Santos CEO Kevin Gallagher quits MinRes board after investor rebuke
Santos chief executive Kevin Gallagher has stood down from the Mineral Resources board after shareholders raised concern over the move.
Santos chief executive Kevin Gallagher has abruptly reversed a decision to join the board of iron ore and lithium producer Mineral Resources following a rebuke from investors and said he wanted to “leave no doubt” his focus was on leading the South Australian energy producer.
Mr Gallagher was named a non-executive director of billionaire Chris Ellison’s MinRes on February 1, an unexpected appointment just a month after Santos wrapped up its $21bn blockbuster merger with rival Oil Search.
The move at the time was slammed by a prominent investor activist, warning it would distract from the Oil Search integration and Santos’s ability to tackle broader climate issues.
MinRes said on Thursday that Mr Gallagher had withdrawn his nomination with sources saying several high profile investors were deeply unimpressed with the decision.
“Mr Gallagher made his decision in the context of his primary role as managing director and chief executive of Santos and following consultation with Santos stakeholders,” MinRes said in an ASX statement.
Santos shareholder Allan Gray, a former Oil Search investor critical of the merger, said Mr Gallagher erred in joining the MinRes board.
“We do take exception to that and it suggests that their time is being spread across multiple companies rather than the one that they’ve been paid to spend all of their time on,” Allan Gray managing director Simon Mawhinney said, while noting he had not complained about the move to Santos’s board.
The Australasian Centre for Corporate Responsibility said in early February that Mr Gallagher’s board election would annoy Santos shareholders and was inappropriate for a modern CEO.
At the time, Mr Gallagher hit back at the criticism and said he was committed to Santos until at least 2025.
“I have very few external commitments outside my Santos role and I am confident there will be no conflict on my time through taking up this non-executive role,“ he said on February 1.
However, the Santos boss took a more conciliatory tone on Thursday and said he wanted to focus on his day job.
“With the integration of Oil Search to be completed and as Santos looks to build around our existing long-life natural gas assets and grow new revenue streams through decarbonisation and clean fuels, I have decided now is not the time to take on additional corporate responsibilities outside of Santos,” Mr Gallagher said in a statement.
“I want to leave no doubt that, together with my senior executive team, I am fully committed to implementing our transform, build and grow strategy, which will deliver superior returns to all shareholders.”
A deal was cooked up last year that will see Mr Gallagher receive a $6m “once-off growth projects incentive” to deliver the oil and gas giant’s major projects to 2025, in a move that was designed to keep him out of the race for Woodside’s top job.
The Santos board had belatedly made the correct choice, the ACCR said, after exercising poor judgment.
“The withdrawal of Kevin Gallagher’s nomination to the board of Mineral Resources confirms that institutional investors believe CEOs should be focused on one job only,” ACCR director of climate and environment, Dan Gocher, said.
“Mr Gallagher should be focused on integrating the merger of Santos and Oil Search, and the difficulties of the energy transition, not another resources company. The board of Santos showed poor judgment in sanctioning Gallagher’s nomination, particularly after he was generously incentivised to remain in his position in early 2021.”
A raft of senior Santos executives including chief technical and marketing officer David Banks and the company’s two chief operating officers for upstream and midstream, Brett Darley and Brett Woods, are seen as in the running for the top job at Beach Energy given Mr Gallagher won’t vacate the CEO role for a further three years.
Mr Gallagher sold $2.86m worth of shares in the South Australian gas producer on Monday to meet personal tax obligations, offloading 400,000 shares in an on market sale.
The Scottish executive wrapped up Santos’s merger with Oil Search prior to Christmas and is now working through a raft of asset sales as it looks to trim its funding exposure for a pipeline of projects.
Santos hired investment bank Moelis to garner interest in its Pikka oil field in Alaska, seen as ripe for a partial or full sale given funding barriers for the development. It’s also expected to sell down its 42.5 per cent stake in PNG LNG and will consider trimming its 80 per cent stake in the Dorado oil project in Western Australia.
MinRes announced on Tuesday its long-serving chairman Peter Wade had retired, to be succeeded by James McClements.
Santos rose 1.7 per cent to $7.84 while Mineral Resources gained 3.4 per cent to $47.47.