Santos, Oil Search deal set to be signed today

PNG LNG Project export jetty near Port Moresby.

Santos and Oil Search are believed to be signing a $21bn merger agreement on Friday.

It is understood that there will be no changes to the current deal announced and it will be finalised by the end of December.

It comes after the pair agreed to extend the exclusive due diligence period for a further week to 13 September.

Santos has offered Oil Search shareholders 0.6275 Santos shares for every share held.

It comes after Santos earlier offered Oil Search 37 per cent of the merged entity instead of 38.5 per cent under the current offer.

Both parties have been carrying out due diligence.

Working for Santos are Citi and JB North & Co, while Oil Search has called on Goldman Sachs, Macquarie Capital and Rothschild.

The groups are shareholders in the PNG LNG project, with Oil Search holding 29 per cent and Santos 13.5 per cent.

Oil Search also owns a 22.8 per cent share in the Papua LNG development.

Last year, Oil Search came under pressure when the oil price plunged to about $US45 a barrel on the back of the pandemic, prompting the interest from Santos, which is one of Australia’s major domestic gas producers with stakes in assets such as the Darwin LNG and Gladstone LNG plants.

Santos put a merger proposal to Oil Search in July.

This latest Oil Search proposal, along with an agreed proposal for Woodside to buy BHP’s petroleum business for close to $20bn, are two of the largest acquisitions in Australian corporate history as the energy industry remains under pressure to consolidate.

With environmentally friendly investors and lenders – nervous about their corporate image when it comes to environmental responsibility – shunning oil stocks, the thinking is that larger groups will have an easier time funding projects.