Under the proposed deal, Santos will acquire 100% of Quadrant, including the 70-80% interest in the Phoenix project, for cash consideration of US$2.15 billion in addition to contingent payments and royalties.
Third largest North West Shelf discovery
News of the Santos move comes as Carnarvon has received confirmation that the recent oil discovery at Dorado-1 is the third largest discovery in the history of the North West Shelf.
Leading oil and gas consultancy firm Wood Mackenzie puts the Dorado 2C contingent oil resource of 171 million barrels of oil behind the Barrow Island and Wanaea resources.
Very few junior ASX-listed oil and gas companies have participated in a discovery of this magnitude.
READ: Carnarvon Petroleum Dorado discovery “one of the largest oil resources ever found on the North West Shelf”
Carnarvon holds a 20-30% interest in the four associated permits that comprise the Phoenix project, including the Dorado, Roc and Phoenix South discoveries.
The company said it had good relations with Santos, a highly experienced oil and gas exploration and production company, and looked forward to progressing the Phoenix project together.
It said that it shared the enthusiasm shown by Santos in relation to the Phoenix project and the willingness to quickly commercialise the recent discoveries including Dorado.
Santos has not stated what proportion of the upfront consideration was applied to the Phoenix project area.
Accordingly, it is not possible to ascertain the consideration applicable and, therefore, the look through value associated with the project.
Carnarvon intends to shortly provide further details on prospects identified by the play concept now proven at Dorado, that it believes have potential to add to the contingent oil resource.
Overlap with Quadrant portfolio
In a statement on Wednesday, Santos said there was considerable overlap with the Quadrant portfolio.
This “provides combination synergies estimated at US$30-50 million per annum” along with “opportunities to leverage Quadrant’s offshore operating capability across Santos’ Western Australia and Northern Australia portfolio”.
READ: Carnarvon Petroleum’s oil exploration strategy continues to generate significant shareholder value
Quadrant holds natural gas and oil production, near and medium-term development, appraisal and exploration assets across more than 52,000 square kilometres of acreage.
This is predominantly in the Carnarvon Basin offshore WA, Australia’s largest offshore oil and natural gas province.
Quadrant’s portfolio includes a large inventory of discovered resources to backfill existing infrastructure and a leading position in the highly prospective Bedout Basin, including the Dorado discovery.
“Near-term development opportunity”
Santos said this “provides near-term development opportunity and unlocks material exploration potential”.
Quadrant is held directly or indirectly by Brookfield Asset Management (36.2%), Macquarie
Capital (21.8%), Wesfarmers Ltd (ASX:WES) (13.2%), AMB Holdings (13.2%), Canadian institutional investor CDPQ (12.1%) and Quadrant management (3.4%).