Santos and Oil Search agree to merge


Oil and gas companies Oil Search and Santos have completed a merger agreement set to create a company with ‘a pro-forma market capitalisation’ of approximately A$21 billion (K54 billion). Regulatory and shareholder approvals will ultimately decide the deal’s fate, however.

Its merger with Oil Search will make Santos the largest single venture partner in the PNG LNG project, PNG’s largest gas project. Credit: Oil Search

After about a month of due diligence, the two companies have jointly announced a ‘definitive agreement’ to merge, which will give Santos’ shareholders about 61.5 per cent of the new entity and Oil Search’s shareholders about 38.5 per cent.

The combined company will be led by Santos’ Managing Director and Chief Executive Officer, Kevin Gallagher.

Together, the two companies’ annual production would be around 116 million barrels of oil equivalent.

‘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,’ said Oil Search’s Chairman, Rick Lee.

‘The combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities.’


This pipeline includes the Total-led Papua LNG project in Gulf Province, in which Oil Search has a 22.8 per cent interest, and the ExxonMobil-led P’nyang gas project (Oil Search’s share, 38.5 per cent), currently the subject of negotiations for a gas agreement between ExxonMobil and the PNG State.

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‘If the merger will result in the weakening of any Papua New Guinean shareholders or shareholder interests … it is not in PNG’s national interest’

Santos will also acquire Oil Search’s 29 per cent interest in the productive ExxonMobil-led PNG LNG project. Santos already holds a 13.5 per cent interest in PNG LNG.

The deal has the unanimously support of Oil Search’s board but is subject to a number of approvals before it can be finalised, including regulatory approval in PNG and approval by Oil Search’s shareholders.

The process of obtaining the necessary approvals is expected to take the rest of the year, with an implementation date for the merger being set for 16 December.

National interest

What remains unclear is whether the merged entity, which will be listed on the Australian Securities Exchange, will also list on PNG’s stock market, the PNGX, as Oil Search has done since 1999.

A statement issued by PNG’s Deputy Prime Minister Sam Basil last week suggests that this could be a bone of contention if unaddressed.

‘If the merger will result in the weakening of any Papua New Guinean shareholders or shareholder interests, reduction in market liquidity, potential for job losses, potential delisting from PNGX, and loss of local ownership of the company assets to a foreign interest, it is not in PNG’s national interest,’ said Basil last Thursday.

‘The Board of Oil Search and Santos must explicitly inform Papua New Guinea their plans for PNG Capital Market development in the context of this merger.’

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