The companies agreed an all-scrip deal earlier this month to combine Santos’ oil and gas assets in Australia with those of Oil Search in Papua New Guinea and Alaska. Oil Search shareholders are expected to vote on the deal by late November, Santos said on Tuesday.
Santos, Australia’s second-largest independent gas producer, would become the country’s top oil and gas firm after the Oil Search acquisition. However, rival Woodside Petroleum is in talks to acquire BHP Group’s oil and gas business, which would make it twice the size of the enlarged Santos.
Santos Chief Executive Kevin Gallagher said the larger group would be well funded to finance capital-intensive operations and better positioned to address environmental concerns, amid the company’s push to develop carbon capture and storage and eventually hydrogen.
“It gives us more funding capacity and that allows me to invest in some of those clean fuels faster,” Gallagher told Reuters.
In his first briefing on the deal, Gallagher said he expects to deliver “significant synergies” from the merger, pointing to its track record of extracting $160 million in savings following its acquisitions of ConocoPhillips’ northern Australian assets and Quadrant Energy over the past three years.
One of Oil Search’s priorities this year is to sell a stake in its $3 billion Pikka oil project in Alaska before reaching a final go-ahead. Gallagher said he would continue that process and would be willing to give up operatorship for the right price.
A recent report in The Australian said ConocoPhillips, which has operations in Alaska, had walked away from talks as Oil Search was unwilling to give up operatorship.
Gallagher told Reuters he would be willing to revive that discussion as he has a “very good relationship” with ConocoPhillips and sees the company as a “world class operator”.
Gallagher spoke after delivering a 50% jump in half-year profit to $317 million for the six months to June, on the back of a rise in production, higher oil and gas prices and lower costs – rebounding from the COVID-19 pandemic battering a year earlier.
Santos shares fell 0.8% in line with the broader market.
Arundhati Dutta and Harish Sridharan