Santos boss Gallagher’s $6m carrot to pull out of Woodside race

Santos boss Kevin Gallagher has $6m worth of reasons to pull out of the race for Woodside’s leadership, at least until 2025.

Santos boss Kevin Gallagher. Picture Mark Brake

Santos boss Kevin Gallagher will receive a $6m “once-off growth projects incentive” to deliver the oil and gas giant’s major projects to 2025, in a move designed to keep him out of the race for Woodside’s top job.

The Santos board has agreed to pay Mr Gallagher the incentive, subject to shareholder approval, to see through its major projects, including the recently-approved $4.7bn Barossa gas project in the Northern Territory, Dorado and Moomba carbon capture and storage project developments.

He will also continue to lead the energy strategy to 2025, aimed at transitioning the ASX-listed, $15bn group to cleaner fuels and its target of net-zero emissions by 2040.

Mr Gallagher was widely believed to be in the running for Woodside’s top job as successor to chief executive Peter Coleman when he leaves later this year.

Woodside is likely to make a decision soon, possibly as early as this week, ahead of its annual general meeting on April 15.

Last week, Mr Gallagher stoked speculation he was in the race, but on Monday said his job at Santos “is not yet done”.

It is understood Mr Gallagher was not on the list of final candidates, which is likely to include Shell’s Zoe Yujnovich, BHP’s Geraldine Slattery and Woodside’s executive VP development and marketing Meg O’Neill.

Mr Gallagher was previously a contender for the Woodside job when Mr Coleman was appointed in 2011.

Woodside’s outgoing chief executive Peter Coleman. Picture: Jane Dempster/The Australian.

Back then, he used to run the producer’s North West Shelf LNG plant and has rebuilt Santos since taking over five years ago in the midst of an oil crash.

Mr Gallagher said it is a “privilege” to lead Santos.

“We have made significant progress on our transformation journey, but the job is not yet done,” he said.

“I am delighted to commit to continuing to drive the delivery of our growth strategy, the transition to a leading clean fuels business and to achieve our net-zero emissions targets.”

The growth projects incentive will be delivered in the form of share acquisition rights (SARs) with a face value at grant of $6m.

Vesting of the SARs will be subject to strict performance hurdles related to the successful delivery of major growth projects, the energy transition strategy and continued employment.

Further details on the incentive will be provided at the annual general meeting on Thursday, April 15.

Santos will seek shareholder approval for the issue of shares to satisfy vested awards at the 2022 AGM, which will also see a first non-binding shareholder vote on its climate change report.

Santos chairman Keith Spence said Mr Gallagher is well-recognised as one of Australia’s leading chief executives with a proven track record of delivering value for shareholders.

“Kevin is critical to the successful delivery of the company’s strategy, major growth projects and driving the energy transition over the next five years,” Mr Spence said.

One of the industry’s most well-paid executives, Mr Gallagher took home $8.1m in “realised” remuneration in 2020, including an $887,749 incentive for 2020 and deferred incentives from 2018 and 2017. His statutory remuneration, excluding deferred payments, came in at $US4.2m.

On the Woodside front, Mr Coleman is not due to leave until the second half of this year, but there is an appetite to have his successor in place soon ahead of a final investment decision to sanction its $16bn Scarborough project, an offshore gas development aimed at boosting its share of the LNG market.