Aramco, Adnoc consider bid for gas producer Santos

(Bloomberg) — Saudi Aramco and Abu Dhabi National Oil Co. are separately exploring potential bids for Australia’s Santos Ltd. as the Middle Eastern energy giants seek to boost their gas investments abroad, people familiar with the matter said.

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State-owned Aramco and Adnoc have made preliminary assessments of Santos as a potential acquisition target, the people said, asking not to be identified because the information is private. Santos shares gained about 1% in Sydney in the year through Wednesday, giving the company a market value of A$24.9 billion ($16.7 billion).

Santos has liquefied natural gas projects in Australia, Papua New Guinea and Timor-Leste, which are prized for their proximity to growing demand in Asia. The company also has gas operations focused on the Australian domestic market as well as conventional oil assets in Alaska.

Santos shares rose 5.2% to A$8.08 each, the highest intraday level since August.

Santos declined to comment. A representative for Adnoc declined to comment, while an Aramco spokesperson did not immediately respond to a request for comment.

Gulf countries are investing billions of dollars in gas, seen as an important bridging fuel in the energy transition. Qatar plans to nearly double its LNG export capacity, and Saudi Arabia and the United Arab Emirates are pouring capital into their domestic fields and expanding global commercial operations.

In June, Aramco struck a first deal to buy a stake in Sempra’s LNG export plant in Texas, in a deal that would include fuel shipments from the project. The Saudi company struck its first U.S. LNG purchase agreement the same month, signing a non-binding 20-year contract to take 1.2 million tons per year of LNG from NextDecade Corp.’s planned project in Texas.

Adnoc has been on a acquisition spree, making it one of the most active dealmakers in the energy sector. Last month, it began detailed talks on a possible €11.7 billion ($12.6 billion) takeover of German chemicals maker Covestro AG. In May, Adnoc bought stakes in gas projects in the United States and Mozambique, and has ambitions to expand into chemicals and trading globally.

Santos, which is headquartered in Adelaide, could also attract interest from other potential buyers, the sources said. Deliberations are ongoing and the suitors have not yet decided whether to proceed with their offers, the sources said.

Santos has received several takeover offers in recent years. In 2018, Santos rejected several offers from U.S.-based Harbour Energy Ltd.

Last year, Woodside Energy Group Ltd. held preliminary talks about acquiring Santos in a deal that would have created an LNG giant. The talks collapsed earlier this year and Santos said in February it would look for other ways to create value for its shareholders.

–With assistance from Michelle F. Davis and Matthew Martin.

(Updated with Santos stock movement in fourth paragraph.)

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