US group, Harbour Energy has bowed to the inevitable and lifted its proposed offer price for Santos which now values the Australian oil and gas group at $A14.4 billion compared to around $A13.7 billion last week when the final, binding offer was proposed.
The decision last week by Harbour Energy not to lift the proposed offer price from the existing $US4.98 a share was seen as a joke in the light of the rapid rise in oil prices to their highest levels since late 2014.
The new offer is $US5.21 a share, which is equivalent to $A6.95 a share at an exchange rate of 75 US cents a share, and is at an 11.2% premium to the last close of Santos shares on Friday. That may see it win the support of the Santos board.
Santos shares rose 1.7% to $6.36, so the market remains to be convinced by the higher Harbour price.
A question mark however remains over one condition attached to the higher offer – that Santos increase its oil price hedging this year and next by around 30% or more.
Analysts say that’s because Harbour Energy wants the certainty of cash flows to enable it to meet debt repayments if the offer is successful.
Global oil prices are up around 17% since the first firm price was issued by Harbour Energy in April.
Santos says its independent directors will now consider the new, higher priced offer.
Harbour Energy said it was its best and final offer, meaning no more increases.
"Harbour’s 21 May 2018 proposal is ‘best and final’ and will not be further increased prior to entering into a Scheme Implementation Deed. The Proposal is subject to final confirmatory due diligence and entry into a Scheme Implementation Deed with Santos,” the statement said.
