Australian LNG player Santos has completed the acquisition of Quadrant Energy valued at $2.15 billion.
On completion Santos paid an amount of $1.93 billion, comprising the purchase price of US$2.15 billion less completion adjustments and cash acquired, the company said in its statement on Tuesday.
The completion amount was fully funded from Santos’ existing cash resources and $1.2 billion of new debt facilities.
Stronger operating performance and free cash flow generation since June 30 means Santos is now expecting gearing to be approximately 33 percent at year-end, the company said.
Speaking of the acquisition Santos managing director and CEO Kevin Gallagher said it is consistent with the company’s strategy to build and grow its core assets around existing infrastructure.
“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,” Gallagher said.
He added that the key benefit of the transaction is the diversification of the Santos revenue base to include 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,” he said, adding that “the portfolio also includes a leading position in the highly prospective Bedout Basin, including the recent significant oil discovery at Dorado.”
UBS and JB North & Co acted as financial advisers and Herbert Smith Freehills acted as legal advisers to Santos.