Energy
Friday, December 8th, 2023 4:45 pm EDT
Key Points
Potential Merger Between Santos and Woodside Energy:
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- Santos and Woodside Energy, two major Australian oil and gas producers, are in talks to explore a potential merger.
- The merger, if successful, could result in the creation of a significant oil and gas entity with a combined value of around AU$80 billion ($52 billion).
- Santos is concurrently assessing alternative structural options to unlock value, as mentioned in a statement issued by the company.
Market Response and Financial Context:
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- Following the news, shares of Santos experienced an 11% spike, reaching a five-week high, indicating a positive market response.
- Woodside Energy’s shares, however, slipped by 0.7%.
- Santos, with a market capitalization of approximately AU$22 billion, has been actively working on options to enhance its value, as stated in a recent investor briefing. Woodside Energy’s market capitalization is around AU$57 billion.
Challenges and Industry Trends:
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- Discussions regarding the potential merger are still in the early stages, and both companies have emphasized that there is “no certainty” the talks will lead to a deal.
- The oil and gas industry has been witnessing a trend of consolidation globally, with major deals occurring, such as Exxon Mobil acquiring Pioneer Natural Resources and Chevron purchasing Hess in the U.S.
- Analysts, including Citi’s head of energy, James Byrne, point out potential positives and challenges in the merger, including Woodside addressing its portfolio concerns and Santos improving its balance sheet. However, finding the right value that satisfies Santos shareholders could be a significant challenge.
- The talks between Woodside and Santos follow the recent collapse of a $13 billion bid by Brookfield to acquire Australia’s largest power retailer, Origin Energy.
- Analysts also highlight potential risks associated with the Scarborough shoal, a disputed territory claimed by both the Philippines and China, which Santos shareholders might inherit.
Australian energy companies Santos and Woodside Energy are engaged in talks about a potential merger, which, if realized, could result in the formation of an AU$80 billion ($52 billion) oil and gas giant. Santos, with a market capitalization of around AU$22 billion, and Woodside Energy, boasting a market capitalization of approximately AU$57 billion, have seen an immediate market response, with Santos shares surging 11% to a five-week high, while Woodside shares slipped 0.7%.
Both companies, among Australia’s largest oil and gas producers, are exploring the possibility of a merger to create significant value. Santos, in particular, has been evaluating various structural options to enhance its value, as indicated in a recent investor briefing. Discussions are still in the early stages, and both companies emphasized that there is “no certainty” the talks will lead to a deal.
This potential merger follows a trend of consolidation in the global oil and gas sector, with major deals occurring in the U.S. and elsewhere. In Australia, this move comes after the recent collapse of a $13 billion bid by Brookfield to acquire Origin Energy. Analysts, such as Citi’s James Byrne, see potential positives in the merger, suggesting that Woodside could address portfolio stagnation, while Santos might improve its balance sheet. However, challenges exist, including determining the right value that satisfies Santos shareholders and potential risks associated with shared interests in the Scarborough shoal, a disputed territory claimed by both the Philippines and China.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/08/australia-oil-and-gas-producers-woodside-and-santos-in-merger-talks.html
