Aramco, ADNOC eye Santos assets

Saudi Aramco and Abu Dhabi National Oil Co. (ADNOC) are considering bids for Santos Ltd., showing interest in the Australian company’s liquefied natural gas assets. The potential acquisition has boosted Santos’ stock by 6.5 per cent in Sydney, valuing it at A$26.6 billion ($17.9 billion). Previous takeover attempts failed, prompting calls to break up the business.

Aramco and ADNOC are evaluating Santos as an acquisition target, according to insiders. These energy giants are investing heavily in natural gas as a transitional fuel, particularly in Asia. However, no decisions have been made yet, and deliberations are ongoing.

In the past, Santos rejected offers from Harbour Energy Ltd. and had unsuccessful talks with Woodside Energy Group Ltd. Some investors advocate for separating its LNG assets from other operations to increase value.

“Santos has been shopping itself for awhile,” said Saul Kavonic, an energy analyst at MST Marquee. “But once they look under the surface at Santos they see too many problems at the legacy onshore Australian assets and walk away.”

CEO Kevin Gallagher faces pressure to improve stock performance and increase shareholder returns. With no succession plan in place, investors are concerned about added vulnerability. Kavonic suggests Santos’ portfolio might appeal more to European oil majors or MidOcean Energy LLC, partly owned by Aramco.

“I would be pleasantly surprised if there was an approach,” said Matthew Haupt, a portfolio manager at Wilson Asset Management. “Santos is an attractive target for other parties, so it’s in play, but not sure it’s the Middle East players.”

Attribution: Bloomberg.