Santos open to M&A deals amid consolidation push
Santos is ‘open to all opportunities’ to maximise the value of its assets, with more consolidation expected across the world oil and gas sector, says CEO Kevin Gallagher.
Santos is “open to all opportunities” to maximise the value of its assets, with more consolidation expected across the world oil and gas sector, according to chief executive Kevin Gallagher.
Mr Gallagher conceded that the company was not happy that its discussions about a possible $80bn merger with gas company Woodside earlier this year had leaked out.
“We didn’t want those conversations to be in the public domain,” he told the Macquarie Australia Conference in Sydney on Thursday.
“We will always be open to some of those structural and merger and acquisition-type possibilities. (But) if any of that goes on, our preference is to do it behind closed doors.”
He said there had been a pick-up in global merger activity in the sector globally recently. “Right across the oil and gas spectrum the appetite for M&A is returning,” he said.
He said big companies that were “recognised names” were “back looking to grow their businesses through M&A”.
“I do expect more consolidation in the year or so ahead,” he said.
Dealmaking included recent talks between Exxon Mobil buying Pioneer Natural Resources and the move last year by Chevron to buy Hess.
However, he said the focus of Santos management had to be on running the company and delivering on its projects.
Mr Gallagher was asked how he planned to unlock value for Santos shareholders. He said if the market was not properly valuing Santos’s potential, “we’ve got to think carefully about what it will value and how to get value”.
But he said he believed that “if you do a good job of managing the business for value then over the long term things take care of themselves”.
Santos was not planning any new acquisitions, with its next phase of growth focusing on organic growth, he noted, adding Woodside had been interested in Santos’s LNG portfolios.
“Why wouldn’t you be? It is one of the highest value LNG portfolios in the world,” he said.
He said Santos’s LNG portfolio would be producing seven million tonnes a year once its new Barossa project, offshore from Darwin, came online.
“We have growth opportunities – not all of them require building new LNG facilities,” he said.
“If you add them up, there is more than 10 million tonnes of additional growth within that existing portfolio.”
He said Santos was limited in how it could increase its LNG assets because of its capital constraints “and the size of the organisation we are”.
“But there is no doubt in my mind that we have a very attractive portfolio with very real growth opportunities for other folks out there,” he said. “Whether that is through partnering or taking Santos out, who knows?”
Mr Gallagher said he would not discuss reports that Santos was negotiating to sell down part of its holding in the Pikka oil project in Alaska that the company inherited from its $21bn merger with Oil Search in 2021.
He said the company was “always open for value-accretive opportunities” and had had a dataroom open on the Pikka project for “a long time”.
Mr Gallagher welcomed the federal government’s new gas policy outlined on Thursday. He said he was not worried about the proposed introduction of new “use it or lose it” measures that would force companies to develop gas fields and not sit on them, provided any new powers were administered properly and were accompanied with the proper regulatory approval processes.
He said the big concern for companies like Santos was getting the approval processes in place for their proposed projects.
“We have just gone through a couple of years where you could ‘use it’ but get nothing done because we were held up with approval and regulatory roadblocks,” he said.
“We all want to ‘use it’. But you have to have a balanced approach to allowing the approval processes to be effective and support our development aspirations.”
He said it may be the case that some companies were warehousing assets, but said Santos had never deliberately done this.
“We would be accused of doing the opposite and spending too much money in our history trying to develop everything fast.”
More Coverage
