Oil Search’s shareholders have voted overwhelmingly to approve its merger with fellow petroleum and gas company Santos at a special shareholders meeting. With National Court and ICCC approval also received, the way is clear for the creation of a A$23 billion (K56.88 billion) resources company.
Santos will acquire Oil Search’s 29 per cent interest in the PNG LNG project as a result of the merger. Credit: Oil Search
The decision, supported by around 95% of Oil Search’s shareholders, paves the way for the creation of a resources company with a pro forma market capitalisation of A$23 billion (K56.88 billion), making it one of the 20 largest oil and gas companies globally.
Under the deal accepted today, Oil Search’s shareholders will receive 0.6275 Santos shares for each Oil Search share they own, which will give them 38.5 per cent of the merged entity.
The merger proposal was at the recommendation of Oil Search’s board and an independent assessment by advisory firm Grant Samuel.
What’s next?
Yesterday, Santos announced it had received the necessary approvals from the Securities Commission of Papua New Guinea for the deal to go ahead. Approval from PNG’s Independent Consumer and Competition Commission has been received.
There is one key hoop still to jump through, however. The parties are scheduled to return to PNG’s National Court for its final approval for the merger this Thursday. [Editor’s note: Court approval has been received as of 9 December.]
As a result of the merger, Oil Search shares will be de-listed from both the Australian Securities Exchange and PNG’s stock exchange, PNGX. The last day of trading of shares in Oil Search, a company founded in 1929, is scheduled to be this Friday 10 December.
For those with shares valued at over A$500, the transition from being an Oil Search shareholder to being a Santos shareholder will effectively be automatic. However, those with share bundles valued at less than A$500 have until Monday 13 December to manually opt in to a scheme to purchase Santos shares.
‘There would be no planned job losses in PNG national workforce as a result of the merger, and there will be a place for a PNG national on the Santos board’
Kevin Gallagher, Santos’ CEO, told last week’s PNG Mining and Petroleum Conference that he expected the deal to be finalised ‘by the end of this year’. A date of 20 December has been set for the trading of shares in the merged entity to commence.
To the relief of Oil Search’s 4000 PNG-based shareholders, Gallagher said Santos intended to create a secondary listing on PNGX.
‘This will importantly allow all the shareholders to trade their Santos shares on the local exchange,’ said Gallagher.
Enhanced PNG presence
PNG’s gas resources. Credit: Oil Search
The merger will see Australia’s Santos greatly expand its interests in Papua New Guinea.
‘This merger will create an entity that will have the balance sheet to fund major projects in PNG,’ said Gallagher.
It will add Oil Search’s 29 per cent interest in the productive ExxonMobil-led PNG LNG project to its own 13.5 per cent interest, making it the single largest partner in the project, although there is some expectation that Santos may offload some of this interest.
In addition, Santos will take over Oil Search’s interests in two future gas projects: Papua LNG (based on the Elk-Antelope gas fields) and P’nyang.
Oil Search has a 22.8 per cent interest in the TotalEnergies-led Papua LNG project in Gulf Province (final investment decision due in 2023) and a 38.5 per cent share in the ExxonMobil-led P’nyang gas project, currently the subject of negotiations for a gas agreement between ExxonMobil and the PNG State.
No job losses
Santos’ Kevin Gallagher
Gallagher said he had committed to Prime Minister James Marape that there would be no planned job losses in Oil Search’s PNG national workforce as a result of the merger, and there will be a place for a PNG national on the Santos board. The work of the Oil Search Foundation would also continue.
Santos is also committed to establishing the leadership of its new PNG business ‘in-country’.
‘We will implement a capability building program, including secondments for high potential, Papua New Guinea national employees, to work across Santos’s broader portfolio of operated assets to develop the technical and importantly, the leadership skills,’ said Gallagher.
‘We will maintain focus on exploration activities in PNG to support the development and the commercialisation of the nation’s resources.’
In addition to its interests in PNG’s hydrocarbon sector, Gallagher said last week that Santos’ carbon solutions business would also start looking for ‘carbon abatement projects’ and ‘carbon capture and storage opportunities’ in PNG, as well as pursue future clean fuels opportunities such as hydrogen or ammonia.
‘The merger will position us for success in the new era of cleaner energy and clean fuels,’ he said.
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