Santos pays $2.9bn for Quadrant
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This comes three years after Brookfield Asset Management and Macquarie Capital bought Apache Corporation’s Australian oil and gas assets, which have since been rebranded as Quadrant.
Wesfarmers said it would report a $US98 million pre-tax profit on the sale of its 13.2 per cent stake.
The Perth conglomerate said it bought the stake in 2015 for $US100 million and would reap net proceeds of $US170 million.
The Santos deal comes after Quadrant’s owners explored multiple sale options, including a stockmarket float.
Santos was always an interested party, as it holds joint venture interests in some of Quadrant’s major assets, including the Devil Creek and Varanus Island gas plants in WA’s north and associated offshore gas fields.
It said the significant portfolio overlap provided combination synergies estimated at $US30 million to $50 million per annum (excluding integration and other one-off costs)
Quadrant also owns equity interests in BHP’s Macedon gas hub and the Ningaloo Vision and Pyrenees oil projects.
In addition, it has an 80 per cent interest in the Dorado-1 field, which is considered one of Australia’s biggest oil and gas discoveries.
“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,” he said.
"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.”
As well as an upfront payment of $US2.15 billion, there will be potential future payments.
These include a $US50 million payment if Dorado’s certified oil and gas (2C) resource at the time of a final investment decision on development is at least 100 million barrels.
Further payments of at least $US2 per barrel (above 100 million) may also be made.
There will also be royalty payments over any future Bedout Basin project revenue (excluding production of Dorado oil/liquids).
The former owners issued a joint statement on the sale.
"Following the Dorado-1 oil discovery and given the financial strength of the business, Brookfield and Macquarie (the Owners) determined it to be the appropriate time to transition Quadrant to a long term owner that is suitably equipped to take it through the next phase of development," it stated.
"With an increasing focus on exploration and development activities, including the assessment and development of the exciting Dorado opportunity, the Owners believe Santos is an ideal party to optimise the future prospects of the company."