Santos managing director and chief executive Kevin Gallagher. (AAP Image/Paul Miller).
Camera IconSantos managing director and chief executive Kevin Gallagher. (AAP Image/Paul Miller). Credit: AAP

South Australian oil and gas company Santos’ leadership team gears for new takeover test

Valerina ChangarathilThe Advertiser

SANTOS has confirmed it rejected an unsolicited, “inadequate” August offer from Harbour Energy and is not engaged in any further takeover discussions.

The South Australian oil and gas company was responding to reports it had received an all-cash takeover proposal worth $11 billion from a consortium led by Harbour Energy’s Linda Cook, the former director of Royal Dutch Shell. The offer followed an earlier $9 billion plus approach rejected by Santos in the previous quarter.

Santos shares rose 11 per cent to $4.87 in noon trading.

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“Santos confirms that it is not currently engaged in discussions with, and has not received a current proposal from Harbour Energy regarding a change of control transaction for Santos,” it said.

It received a confidential, non-binding conditional and indicative proposal from Harbour to acquire all shares in Santos by way of a scheme of arrangement with an indicative price of $4.55 per share.

“The board rejected the approach on the basis that the indicative price was inadequate and the sources of funds were uncertain,” Santos said.

The company said it receives proposals from time to time and is in compliance with its continuous disclosure obligations.

Harbour Energy director Hock Goh has been a Santos director since October 2012.

With Harbour Energy circling the company, it is Santos managing director and chief executive Kevin Gallagher’s biggest leadership test yet at the company.

The takeover bid comes two years after outgoing chairman Peter Coates refused a $7 billion plus bid by Scepter Partners, which has links to royal families of Brunei and the United Arab Emirates. That bid also had the support of former Santos chairman John Ellice-Flint.

Mr Gallagher joined Santos in February 2016 and Mr Coates is due to retire in February 2018, making way for Keith Spence to come in as chairman.

Both Mr Spence and Mr Gallagher have been senior management colleagues at Clough and Woodside previously.

The energy company, which has struggled with oil prices in recent years and has heavily cut jobs and other costs, last week revealed a stronger focus on core assets, including the controversial Narrabri coal seam gas project in NSW to boost production as part of its turnaround plan.

The explorer has for years faced opposition from local communities and anti-CSG ­activist groups wishing to stop the project from going ahead.

Its major five long-life natural gas assets are the Cooper Basin gas division (including the Moomba gas plant), the ­Gladstone LNG terminal, stakes in Papua New Guinea projects, Western Australian gas division and its pros­pective Northern Australian holdings.

Santos is expecting production to be largely stable in 2018, but expects sales will be lower during the year than its 2017 volumes.

Santos expects to produce between 55 and 60 million barrels of oil equivalent (mmboe) in 2018, similar to the 2017 guidance of 58 to 60 million barrels.

Santos is looking to divest all other non-core assets and targeting net debt of $US2 billion by end-2019, from $US2.8 billion now.

More to come