Santos says it has completed the acquisition of Quadrant Energy, a deal that cements its future after the run-in with private equity earlier in the year.
The effective date of the transaction is the start of this year, meaning Santos will benefit when it rules off this year’s accounts at the end of next month.
Santos said it paid an amount of $US1.93 billion, comprising the purchase price of $US2.15 billion less completion adjustments and cash in the company.
Santos said the purchase price was fully funded from Santos’ existing cash resources and $US1.2 billion of new debt facilities.
Stronger operating performance and free cash flow generation since 30 June means Santos is now expecting gearing to be approximately 33% at year-end.
Santos CEO Kevin Gallagher said: “The acquisition of Quadrant is value accretive for Santos shareholders and is consistent with our strategy to build and grow our core assets around existing infrastructure and become Australia’s leading domestic natural gas supplier.”
“Santos has now increased its ownership and become the operator of a high-quality portfolio of low cost, long-life conventional Western Australian natural gas assets with stable cash flows.”
“Santos knows these assets well and has enjoyed a long-established relationship with Quadrant, which has operated our WA natural gas assets for many years.”
“A key benefit of the transaction is the diversification of the Santos revenue base to include strong operating cash flow from long-term CPI-linked gas supply contracts at a time when the oil price continues to be volatile.”
“The Quadrant acquisition lowers our forecast 2018 proforma free cash flow breakeven oil price to approximately $32 per barrel.”
“The portfolio also includes a leading position in the highly prospective Bedout Basin, including the recent significant oil discovery at Dorado.”
“This acquisition strengthens our ability to fund our growth activities in WA, northern Australia and PNG, and the sustainable dividend through the cycle.”
“We look forward to welcoming Quadrant’s staff to Santos and integrating our Western Australian operations,” Mr Gallagher added.
Santos shares rose 2% to $5.60 yesterday. They were trading at $6.80 on August 28 when the Quandrant deal was announced.
