Woodside rushes to capitalise on LNG demand as Santos talks continue
Woodside is pushing to capture demand for LNG amid a transition away from coal, and talks with Santos over a merger meet the ambition.
Woodside is pushing to capture demand for LNG amid a transition away from coal, and talks with Santos over a merger meet the ambition, chief executive Meg O’Neill has declared.
Woodside and Santos in December confirmed they were in preliminary talks over a merger, a deal that would propel the combined company into global giant status, rivalling some of the US majors such as Shell, Chevron and ExxonMobil.
As Woodside reported record annual production on Wednesday, Ms O’Neill said Santos talks were ongoing, though she declined to speculate when discussions could reach a resolution.
Ms O’Neill did, however, offer some clues to the motivations behind exploring a deal.
“I do think it’s worth going back to our strategy which is to thrive through the energy transition and we are looking at a range of both organic and inorganic ways to grow the business consistent with that strategy,” Ms O’Neill told The Australian.
“We do have a focus on LNG. We have capabilities in deep water and we’re also working on our new energy options. We’re looking at a variety of organic and inorganic options and all three of those thematics.”
Ms O’Neill’s comments came as Woodside reported record annual production. The company said production over the year totalled 187.2 millions of barrels of oil equivalent (MMboe), at the top end of guidance issued by the company. Quarterly production totalled 48.1 MMboe, with revenues during the three months hitting $3.35bn, up 3 per cent from the previous three months, due to higher realised prices.
Ms O’Neill said the result illustrated why Woodside had pursued its $63bn merger with BHP Petroleum, and the company’s outlook was bolstered by rapid development of new projects.
“The growth projects are cranking. Sangomar is headed for first oil mid this year, Scarborough is making great headway. Pluto train 2, the activity on site is going to ramp up rapidly this year. And excitingly the Trion project in Mexico is going to start moving into the construction phase. So feel really good about how we’re positioned,” Ms O’Neill said.
Woodside in June 2022 approved the development of its $US7.2bn ($10.5bn) deep water oil project in the Gulf of Mexico, which it expects to begin production in 2028.
While progress on new projects will be welcomed by investors, the broader market remains on edge about the prospects of a tie-up with Santos.
The Australian late last year reported that Woodside had taken the lead role in exploring talks with Santos after determining the company would be open to an approach amid broad shareholder disappointment about how the market was valuing the South Australia-based oil and gas company.
A group of investors last year wrote to Santos to suggest the company split the business, creating a separate LNG entity that the shareholders said would drive the share price up more than 40 per cent. Santos confirmed receipt of the proposal, but never revealed its view on the plan.
However, The Australian understands that Santos quietly engaged Citigroup to undertake a strategic review of options, including the proposal mooted by the group of investors.
But shares in Santos have jumped more than 12 per cent in the last couple of months after a series of regulatory approvals and legal victories – creating some uncertainty about whether a deal with Woodside could be reached.
Santos in December secured approval from a regulator to begin drilling on its $5.3bn Barossa project after more than a year of delays, and a Federal court earlier this month rejected an application from a Tiwi Islander to block a 262km pipeline needed for the LNG development.
While the victories may be problematic for Woodside if it pushes ahead with a deal with Santos, Ms O’Neill said the decisions were signs that perhaps the regulatory landscape for Australia’s LNG industry has improved.
“These couple of things, I would point to these as green shoots,” Ms O’Neill said.
However, she cautioned that the federal Labor government would need to follow through and tighten ambiguous rules about who a developer must consult prior to securing regulatory approvals for an offshore project.
Resources Minister Madeleine King this month launched the first step in such efforts to tighten the rules around who is deemed a relevant person and must be consulted and considered when new projects seek regulatory approvals.
The Australian exclusively revealed that Labor has quietly assured the market that changes will be enacted in the autumn.
More Coverage
