ASX Participants and ASX Clear (ASXCL) Participants were advised in ASX Notice #1695.21.11 dated 24 November 2021 of the adjustment method for the corporate action between Oil Search Limited (ASX Code: OSH) and Santos Limited (ASX code: STO) combination. Following shareholders and court approvals, the scheme is now effective with the last day of trading of OSH shares on 10 December 2021.

What do I need to do by when?

Scrip Offer Adjustment

As earlier advised, ASX will, after the close of business on the last date of trading of Oil Search shares (Friday, 10 December 2021), adjust Open Positions in OSH Options under ASX Market Rule 11.3 Procedure 10 as follows:

The option code will change from OSH and become ST9.  The Underlying Securities will be STONA shares;

OC = old contract size (currently 100)         

TC = theoretical new contract size (prior to any rounding) which is used in intermediate calculations

      = the final number of STO shares

      = 0.6275*100 = 62.75          

NC = Adjusted new contract size (after rounding) = 62

The difference between the theoretical new contract size and the adjusted new contract size, will be cash adjusted using the ETO cash equalisation adjustment payment formula detailed in the final notice.   

The strike price in each Series will be adjusted using the following formula:

          New Strike Price = Old Strike Price*(OC/TC)

When Effective

The adjustment to ST9 ETOs will be effective on Monday 13 December 2021.

Following the end of deferred settlement trading, On Friday, 17 December 2021 ASX Clear will convert the ST9 ETOs to STO ETOs on a one for one basis.

Restriction on Exercise

Exercise of OSH ETOs will be restricted on the last day of trading of OSH Shares (Friday, 10 December 2021).

Exercise of ST9 ETOs will be restricted on the last day of deferred trading of STONA Shares (Friday, 17 December 2021)               

Table of adjusted series are as follows

DCS Cash Adjustment Calculation Methodology

Where a cash adjustment is applicable, DCS will apply the methodology described in this section.

The cash adjustment is calculated by taking the difference between the contract value of the option before and after the adjustment.  Variants to the formula apply for rights style adjustments and when the adjustment occurs on the day of the option’s expiry.

Cash adjustment = (BOP * BUV) – (AOP * AUV)

Where

BUV =Before (adjustment) Unit Value = BP * BU rounded to nearest cent

AUV =After (adjustment) Unit Value = AP * AU rounded to nearest cent

BU = units per lot (multiplier) before the adjustment (old traded entity)

AU = units per lot (multiplier) after the adjustment (old traded entity)

BP = for rights style, =SP/Adjustment Factor, for non-rights style=SP.

AP = for rights style, =SP, for non-rights style=SP * Adjustment Factor.

SP = settlement price of the option if not the options expiry day, otherwise the intrinsic price (underlying price-strike price for calls, strike-underlying price for puts) if on expiry date.  Refer Notes 1 and 2 below

BOP =pre-adjusted open position Refer Notes 1 and 3 below

AOP =post-adjusted open position Refer Notes 1 and 3 below

Note:

1. Cash adjustments on expiry will apply to exercised positions only.
2. The intrinsic price used for exercised positions on expiry is based on the adjusted strike price for rights style adjustments and the pre-adjusted strike price for non-rights style adjustments.  Set negative intrinsic prices to zero i.e. if an out of the money is exercised, the intrinsic price and hence cash adjustment is zero.
3. Pre and post adjusted positions will be the same unless there is a position adjustment factor applied to the open position associated with the adjustment.  For rights style use the start of day position (i.e. exclude any UA trading activity), for non-rights style use the (end-of-day) position prior to the adjustment.
4. Cash adjustments will also apply to LEPO positions.
5. For short positions, the result of the cash adjustment formula should have its sign reversed (multiply by -1). For non-LEPO positions the truncation approach ensures that the seller (writer) is always debited and the buyer (taker) is credited.  Because the LEPO strike is usually returned to 1c after the adjustment, the holder of a short LEPO position may be credited and long position may be debited.

Need more information?

Issued by

Greg Fitzpatrick, Senior Manager, Clearing Operations

Contact information

Will Ward
1800 240 033

clearing@asx.com.au

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