By Oliver Gray
Investing.com - Santos Ltd (ASX:STO) and Oil Search Ltd (ASX:OSH), two of Australia’s biggest energy producers, finalised their agreement today to merge into an A$21 billion ‘regional champion.’
Upon completion of the Merger, Oil Search shareholders will own approximately 38.5% of the merged entity and Santos shareholders will own approximately 61.5%. The merged entity will be in the top-20 ASX-listed companies and the 20 largest global oil and gas companies with 2021 production expected to be about 116 million barrels of oil equivalent.
The company will remain headquartered in Adelaide and led by current Santos managing director and chief executive officer Kevin Gallagher with three non-executive directors from Oil Search to join the Santos Board. The Oil Search board of directors has unanimously recommended that its shareholders vote in favour of the merger.
Santos chairman Keith Spence noted that the merged entity would be well-positioned for success in the new era of oil and gas, saying that “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.”
Oil Search chairman Rick Lee noted that the combined entity would have the capacity to deliver on an exciting pipeline of organic growth opportunities. “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 merger still requires approval from shareholders of Oil Search and from a Papua New Guinea court, according to today’s announcement.