Santos is set to grow further into Western Australia with a takeover of oil and gas company Quadrant Energy.
The $US2.15 billion ($2.93 billion) acquisition will be funded by a combination of existing cash reserves and $US1.2 billion of new debt split between a $600 million bank loan and $600 million two-year bridge facility.
Quadrant Energy is one of Western Australia’s largest gas producers, accounting for 22 per cent of overall state gas production in 2017.
Santos managing director and chief executive officer 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 expects to lower its proforma 2018 forecast breakeven price by $4 per barrel to $32 per barrel with the acquisition.
Proforma plus probable (2P) reserves will increase by 220 million barrels of oil equivalent, a 26 per cent increase over December 2017 figures. Likewise, proforma production is expected to increase by 32 per cent
Santos singled out Quadrant Energy’s recent oil discovery at the Dorado-1 well as an attractive near-term development opportunity.