Based on the proposed merger announcement, Drillsearch shareholders will receive 1.25 shares of Beach for every share of Drillsearch held.
Beach already has a 4.5% interest in Drillsearch and the deal is judged likely to resist any outside competing bid. Beach says it has no other competing proposals.
Both companies have Seven Group Holdings of Perth as a common substantial shareholder with 19% of each.
Drillsearch Chairman Jim McKerlie said any competing bid would be evaluated, but the current desire is to progress with the Beach merger to build a significant company.
McKerlie and another Drillsearch director, Phil Bainbridge (formerly with BP PLC and Oil Search Ltd.), will join the board of the combined group.
Two Beach directors will step down while Beach Chairman Glenn Davis will continue as chairman of the combined entity. Beach has been looking for a new chief executive following the resignation of Rob Cole earlier this year for personal reasons after 9 months in the job. The new chief executive officer will become CEO of the combined companies.
A merger integration group has been appointed to manage the merger process. Drillsearch Chief Executive Walter Simpson and acting beach CEO Neil Gibbins will manage the integration group.
There will be combined pretax synergies and cost savings of about $20 million (Aus.)/year.
The key assets of the combined entity will be the producing Western Flank oil fairway in South Australia’s Cooper basin, including Bauer oil field and the producing Western Wet Gas joint venture.
The companies have a substantial footprint in the Cooper-Eromanga basins of South Australia and Queensland and the merger will create a $1.2-billion (Aus.) company even at $50/bbl, according to Jim McKerlie.
Both companies have been low-cost operators and the marriage is seen as a vehicle for improved liquidity, possibly a market rerating, and the ability to be more profitable than the separate companies on their own.