Santos nabs Quadrant Energy for $2.9bn

The sale by Macquarie, Brookfield, Wesfarmers and richlister Angela Bennett will dramatically increase Santos’s assets.

Santos has agreed to buy the West Australian Quadrant Energy business from Macquarie, Brookfield, Wesfarmers and richlister Angela Bennett for $US2.15 billion ($2.93m) cash and what could be a future payment of $US240 million if the recent Dorado offshore oil discovery, the biggest off WA in 30 years, is developed.

Santos chief executive Kevin Gallagher said: “This acquisition delivers increased ownership and operatorship of a high quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability.

“It is materially value accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

Santos is Quadrant’s non-operating partner in the Varanus Island and Devil Creek domestic gas plants and fields in WA.

“The transaction lowers our proforma 2018 forecast free cash flow break-even oil price by a further $US4 a barrel and Quadrant’s stable cash flows provide increased certainty during the upcoming period of major growth project delivery.”

The value of Quadrant increased dramatically in recent months after it made the Dorado discovery, which 20 per cent partner Carnarvon Petroleum last week said had a contingent liquids resource of 186 million barrels.

If this is certified and the project is developed, Santos will pay Quadrant around $US240m based on a calculation around the eventual 2C resource. Mr Gallagher said there was the potential for more resources to be found.

Quadrant is 48 per cent owned by Brookfield and partners, 21 per cent owned by Macquarie Capital and its partners and 13.2 per cent each owned by Wesfarmers and Ms Bennet. Quadrant management holds 3.4 per cent.