BY Richard Summerfield
Santos Ltd, Australia’s second largest independent oil & gas producer, is to acquire privately held Quadrant Energy for at least $2.15bn.
The deal will provide Santos with a strong boost to its domestic natural gas offering as it will gain access to Quadrant’s 80 percent stake in the Dorado oil field, which Quadrant’s partner Carnarvon Petroleum recently called a “truly incredible” oil discovery. The field has been found to have around 171 million barrels of oil, making it one of the biggest discoveries in the region for around 30 years as well as one of the largest oil resources ever found on the North West Shelf.
Under the terms of the deal, Santos has agreed a $2.15bn base price for Quadrant; however, the company has agreed to pay $50m for certified resources of 100 million barrels for the Dorado field, and then $2 a barrel extra for reserves of between 100 million and 125 million barrels, and $2.50 a barrel for reserves above 125 million.
“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,” said Kevin Gallagher, managing director of Santos. “It is materially value-accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”
“We have delivered operational excellence, outstanding results in our exploration program and successfully integrated an entire new business model throughout the company,” said Brett Darley, chief executive of Quadrant. “All of this has been achieved with a strong focus on the environment, and the commitment to the health and safety of our people.
“On behalf of Quadrant Energy I would like to say how pleased I am to be part of this agreement with Santos and our business and people are well placed for this exciting new chapter as part of a national and international oil and gas producer.”
The deal for Quadrant, which is 36 percent owned by Brookfield Asset Management Inc and 22 percent by Macquarie Group Ltd, will be funded via existing cash resources and new debt facilities.
According to a statement from Santos, the two companies’ assets overlap in Western Australia, providing synergies estimated at $30m to $50m a year.