Carlyle targeted Aussie energy groups ahead of Santos play

Under the deal ADNOC takes the major Santos assets and Carlyle would take those within the portfolio which are less desired.

The Carlyle Group lobbed an expression of interest for Strike Energy in addition to Woodside assets and may have even bid for parts of Santos before it emerged as a backer for the Abu Dhabi National Oil Company’s latest $29bn-plus energy play.

Based on its recent interest in assets, it has many in the market betting that after coming forward with an offer to buy Santos with ADNOC, The Carlyle Group may not leave it there and will add other Australian acquisitions to its agenda.

Already, Carlyle last year tried to buy the Macedon asset in the Perth Basin from Woodside, of which Santos was also a shareholder, but the asset was retained.

Now DataRoom can reveal that an approach was made about buying Strike Energy, which also operates in the Perth Basin, and interest may have earlier emerged for the Santos-controlled Perth Basin assets.

Carlyle has funds to deploy for energy investments – and if they are not used for deals within a certain time frame then they are returned to the investors, which makes it a motivated buyer.

Carlyle is partnering with ADNOC for Santos, and there’s a view that if a transaction receives approval then Carlyle’s role will be to take the Perth Basin assets that Santos owns.

Globally, Carlyle has been highly active on energy deals but, for ADNOC, its play for Santos came as a surprise for some due to its hesitance to take on complex transactions of such a nature.

One view is that having the expertise of Carlyle executives involved is what enabled it to navigate deals of such complexity, and it gave ADNOC confidence to move forward with a buyout plan.

The private equity firm, which has $US453bn of assets under management, is described as a sophisticated investor which is data driven and analytical.

The pair joining forces has been described as a clever business model, where ADNOC takes the major Santos assets and Carlyle would take on those that are less loved within the portfolio.

Only this week, Carlyle joined with natural gas producer Diversified Energy to invest as much as $US2bn in mature oil-and-gas fields, as the private-equity firm seeks to capitalise on rising demand for energy by backing assets that generate steady cashflow.

The Wall Street Journal reported that investing alongside Carlyle will make it easier for the publicly traded company to acquire natural-gas and oilfields across the US, according to Carlyle’s head of asset backed finance in its global credit group, Akhil Bansal.

Increased emphasis on energy security by governments, combined with rising demand for electricity to power artificial-intelligence systems, was one of the deal drivers, he said.

Diversified sees opportunities in the non-core assets that large energy producers are shedding.

This is following a wave of multibillion-dollar mergers and acquisitions in the US oil-and-gas sector during the past few years, he said.

It’s also looking at the private equity-backed companies which sponsors are eager to sell after an extended period of subdued asset sales in the sector.

Last year, Carlyle swooped on a portfolio of gas assets in Italy, Egypt and Croatia, buying the assets from London-based Energean. The assets are expected to produce the equivalent of 47,000 barrels of oil per day.

It’s previously invested in Neptune Energy, Assala Energy and SierraCol, to establish a stand-alone, leading exploration and production company in the Mediterranean, through organic growth initiatives and mergers and acquisitions.

Jarden analysts said in a research note that they expected that the timeline for the $8.89-a-share Santos buyout could involve due diligence being completed in August, and investors could vote on a deal by the first quarter of 2026, if all goes to plan.

Jarden expects key regulatory focus areas to include the roughly 24 per cent market share that Santos has in the WA domestic gas market, the bidder’s commitments to maintain the Santos brand and an Adelaide headquarters and local operations.

If Santos assets need to be sold as part of the conditions for regulatory approval, Beach Energy could be a buyer of some.

Additional reporting: The Wall Street Journal