Harbour Energy’s Santos bid may need Cooper Basin sale: Don Voelte
Former Woodside Petroleum chief Don Voelte says the Cooper Basin could be seen as a strategic national asset.
Former Woodside Petroleum and Seven Group chief Don Voelte says the Cooper Basin could be seen as a strategic national asset in Foreign Investment Review board deliberations on Harbour Energy’s $13.5 billion Santos takeover bid, and that it may make sense for Scott Morrison to require it be sold separately.
Mr Voelte revealed he was part of a consortium that was considering a bid for Santos before current chief Kevin Gallagher took the reins — meaning Mr Voelte has looked closely at the company and considered the implications of a foreign bid.
US-based Harbour, run by former Shell gas boss Linda Cook, was last week granted due diligence on Adelaide Santos’s assets, after raising an original August approach of $4.55 a share to $6.50.
Mr Voelte said he did not think the deal would be blocked — like Shell’s bid for Woodside was in 2011 — but said asset sales may be required. “The government is going to want to make sure that all the Cooper Basin gas isn’t siphoned off into the (Gladstone LNG) gas plant and taken to foreign shores, and that there’s enough gas left for domestic and industrial consumption in Australia,” Mr Voelte told The Australian.
“I think it would be a very legitimate outcome for Santos to be able to be sold to Harbour, but the requirement would be that they would sell or have Santos sell (Cooper Basin) to another domestic player in Australia.”
The Santos-run GLNG plant buys some of its export gas from domestic markets and is still not running near full capacity.
Mr Voelte said Beach Energy, in which Seven Group has a 24 per cent stake it began building under Mr Voelte, was probably a logical operator because of operational synergies it could reap.
Mr Voelte said it could be argued former treasurer Peter Costello was right to block the Shell takeover of Woodside — which later discovered and developed the $15 billion Pluto LNG plant at Karratha under Mr Voelte — because of concerns Shell could warehouse Woodside gasfields as it focused on other assets.
But he said Santos was a different matter. That is because its other assets, including stakes in Gladstone LNG, Darwin LNG and Papua New Guinea LNG, would probably not be considered strategic to the national interest.
“The FIRB could make a case that Cooper Basin supply is very strategic to the national interest, to domestic gas users,” Mr Voelte said.
He said one way to let the sale go ahead would be to follow the example of US regulators who made BP sell the Alaskan North Slope assets of Atlantic Richfield (ARCO) to a US operator — Phillips — for a $US26bn ARCO takeover to go ahead in 2000.
“It’s a very easy thing to resolve and I don’t think the FIRB or commonwealth want to be seen as constantly blocking foreign takeovers,” Mr Voelte said.
Ms Cook told The Australian last week that Harbour would take a plan to regulators to accelerate Cooper Basin gas production and boost domestic supply.
“Of course she is going to say that,” Mr Voelte said.
Ms Cook had control of Shell’s Australian business shortly after the Woodside knock-back and had run-ins with Mr Voelte over local projects.
But since Ms Cook and Mr Voelte left Shell and Woodside respectively, they have met up several times and get on well.
“I have huge respect for Linda and her capabilities. Harbour is a legitimate outfit.”
He said Harbour’s $6.50 a share offer, which values the company at $13.5bn, appeared “very generous” based on his previous look at Santos.
“I know the assets from that work and I would say this: Harbour is a serious company led by a serious person with a serious number,” Mr Voelte said. Santos shares closed Friday at on $5.88
Mr Voelte’s look at Santos, after he left Seven Group in mid-2015, did not result in a formal approach. It was being done with a view to seize operational value that the consortium did not believe was being captured under previous management.
“There were a group of people that were pretty well known in Australia and in Europe that asked me to join up and help them out,” he said.
“We took a serious look and had serious money, but we couldn’t quite get it to work.”
He said the appointment of Mr Gallagher in February 2016 was one reason an offer was not made.
“When they put Kevin in charge, I thought there probably weren’t a lot of potential margin benefits because he knows how to get margins right,” Mr Voelte said.
“Part of the reason (it didn’t go ahead) is we couldn’t get the numbers right, but another was that a lot of the potential value there would have been realised by Kevin.”
Mr Voelte was speaking from Colorado. Since returning to the US he has embarked on private enterprises including Permian Basin oil and gas, property development and farming in his home state of Nebraska.
“We farm soy beans and corn,” Mr Voelte said.
“I bought a lot of farmland around where I grew up because it’s familiar and they’re not making any more dirt.”
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