Santos soars 13pc on Harbour Energy takeover talk
Santos shares have surged to a two-year high after it said it had knocked back a $9.3bn offer from Harbour Energy.
Santos is in play again, with the oil and gas producer’s shares surging to a two-year high after it said it had knocked back a $9.3 billion offer from Harbour Energy, a US private equity group run by former Shell executive Linda Cook and with intimate boardroom knowledge of Santos’s assets.
Harbour, which is backed by the $US17bn ($22.4bn) EIG Global Energy Partners, the major shareholder in Queensland’s Senex Energy, declined to comment on the initial bid made in August, or reports it was lining up a fresh bid at $5.30 a share.
But Santos managing director Kevin Gallagher said it was a big vote of confidence for the company and the plan he had put in place to turn it around.
“It is no surprise that there’s renewed interest in Santos,” Mr Gallagher said. “It’s a very positive reflection of our turnaround journey over the last two years and I take it as a compliment.”
The stock jumped 57c, or 13 per cent, to $4.95 yesterday. This is the highest price since Santos embarked on a $2.5bn capital raising in November 2015 after having rejected a conditional $6.88-a-share bid from Brunei and UAE-backed Scepter Partners, which wanted to reinstall former Santos chief John Ellice-Flint as CEO. When asked last night if he was involved in the Harbour bid, Mr Ellice-Flint declined to comment.
In response to a media report yesterday that Harbour was gearing for another approach, Santos said it had received a conditional, non-binding and indicative proposal from Harbour at $4.55 a share to acquire the company through a scheme of arrangement. “The board rejected the approach on the basis that the indicative price was inadequate and the sources of funds were uncertain,” Santos said.
Mr Gallagher, who took the top role in February last year, said he had more to do to increase Santos’s value to shareholders.
“Our transformation journey is not finished,” he said.
“We continue to deliver more for less and we are now focused on building off the platform of our five core long-life natural gas assets, our lowest-cost onshore drill-complete-connect business, our facilities and infrastructure, and our marketing and trading business.”
Macquarie said the reported $5.30-a-share offer would not be sufficient, saying it was only 11 per cent above where the stock was trading earlier this month.
“Given the turnaround in Santos’s fortunes prior to crude oil rallying, and the value for Darwin LNG and other projects yet to be unlocked, we see the offer as unrepresentative of Santos’s potential and opportunistic,” Macquarie analysts said.
Harbour and EIG had a look at Santos assets in 2015, when chairman Peter Coates conducted a strategic review that ended up in the equity raising, rather than substantial asset sales.
Ms Cook was Shell’s head of gas and power until she left the company in 2009 after being passed over for the top job at the oil giant for Peter Voser. During the time she oversaw Shell’s entrance into Queensland’s coal-seam gas industry, eventually through a 30 per cent stake in Arrow Energy in 2008 (before joining PetroChina in a takeover of the whole business in 2010).
It is believed Shell was in talks with Santos in 2008 when it was courting majors to join the Gladstone LNG project, including some of the time when Mr Ellice-Flint was still chief executive.
Visiting Australia for the annual oil and gas industry conference in April 2008, Ms Cook said Shell was keen to join the sector. Since 2015, Harbour’s board has included Asian oil industry veteran Hock Goh, who was appointed a Santos non-executive director in 2012.
Former Apache Corporation chief Steven Farris is also on the Harbour board.
He has intimate knowledge of Santos’s West Australian domestic gas assets, where Apache was previously a partner before selling to Quadrant Energy.
Harbour is managed by EIG, where Ms Cook sits on the board and which has $US17bn under management.
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