Santos admits to leasing private jet for executive use
Time is money says Santos, as it defends leasing a private jet so boss Kevin Gallagher could fly more quickly to meetings, including one that coincided with a top rugby game.
Oil and gas major Santos’s use of a private jet for the board and boss Kevin Gallagher has been derided as a “terrible look” by a major institutional investor after the company admitted to the multimillion-dollar expense on Tuesday.
Mr Gallagher’s tenure at the company, starting in 2016, has been defined, until now, by a keen focus on costs, with the company slashing more than 1000 jobs soon after he started in the role.
The company successfully, and rapidly, got its expenditure problems under control, and beat its own targets with regard to debt reduction, however the Adelaide-based company has now admitted to setting aside $US3.3m this year for the use of a Dassault Falcon private jet.
The company confirmed on Tuesday that in 2022 it leased a 2017 Dassault Falcon - which depending on the model can carry up to 19 passengers and which cost more than $20m to buy outright - in order to facilitate more cost-effective use of executive and board member time.
Santos shareholder Snowcap Research, which in March accused Santos of having lost its way, said it was inappropriate.
“It’s not appropriate and heightens our existing concerns that Santos’ board is not providing adequate oversight of the CEO,” Snowcap told The Australian. “That it wasn’t disclosed also shows a total lack of respect for shareholders”.
Snowcap has previously taken aim at Mr Gallagher’s one-off bonus incentive – a sore point for investors since it was announced in April 2021.
The use of the jet was not proactively publicly disclosed by the company, however Santos confirmed its use after media reports on Tuesday revealed its existence.
“Santos leased a corporate jet in mid-2022 following the expansion of the company through the Oil Search merger,’’ the company told The Australian.
“The lease was entered into to enable more cost- and time-efficient business travel to operations remote from our capital city offices in Adelaide, Brisbane and Perth.
“The jet is used by other companies when Santos does not require it and it generates revenue for Santos from these activities.
“The jet is primarily used for travel to Papua New Guinea, Timor Leste, Alaska and remote facilities in Australia where we operate.’’
The cost of the corporate jet this year has reportedly been budgeted at $US3.3m, and is subleased to other users when not being used by the energy company.
Santos said the jet had been leased to third parties for charter flights 13 times so far this year, while Mr Gallagher had flown on the jet 33 times since it was leased in mid-2022, and he had flown 13 times commercially this year.
The private jet trips included jaunts to North America and the UK for post-results investor roadshows, with one trip coinciding with a Scotland Vs Ireland rugby match in Edinburgh, which Mr Gallagher attended “as a guest of an energy consultancy and advisory’’.
One institutional shareholder with a Santos stake said the optics over the use by Mr Gallagher of the private jet were “terrible”.
“For a company that has been touting that they’re focusing on unit costs, and that’s in their mantra for everything they do, it’s just a terrible look. I don’t know what they’re thinking,” the institutional shareholder said.
“Kevin has always been about cost out. It clearly shouldn’t have happened. They have assets in the middle of Australia so they have to get to remote sites. But you don’t need a private jet.
“And especially when you’re managing the unit costs of every single employee down to the ground in terms of what troops are having to be doing. It’s just a terrible look.”
Santos has long spoken of its “disciplined operating model’’, which was a phrase last used in its first half results released in late August and which refers to the cost constraint the company has espoused in recent years.
The company’s remuneration policies have also come in for criticism in the past year or so.
Mr Gallagher was paid $7.05m in 2022 according to the Santos annual report and recent ASX disclosures show he sold 600,000 shares in the company last week for $4.67m “as part of a reorganisation of personal financial matters’’.
The company received a “first strike” protest vote from shareholders in May this year, with a one off $6m “growth projects incentive’’ awarded to the managing director - which was seen by observers as a move to stop him from being poached by rival Woodside Energy - irking some investors.
That bonus is tied to project deliveries out to 2025.
A first strike occurs when 25 per cent or more of shareholders vote against a company‘s remuneration report.
Santos shares closed 1.3 per cent lower at $7.72 on Tuesday.
