Investors vent ire at Santos at Adelaide AGM
New Santos managing director Kevin Gallagher has flagged job losses and a slimmed down asset portfolio for the company.
New Santos managing director Kevin Gallagher has flagged job losses and a slimmed down asset portfolio as he tries to reshape the oil and gas company after a turbulent 2015 where low oil prices and high debt forced a $2.5 billion equity raising.
Anger over the raising, and the delay in pursuing it, was plain at the Santos annual meeting in Adelaide yesterday, where chairman Peter Coates was forced to defend the board’s actions in a sometimes heated exchange with shareholders.
But the chairman was resolute in defending the actions the board took in the face of the sliding oil price (when he was executive chairman), saying no one had predicted the extent of the rout.
Mr Gallagher, who joined Santos from engineering company Clough in February, said his focus was on stabilising the company, seeing what costs could be cut and then reshaping Santos to be able to break even at oil prices of $US35-$US40 a barrel, down from current levels of about $US47.
“I’m working fast to review the assets and look at the opportunities and see what we can do to establish a more efficient operating model that aims to be free cashflow positive between $US35 and $US40,” Mr Gallagher told shareholders in his first official appearance in his new role.
“In reality, I don’t know if and when we’ll achieve that, but we will work tirelessly to get to that.”
If it can’t be achieved, higher-cost assets will be shed.
After the meeting, he said job losses, which already total 825 under cost-cutting by his predecessor David Knox, had not finished.
“As we drive efficiencies and we drive costs out of our businesses, there will undoubtedly be some job losses,” Mr Gallagher said, declining to put a number on the cuts.
The market was unimpressed, knocking 40c, or 9 per cent, off the share price to leave it at $4.20.
About 500 people attended the two-hour meeting at Adelaide’s convention centre.
Much of the time was taken up by shareholders voicing discontent about the loss of value and, as at last year’s AGM, protests about the company’s Narrabri coal seam gas project in the Pilliga state forest of NSW.
While shareholders were vocal, and the auditorium applauded statements criticising the board’s decision, 89 per cent of shares voted were in favour of approving the remuneration report and directors Greg Martin and Hock Goh were both re-elected.
At the Narrabri coal seam gas project, Santos has written down most of the value and slowed the work program due to community opposition, government hurdles and field underperformance.
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