resource base of 4,867 million barrels of oil equivalent, and an investment-grade balance sheet with more than $5.5 billion of liquidity to self-fund development projects.

The merged company will also have strong ESG credentials as it would maintain Santos’ net-zero emissions target by 2040 as well as its focus on carbon capture and storage projects and Oil Search’s social and community investment in Papua New Guinea and North America.

This move is also expected to create greater alignment in Papua New Guinea supporting the development of key projects including Papua LNG.

“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,” Oil Search chairman Rick Lee 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,” Santos chairman Keith Spence added.

“The merged entity will be well-positioned for success in the new era of oil and gas, with strong cashflow generation from a diverse range of assets providing a platform to self-fund growth and deliver shareholder returns. We look forward to integrating our businesses to create one high-performing team – with a vision of becoming a global leader in the energy transition.”

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.

“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 capability combining with Oil Search’s ESG programs in PNG and Alaska to provide a strong foundation,” Gallagher stated.

To contact the author, email

What do you think? We’d love to hear from you, join the conversation on the Rigzone Energy Network.

The Rigzone Energy Network is a new social experience created for you and all energy professionals to Speak Up about our industry, share knowledge, connect with peers and industry insiders and engage in a professional community that will empower your career in energy.