Under the terms of the deal, each shareholder of Drillsearch will receive 1.25 Beach shares for each share held, for A$0.83. Beach Energy already holds 4.56% stake in Drillsearch.
Drillsearch chairman Jim McKerlie said: "Under the all-scrip consideration, Drillsearch shareholders will receive a premium for their shares while also gaining exposure to a company of enhanced scale and balance sheet strength that is well positioned to take advantage of growth opportunities."
The firms said that the combined entity will become a A$1.17bn ($842.7m) energy company, which would be the country’s biggest onshore oil producer.
In addition to having a combined production capacity of 12.1 million barrels of oil equivalent a day with operations in the Cooper and Eromanga Basins, the new company is estimated to have pre-tax synergies and cost savings of approximately $20m per annum.
Beach Energy chairman Glenn Davis said: "The proposed merger will provide both Beach and Drillsearch shareholders exposure to a more efficient, cost effective and diverse Cooper Basin business with larger production and reserves, delivering real benefits to all shareholders."
Beach Energy is already a partner with Drillsearch in the Western Flank Oil Fairway joint venture and also in the Western wet gas joint venture in the Cooper basin.
Subject to the approval of Drillsearch shareholders as well as Court approval and other conditions, the transaction is planned to be completed in late January 2016.
Upon completion of the deal, the firms expect to produce between 10.6 million and 11.8 million barrels of oil equivalent in future.
