Beach, Drillsearch to merge

OREANDA-NEWS. October 26, 2015. Australian independents Beach Energy and Drillsearch have agreed to merge their operations both based in South Australia's Cooper basin in a A\\$384mn (\\$277mn) deal. Average daily output of the combined firm is forecast at 29,000-32,000 b/d of oil equivalent (boe/d) for the 2015-16 fiscal year ending 30 June.

Beach and Drillsearch are partners in the Western Flank Oil Fairway joint venture and also in the Western wet gas joint venture in the Cooper basin. Both companies have exploration permits in the Cooper basin that are located near each other. Beach is the larger company of the two and it is a part owner of the Moomba gas processing plant in South Australia through its 20.21pc interest in South Australia's Cooper basin, which is operated by Australian independent Santos. Beach has 23.3pc of South West Queensland venture that covers the Queensland portion of the Cooper basin.

The Beach-Drillsearch merger forecast annual cost savings of about A\\$20mn that includes Drillsearch's corporate offices to relocate from Sydney to Beach's office in Adelaide. The combined group would have proven and probable reserves of about 100mn boe.

The transaction sees Beach offer 1.25 of its shares for each Drillsearch share, valuing it at A\\$0.83/share and a 27pc premium to Drillsearch's stock market close yesterday.

The deal is the latest in the consolidation of the Australian upstream market. Australian independent Santos received a A\\$7.1bn takeover offer from investment firm Scepter Partners, which it rejected yesterday. A large swathe of the commercial coal-bed methane gas reserves in Queensland are to change ownership through Shell's proposed takeover of UK energy firm BG.

The Beach-Drillsearch tie-up is also a result weaker oil prices that has seen all upstream firms cut capital expenditure and reduce costs to conserve funds. Smaller companies face a more difficult prospect in raising finance to develop new projects in a lower oil price environment.