The company has acquired a 19.9% interest in fellow coal seam gas explorer Eastern Star Gas by paying Hillgrove Resources $176 million for its interest in ESG.
The company also paid $300 million to Gastar Exploration for its 35% interest in various Gunnedah Basin permits and production areas operated by ESG.
In March, PetroleumNews reported there was speculation Santos was eying ESG as a potential takeover target.
Santos chief executive officer David Knox said the acquisition was a significant step in the company’s Gunnedah Basin strategy and presented an opportunity to deliver carbon light gas fired power generation.
“Combining the proven CSG expertise of Santos and Eastern Star with the ability of Santos to deliver major projects and develop various channels to market will advance the region’s potential as Australia’s next major CSG province – bringing jobs and investment to the area,” he said.
The combination of Santos and ESG’s CSG permits in the basin will cover around 63,000 square kilometres, with the resource potential of the area estimated to be more than 50 trillion cubic feet.
“The combination will consolidate the leadership position of both Santos and ESG among the 15 companies active in CSG in NSW,” Santos said.
Santos entered the Gunnedah Basin in 2007 and is undertaking a 23-well drilling program.
ESG began exploring the area in late 2002 and is widely recognised as the leading independent explorer in the region.
ESG chief executive officer David Casey welcomed one of Australia’s largest CSG players as joint venture partner and strategic shareholder in the company.
“We have said before that ESG is market constrained rather than resource constrained – we expect that this transaction will play a key part in removing that constraint and unlocking value for both parties,” he said.
“While ESG’s 65 per cent remaining ownership and operatorship of the Narrabri CSG project is unaltered, Santos’s broad coal seam gas experience and market presence may be expected to enhance opportunities for rapid project development.
“Santos’s neighbouring Gunnedah Basin CSG tenements and downstream involvements, including LNG, provide multiple avenues for collaboration and joint development initiatives.”
Casey added that the company remained committed to implementing its comprehensive gas reserves upgrade program incorporating multi-lateral production pilots.
He said the upgrade program was proving successful and the Narrabri CSG JV was on track to achieve the targeted 1300 petajoules of 2P (proved and probable) gas reserves by the end of 2009.
