Santos chairman flags return of dividends, says Harbour Energy bid not in the bag

Santos’ chair has flagged the potential return of dividends, as he notes board approval of Harbour’s bid is not assured.

Santos’ GLNG project. (Supplied)

Santos chairman Keith Spence says dividends may be back on the agenda early next year after the company sold its Asian assets to Ophir Energy for $US221 million, helping it pay down debt quicker than expected.

The chairman has also stressed a $13.5 billion bid by US private company Harbour Energy’s may not be approved by the board.

Mr Spence said Santos (STO) was set to meet a $US2bn debt repayment target early in the second half of this year, well ahead of its announced time frame of the end of 2019.

“If the performance of the business continues on this trend and current oil price levels are sustained, the board will look to restore dividends based on 2018 financial results,” he told the company’s annual general meeting in Adelaide.

“Our view is that the dividend policy most suitable to Santos’ capital structure is to return to a base sustainable dividend that will be relatively stable over time.”

Last month, Santos agreed to grant due diligence to Harbour and engage with them further on a $6.50 per share indicative cash bid.

“There is no certainty at this time that the Harbour proposal will result in a binding offer for Santos that is capable of being recommended by the Board for consideration by shareholders,” Mr Spence told the company’s annual general meeting in Adelaide this morning.

“I expect the due diligence and engagement process will be concluded within a few weeks.”

Santos is performing strongly thanks to high oil and gas prices and a productivity drive that chief executive Kevin Gallagher has overseen for the past two years.

Helping the debt repayment was the sale of the company’s Asian assets, in Vietnam, Indonesia, Malaysia and Bangladesh, to Britain’s Ophir Energy, he said.

“The journey to repair our balance sheet will therefore be complete in a matter of months and hence we can declare our balance sheet as fixed — and turn our attention to growth,” Mr Gallagher said.