Owners of Santos Ltd (ASX: STO) shares might want to keep an eye out for big news from Oil Search Ltd (ASX: OSH) in the coming weeks.
Long-awaited governmental approval to develop Oil Search’s 38.5%-owned P’nyang gas field could reportedly be just days away.
The green light could see the planned all-scrip merger of Santos and Oil Search skewed further in Santos’ favour.
At the time of writing, the Santos share price is $6.39, the same as its previous close.
For context, the S&P/ASX 200 Index (ASX: XJO) is in the green, boasting a 0.68% gain.
Let’s take a closer look at the news that could reportedly increase the value of Oil Search.
Could this boost the Santos share price?
Santos is set to walk away with a bigger share of the merged entity than it’s brought to the table. An announcement, reportedly expected to be released shortly, could further tip the balance.
The Papua New Guinean government has been in talks with the P’nyang gas field’s operator, Exxon Mobil Corp (NYSE: XOM), for months. According to reporting by The Australian, the pair are getting ready to announce the project has been given the green light.
The approval could see development works begin at the gas fields.
Though, Papua New Guinea Minister for Petroleum, the Hon Kerenga Kua, previously said phasing construction over an 8-year period would benefit the country and its economy.
It could also boost the value of Oil Search’s stake in the project, increasing the company’s value.
That’s worth noting as an independent expert’s report found Oil Search’s value wasn’t reflected in the merger terms. They said:
Oil Search shareholders are contributing around 43-44% of the aggregate estimated underlying value of the merged group compared to the 38.5% of the merged group that they will receive.
They said, even after acknowledging cost savings from the merger, it will lower the value attributed to Oil Search shareholders. However, the expert concluded the merger is in the best interests of Oil Search shareholders.
Also noteworthy, Santos also owns a small share of the P’nyang gas fields. The entity resulting in the companies’ fusion will own a 42.5% stake.
The companies have already indicated they plan to sell the stake down to around 30% following the merger. Doing so will ensure the merged entity has a smaller share than Exxon Mobil.
Oil Search shareholders are expected to vote on its proposed merger with Santos in early December. To get the scheme across the line, 75% must vote in favour.
The post Own Santos (ASX:STO) shares? Here’s why the company could be in for some good news this week appeared first on The Motley Fool Australia.
Should you invest $1,000 in Santos right now?
Before you consider Santos, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Santos wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
More reading
- Could this make an Oil Search (ASX:OSH) merger even better value for Santos?
- ASX 200 (ASX:XJO) midday update: Omicron hits Flight Centre, Domino’s jumps
- ASX energy shares on watch after Omicron sparks oil price crash
- 5 things to watch on the ASX 200 on Monday
- Leading broker names 2 ASX energy shares to buy
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
from The Motley Fool Australia https://ift.tt/3I6MyEU
Leave a Reply