Santos Acquires Quadrant Energy for US$2.15 Billion

Australian oil and gas company Santos (ASX:STO) has entered into a deal to purchase privately owned Quadrant Energy for more than US$2 billion.

The acquisition will make Santos Australia’s leading natural gas supplier, while also giving the company access to valuable assets in the Quadrant portfolio.

“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,” Kevin Gallagher, Santos managing director and CEO, noted in the press release.

Quadrant’s extensive portfolio includes a number of natural gas and oil assets, near and medium term development and appraisal and exploration assets across more than 52,000 km2 of acreage, predominantly in the Carnarvon Basin.

Located offshore in Western Australia, Carnarvon is considered to be the country’s largest offshore oil and natural gas province, and may be the most lucrative aspect of the deal.

In 2017, Quadrant’s assets produced 19 million barrels of oil equivalent (mmboe).

Santos may be acquiring Quadrant now, but both companies have a long history of working collaboratively and have overlapping assets. Santos estimates that synergy between the two energy producers will result in US$30 to US$50 million annually.

“Santos has enjoyed a long-established relationship with Quadrant which has operated its Western Australia natural gas assets for many years developing a well-deserved reputation as a safe, high reliability and low cost operator,” added Gallagher.

In addition to the US$2.15 billion price tag, Santos agrees to pay US$50 million for certified resources of 100 million barrels in the Dorado field, another extra US$2 a barrel for reserves of between 100 million and 125 million barrels and $2.50 a barrel for reserves above the 125-million mark.

The Quadrant deal is just one part of Gallagher’s growth strategy for Santos, an initiative that saw the company turn down a US$10-billion takeover offer from private company Harbour Energy just three short months ago.

Santos shares were up 12.77 percent on Wednesday (August 21), ending the day at AU$6.27.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.