From our friends at the AFR. Devil is in detail re price to be paid ie contingent on size of Dorado being more than $100n barrels. Those payments comprise a a $US50 million payment if a 100 million barrel resource is certified plus additional payments for each additional barrel for Quadrant after that.
Enjoy.
Santos to spend $US2.15b buying Quadrant Energy in WA
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Santos, run by CEO Kevin Gallagher, will pay $US2.15 billion to buy Western Australian major gas supplier Quadrant Energy. Ben Searcy
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by Angela Macdonald-Smith
Santos will pay more than $US2.15 billion ($2.92 billion) to buy Western Australian major gas supplier Quadrant Energy, in a firm sign of chief executive Kevin Gallagher's pursuit of growth for the oil and gas producer after rejecting a $14.4 billion takeover bid from Harbour Energy.
The "financially compelling" deal, to be funded from existing cash and new debt, will add about 17 per cent to free cash flow and lift production by about 32 per cent, Santos said on Wednesday.
"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," Mr Gallagher said in a statement.
"It is materially value accretive for Santos shareholders and advances Santos' aim to be Australia's leading domestic natural gas supplier."
Quadrant's owners, Brookfield and a group led by Macquarie Capital, shelved a potential $3 billion IPO for Quadrant earlier this year amid disagreement between the partners as to the way forward. Brookfield was thought to be still seeking to sell its interest, but any oil and gas suitor would have wanted ful control of the company, analysts said.
Santos was known to be eyeing Quadrant, with Mr Gallagher having made no secret of his appetite to build up the WA gas business. The oil and gas producer's original discussions to buy Quadrant were understood to have been interrupted by the Harbour takeover proposal, which was eventually soundly rejected by the board as insufficient and too risky.
The deal price will include potential further payments related to Quadrant's recent exploration success off the WA coast, including the Dorado oil discovery, which some said increased the WA operator's value by about $2 billion or more.
Those payments comprise a a $US50 million payment if a 100 million barrel resource is certified plus additional payments for each additional barrel for Quadrant after that.
Santos said the deal is "fully aligned" with its growth strategy to build on existing positions around its core assets. It jointly owns several gas ventures with Quadrant, including the Devil Creek gas plant near Karratha, the Varanus Island gas plant off the coast and the Reindeer and John Brookes offshore fields.
Brookfield, which owns 48.3 per cent of Quadrant, and Macquarie said that following the Dorado discovery they had decided it was "the appropriate time to transition Quadrant to a long-term owner that is suitable equipped to take it through the next phase of development".
They said Santos is "an ideal party to optimise the future prospects" of Quadrant.
Wesfarmers, one of the investors brought in by Macquarie to take a minority stake in Quadrant when it and Brookfield bought the former Apache Australia assets, confirmed it has agreed to sell its 13.2 per cent stake.
The conglomerate said it would reap net proceeds of about $US170 million and noted the deal also provides it with a "contingent value right" in relation to the Dorado discovery and a royalty over Quadrant's licences in the Bedout Basin where the find was made.
Angela Bennett's AMB Holdings, Canada's CDPQ and Quadrant management also currently hold stakes in the business and are selling.
STO Price at posting:
$6.27 Sentiment: Hold Disclosure: Held
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