Merger talks with Woodside may flush out other Santos suitors
With a dearth of obvious expansion opportunities, the mooted $80 billion tie-up will help deliver growth and scale, but arguably not much beyond. It could, however, help Santos attract interest from other suitors.
An $80 billion merger between Woodside and Santos would follow a tried and tested trend for oil and gas companies to consolidate to stand a better chance of capturing increasingly fewer growth opportunities.
Marriages between US majors Chevron and Hess, and ExxonMobil and Pioneer in October have been predicated on securing petroleum reserves, flying in the face of forecasts that oil demand will peak by 2030.
Reports of a potential merger of the Australian players first surfaced late on Thursday, and was swiftly confirmed by both parties.
LNG, which is likely to have a longer shelf life, would account for more than 50% of production in a merged Woodside and Santos entity, Jarden analysts wrote in a note. A tie-up would arguably be more beneficial for Santos, which has suffered a declining share price in recent months. CEO Kevin Gallagher called for offers for all or parts of its business, such as the Gladstone LNG project in Queensland, at its investor day in November.
