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Santos & Oil Search to create $21B giant

Santos and Oil Search reached an agreement on Monday regarding a proposed merger that would create a top-20 global oil and gas company after Oil Search said it intended to recommend an improved buyout offer from Santos worth $8.4 billion.

The Board of Oil Search confirmed that subject to due diligence, their intention is to unanimously recommend the improved merger proposal, in the absence of a superior offer and subject to an independent expert concluding that arrangement is in the best interests of Oil Search shareholders.

Under the Revised Merger Proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held, after which Oil Search shareholders will own approximately 38.5% of the merged group and Santos shareholders will own approximately 61.5 per cent.


The proposal implies a transaction price of $4.29 per Oil Search share, representing a 16.8% premium to the Oil Search closing price on July 19.

Santos noted that the merger would create a regional champion of size and scale including:

  • A diversified portfolio of high quality, long-life, low-cost assets across Australia, TimorLeste, Papua New Guinea and North America with significant growth optionality

  • Pro-forma market capitalisation of $21 billion which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies

  • Combined 2021 production of approximately 116 million barrels of oil equivalent

  • Combined 2P+2C resource base of 4,983 million barrels of oil equivalent

  • Investment-grade balance sheet with more than US$5.5 billion of liquidity to self-fund development projects, whilst maintaining further optionality and flexibility to optimise the portfolio

  • Target gearing of less than 30 per cent

  • Substantial potential combination synergies


Santos Managing Director and Chief Executive Officer Kevin Gallagher said the potential merger of Santos and Oil Search is consistent with Santos’ disciplined strategy to grow around our core assets. “It represents a compelling combination of two industry leaders to create an unrivalled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets. The merged company would have strong cash generation from a diverse range of assets which provides a strong platform for sustainable growth and continued shareholder returns.“