Santos silent on Middle East interest

Speculation around a Middle Eastern takeover of Australian oil and gas play Santos led the company’s share price higher in ASX trade today, despite doubts over whether a move will be made.

An overnight Bloomberg report revealed Saudi Aramco and Abu Dhabi National Oil Company had each been looking into a potential bid for the Barossa project owner, which was involved in unsuccessful merger talks with Perth-headquartered Woodside late last year.

The news led the company’s share price more than four per cent higher in trade today.

A Santos spokesperson did not confirm the reports, saying Business News the company did not “comment on media speculation”.

Opinions are mixed over whether any bid will be forthcoming, with analysts split and doubts flagged over the ability for a deal to get past the Foreign Investment Review Board.

Advisory firm EnergyQuest chief executive Rick Wilkinson told Business News It was early days for any move by Middle Eastern interests on Australian oil and gas, but that the news reflected a broader trend towards consolidation globally.

“If anything, the Middle East is conspicuous by its absence,” he said of foreign investment in the Australian oil and gas industry.

Mr Wilkinson said the news did not catch him by surprise, and that it was difficult to assess whether a deal would be done so early in the piece.

“Aramco and ADNOC have got deep pockets, they’re quite capable of (making a deal) if they mind to,” he said.

“I expect it would be patient money, unlike smaller companies who come in and aim for a much shorter, quicker return.

“I would expect both Aramco and ADNOC would take a very long-term view – they’re building a global position and wouldn’t need to make a quick buck and turn it over.

“That would probably be a good thing for Australia.”

Santos has been the subject of merger and acquisition interest for some time, with chief executive Kevin Gallagher telling a results call in February that the company was open to any moves that might unlock value.

This followed the collapse of discussions with Woodside in the early part of 2024.

“We will continue to look at other opportunities that are identified, or that come to us,” Mr Gallagher said at the time.

Santos management has grappled with challenges in recent times, most notably at Barossa off the Northern Territory coast which was significantly delayed because of a legal challenge by Traditional Owners with the backing of the Environmental Defenders Office.

That stalled work on the project for more than a year, before a court ruled work could continue in the latter half of 2023.

Board chair Keith Spence was the subject of a campaign by the Australasian Centre for Corporate Responsibility in April, which called on shareholders to vote against his re-election.

The ACCR claimed a growth strategy by the company which led to a 150 per cent uptick in capital expenditure had generated a seven per cent shareholder return since 2021.

The call was unsuccessful, with Mr Spence re-elected by 93 per cent of voting shareholders.

In May Santos slashed its workforce by 200 mostly Perth-based jobs, a move it attributed to slow project approvals.

The company has major stakes in three domestic gas plants in WA including the Devil Creek plant supplied by the near depleted Reindeer gas field, as well as the lead stake in the Dorado oil field joint venture alongside Carnarvon Energy.