Santos expects to hit deadline for Barossa gas project
Santos has committed to delivering its $US3.6bn Barossa gas project in the Northern Territory by the first half of 2025.
Santos has committed to delivering its $US3.6bn Barossa gas project in the Northern Territory by the first half of 2025 despite a hitch in its environmental permit after it lost a Federal Court appeal over insufficient consultation with traditional owners.
Drilling was halted in September last year after Tiwi Island traditional owner Dennis Tipakalippa won a Federal Court case that found Santos had failed to adequately consult traditional owners, bringing its drilling activities to a halt.
Santos said in April it expects to resume drilling before the end of the year but some analysts remain cautious about delays hitting the project.
Still, Santos boss Kevin Gallagher said on Wednesday he was confident the producer would hit its target.
“We can still deliver the project in time for the first half of 2025,” Mr Gallagher told the Macquarie Australia conference.
Meanwhile international energy companies may run the ruler over a takeover bid for Santos given it has underperformed its peers over the last 18 months, broker E&P Financial said.
Energy majors Total, BP & ConocoPhillips could all be potential acquirers and all have LNG exposure which represents 75 per cent of Santos’ valuation.
“BP is short LNG versus its global peers. ConocoPhillips is already a substantial investor in Australian LNG (and Alaska). TotalEnergies is involved in Papua LNG and GLNG and a substantial investor in Russia which may be viewed less favourably going forward,” E&P said. “US independents are also a possibility albeit the current regulatory uncertainty could be less attractive.” The broker said Santos should not deviate on its strategy, noting its free cash yield will improve over the next few years as growth is delivered.
“The market will ultimately re-rate this on execution. If not, global acquirers might,” E&P analysts led by Adam Martin said.
Santos’ relative underperformance was due to declines at Darwin LNG, giving the go-ahead on Alaska after appearing lukewarm on the project, uncertainty on Barossa approvals and federal government intervention in the market, according to the broker.
“Investors are becoming increasingly frustrated. The question is whether international energy companies are noticing this performance and whether there might be appetite for M&A. We have fielded a number of investor inquiries on the topic. There is also investor interest as to whether some of its growth projects will be completed,” Mr Martin said.
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