Santos (ASX: STO) is swooping in to help Drillsearch (ASX: DLS) speed up its Cooper Basin exploration and production. Drillsearch announced that Santos has acquired a 60% stake in its Western Cooper Wet Gas Project, and will pour $100 million to $120 million into the project to accelerate commercialization opportunities. With both fixed and oil-linked gas sales agreements in hand, Drillsearch has a handle on its finances and needs Santos to streamline sales.
At the same time, Santos will also work to expand Drillsearch’s Cooper Basin oil reserves and production. Drillsearch has increased its stake in the Tintaburra Block from 11% to 40%, and Santos is farming in to a 33% in another part of the plot.
While an interest sale to Santos might seem like an unnecessary profit split, Drillsearch has all the information to wheel a smart deal. With sales agreements signed off, Drillsearch is able to bring Santos on as a partner, knowing (more or less) how its margins will manage. Bigger isn’t always better, but in this case teamwork seems to work best.
Drillsearch and Santos both know it: limited oil supply and growing demand mean oil prices are likely to rise over time. Position yourself to profit from this trend now, with The Motley Fool’s brand-new FREE research report, “3 Oil Stocks to Send Your Portfolio Gushing Higher”.
Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.