Santos cleared to acquire Quadrant Energy

Santos Ltd, Adelaide, has been cleared by the Australian Competition and Consumer Commission (ACCC) for its proposed acquisition of Quadrant Energy Ltd, Perth.

The US$2.15-billion deal announced at the end of August is now expected to reach completion in a matter of weeks.

Santos said the condition precedent for completion of the acquisition of 100% of Quadrant had been satisfied with the ACCC decision not to oppose the deal.

The acquisition includes Quadrant’s 80% share of the Dorado oil and gas discovery in the Bedout sub-basin offshore Western Australia.

The terms include the upfront payment of US$2.15 billion at completion on a cash and debt-free basis. There also are contingent payments linked to the Dorado oil and liquids 2C resource certification of greater than 100 million bbl and a future final investment decision on development of the field.

These comprise a fixed payment of US$50 million triggered on 100 million bbl of certified 2C resource plus variable payments of US$2/bbl for each barrel certified between 100-125 million bbl (gross), payable on Quadrant’s 80% interest net barrels and US$2.50/bbl for each barrel certified above 125 million bbl (gross), again payable on Quadrant’s 80% interest net barrels.

In addition, there will be royalty payment over any future Bedout sub-basin project revenue excluding Dorado production of oil and liquids.

Apart from Dorado, Quadrant has interests in many gas hubs and oil storage facilities in Western Australia.

These include 55% and operatorship of each of the Devil Creek and Varanus Island gas facilities (where Santos has the remaining 45% of each); 28.6% of the Macedon gas hub (which is operated by BHP holding the remaining 71.4%); 52.5% and operatorship of the 540,000 bbl capacity Ningaloo Vision floating production, storage, and offloading vessel (with Inpex holding the remaining 47.5%); and 28.6% of the 840,000-bbl Pyrenees FPSO (operated by BHP, which holds the remaining 71.4%).

Quadrant also has a large inventory of discovered resources to backfill existing infrastructure.

Santos said the acquisition will result in an estimated 17% free cash flow accretive on a per share basis in the first year of ownership.

The deal also increases the company’s proforma 2P reserves by 220 million boe (up about 26%) and proforma production by 19 million boe (up about 32%).

Santos Managing Director and CEO Kevin Gallagher said the acquisition of Quadrant advances the company’s aim to be Australia’s leading domestic natural gas supplier

Source: Oil & Gas Journal