By David Winning 
 

SYDNEY--Santos Ltd. and Oil Search Ltd. said they had agreed to a deal that will combine their operations and create an energy company with a market value of around 21 billion Australian dollars (US$15 billion).

Santos is offering 0.6275 of its own shares in exchange for each Oil Search share. Completion of the deal would lead to Santos shareholders owning around 61.5% of the combined company, with Oil Search investors holding the remaining stock.

In a joint statement, Santos and Oil Search said merging the companies would unlock between US$90 million and US$115 million in pretax savings each year. The deal is conditional on shareholders of each company voting in favor, regulatory approvals and Papua New Guinea court approval. It expects the deal to complete in mid-December.

Oil Search is Papua New Guinea's largest oil producer and owns a minority stake in the Exxon Mobil Corp.-operated PNG LNG gas-export project in the country, which also counts Santos as an investor. Oil Search owns undeveloped oil reserves in Alaska that it hopes to develop if it can bring in another investor.

"Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, ESG and geographic diversity, and access to capital," said Oil Search Chairman Rick Lee.

The combined company will be led by Santos Chief Executive Kevin Gallagher and its head office will be in Adelaide, South Australia state.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

September 09, 2021 21:14 ET (01:14 GMT)

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