ConocoPhillips eyes Santos LNG

Some analysts believe Santos would probably welcome a sale of GLNG for a good price.

Santos made it clear it was getting on with business after its talks with Woodside over a $24bn-plus buyout collapsed in recent weeks, with its focus squarely on operating its assets.

But some wonder if it’s not the end of merger and acquisition activity for the listed gas producer.

It may not be a buyout of the entire company, despite suggestions last year that bankers were testing the interest of global industry players; a buyer may be stalking some of the parts.

One asset in focus is the Santos Gladstone LNG. Sources believe ConocoPhillips has had its eye on GLNG in recent months. The US multinational owns 47.5 per cent in the nearby APLNG after buying an additional 10 per cent from Origin Energy in 2022. Origin Energy now has 27.5 per cent and Sinopec the remainder.

The understanding is that ConocoPhillips had been waiting in the wings to do a possible deal on APLNG after EIG and Brookfield walked away from their $16bn bid for Origin.

EIG was going to buy Origin’s APLNG stake and Brookfield the energy markets business, but Origin’s largest shareholder was not in favour of the transaction and voted against it.

Apparently, ConocoPhillips had been carrying out a lot of work on the merits of bringing APLNG and GLNG together.

One impediment to doing so could be the Australian Competition & Consumer Commission.

An even bigger challenge will be gaining approval from all of the other co-owners.

Santos owns 30 per cent owned of GLNG, Petronas 27.5 per cent, Total 27.5 per cent and KOGAS 15 per cent.

Some analysts believe Santos would probably welcome a sale of GLNG for a good price, with the asset thought to be in the billions.

Santos is under pressure to reorganise its Australian portfolio because its domestic development assets have been bogged down in legal and regulatory delays, and there are risks around GLNG over reserves and capital spending.

Yet a source close to Santos said it was not for sale, and others say it is the jewel in the crown for the domestic portfolio.

When talk surfaced of a Santos break-up before Kevin Gallagher took the helm back in 2015, the suggestion was that its holding could be worth about $6.4bn.

Sources say ConocoPhillips has a close relationship with Morgan Stanley, which has recently done due diligence on Santos on behalf of its client Woodside, so it would be familiar with the inner workings of Santos.

ConocoPhillips has a large team in Australia, and the synergies between GLNG and APLNG would be substantial.

On another matter, now that Woodside has sold a 15.1 per cent interest in its Scarborough asset in Western Australia to JERA for $US1.4bn, the question is what does it do with the money. One possibility is that it is returned to investors.