![]() The market capitalisation of Santos has been nearing an all-time high, Jarden observes, while Oil Search has failed to rally in 2021 despite the 50% increase in the Brent crude price. Yet, in the case of Gladstone LNG, the company's interest would be diluted in a merged entity to just 14% of net asset value, from 24% currently. Santos would obtain a further 29% stake in PNG LNG, a top tier project to add to its existing stake. This would mean Santos, with its PNG interests, can reduce exploration expenditure and develop the resource base at an appropriate time. The bulk of Oil Search's value is tied up in relatively long-life, low-cost assets in PNG. The broker considers the rationale remains sound as the merged company would be the largest Australian listed oil & gas company by market capitalisation. UBS also suspects that in the wake of Dr Wulff's resignation, Santos may now believe it has more leverage in discussions. Morgans agrees that this time the timing is fortunate for Santos with the sudden departure of the Oil Search CEO because of "unacceptable behaviour". This time the circumstances are different, as the Santos CEO, Kevin Gallagher, is well regarded while Oil Search is currently without a permanent CEO. The broker notes the takeover approach from Woodside Petroleum in 2015 was considered to grossly undervalue the company, yet at that time the bid/ask spread was too wide and a deal did not progress. Yet this does not mean it is without strategic merit, Jarden asserts. The merger of the two would significantly improve scale and quality, taking advantage of the weakness in the Oil Search share price. Santos had approached with an all-scrip offer of 0.589 shares for every Oil Search share. From all reports there was a bid in the wind on June 25 and the latter has finally indicated this was rejected, although remained willing to engage.įollowing the controversial resignation of CEO Kieran Wulff, Oil Search confirmed speculation it had received and rejected an indicative non-binding bid, and Santos subsequently disclosed it was the suitor. Santos (( STO)), it seems, is seriously eyeing off Oil Search (( OSH)). Reducing the Oil Search stake in Alaska may be key to any deal Merged company would improve access to debt capital markets for Santos Highly opportunistic bid, given Oil Search is without a permanent CEO ![]() Now the Santos bid for Oil Search is out in the open what does it mean for the future of both companies? This story features SANTOS LIMITED, and other companies. ![]()
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