South Australian government on alert as Santos hits new highs after rejecting one Harbour Energy takeover move as more loom

SANTOS shares are at levels not seen for two years after revelations it knocked back a $9.5 billion overseas takeover bid in August and has a sweetened offer looming - a prospect that has put the state government on alert.

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SANTOS shares are at levels not seen for two years after revelations it knocked back a $9.5 billion overseas takeover bid in August and has a sweetened offer looming - a prospect that has put the State Government on alert.

While the bid “demonstrated” how well Santos has performed, the government would be concerned about any foreign takeover,” Treasurer Tom Koutsantonis said in a statement.

“We are monitoring this situation very closely, and if we need to protect the interests of South Australians we will,” he said.

Santos’ stock surged more than 13 per cent, up 57c to $4.95 after Adelaide’s largest company said it had rejected a bid from Washington DC-based Harbour Energy, to buy the company for $4.55 per share.

There are reports a follow up bid at $5.30 per share will materialise, however the company says there is nothing on the table at the moment.

Santos managing director Kevin Gallagher said the company was not in ongoing talks about a possible higher bid, but it was “no surprise that there’s renewed interest in Santos.

“It’s a very positive reflection of our turnaround journey over the last two years and I take it as a compliment.

“Our progress over the last two years has exceeded my expectations and Santos is now in a strong position with a great future.

“We’re well-positioned to keep delivering value for our shareholders and there are people out there who are going to want to try to take advantage of our success.’’

Santos workers looking across Train 1 at Santos GLNG site.

A Harbour Energy spokesman told the company “we don’t comment on market rumours or speculation’’ while not denying that another bid could be in the works.

The Advertiser has also been told Santos director Hock Goh, who has been with the company since 2012 and is also a director of Harbour Energy - has taken leave of absence “until Harbour Energy’s position id definitively established”.

Harbour is a $US17 billion company which describes itself as “an energy investment vehicle formed ... to pursue control and near control investments in high-quality upstream and midstream energy assets globally’’.

Santos also fielded a takeover bid in 2015, when former chief executive John Ellice-Flint led a $7 billion, $6.88 per share tilt for the company which was rejected by the board.

Santos shareholders have been on a wild, mostly disappointing ride in recent years, with the stock plunging from levels around $13.50 in September 2014 to a low of $2.87 in July this year.

The company had been struggling with high debt levels generated largely from its contribution to building the $US18.5 billion Gladstone Liquefied Natural Gas plant in Queensland which it owns 30 per cent of.

Low oil prices and the inability to access gas from its Narrabri project in New South Wales, which it paid $900 million for and subsequently wrote down to zero, also hampered the company. It is still seeking to develop Narrabri, which could supply a large proportion of the east coast’s gas needs.

The company has also paid down large swathes of debt, reducing levels by 40 per cent since the start of 2016 to $US2.8 billion, and slashing costs by more than 40 per cent in the Cooper Basin oil and gas field. This has also resulted in large numbers of staff — more than 1000 — being made redundant in recent years.

If Harbour Energy were to make a new bid for Santos, a key question for South Australia would be where the company was headquartered.

Santos has a large presence in Brisbane as a result of its involvement in the GLNG project.

Any takeover bid would need the approval of the Foreign Investment Review Board before being implemented.