Santos announces acquisition of Quadrant Energy

ADELAIDE -- Santos has announced that it will acquire 100% of Quadrant Energy for $2.15 billion.

Key highlights:

• Acquisition of 100% of Quadrant Energy for $2.15 billion plus potential contingent payments related to the Bedout Basin
• Fully funded from existing cash resources and new committed debt facilities, with rapid de-gearing expected to ~30% by the end of 2019
• Value accretive acquisition of long-life WA conventional natural gas assets with stable cash flows
• Consistent with Santos' growth strategy of building on existing infrastructure positions around core assets to deliver sustainable shareholder returns
• Advances Santos' aim to be Australia’s leading domestic natural gas supplier
• Increases proforma 2P reserves by 220 MMboe, up ~26% and proforma annual production by 19 MMboe, up ~32%
• Significant portfolio overlap with Santos provides combination synergies estimated at $30-50 million per annum (excluding integration and other one-off costs)
• Upside through further material synergies, near-term developments and exploration
• Material earnings, cash flow and value per share accretion
• Opportunities to leverage Quadrant’s offshore operating capability across Santos’ Western Australia and Northern Australia portfolio

Santos Managing Director and CEO Kevin Gallagher said Santos has enjoyed a long-established relationship with Quadrant, which has operated its WA natural gas assets for many years developing a well-deserved reputation as a safe, high reliability and low cost operator.

“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.”

“It is materially value accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

"The transaction lowers our proforma 2018 forecast free cash flow breakeven oil price by a further $4/bbl and Quadrant's stable cash flows provide increased certainty during the upcoming period of major growth project delivery.”

“We look forward to welcoming Quadrant’s staff to the Santos family and integrating our Western Australian operations,” Gallagher said.

Quadrant portfolio

Quadrant Energy holds natural gas and oil production, near and medium term development, appraisal and exploration assets across more than 52,000 km² of acreage, predominantly in the Carnarvon basin offshore WA, Australia’s largest offshore oil and natural gas province.

Quadrant’s share of production from the assets in 2017 was 19 MMboe. 2P reserves at the end of 2017 were 220 MMboe (~75% developed).

Quadrant’s conventional natural gas assets include significant portfolio overlap with Santos, providing opportunity to realize material combination synergies estimated at $30-50 million per annum.

Quadrant’s portfolio also includes a large inventory of discovered resources to backfill existing infrastructure and a leading position in the highly prospective Bedout basin, including the recent significant oil discovery at Dorado (Quadrant 80%) which provides near-term development opportunity and unlocks material exploration potential.