Santos Unlikely to See Middle Eastern Takeover Despite Ongoing Asset Sale Talks

Santos Ltd., the Adelaide-based oil and gas producer, has been the subject of recent market speculation regarding potential takeover bids by major Middle Eastern companies. However, analysts and market sources suggest that a serious bid from Saudi Aramco or Abu Dhabi National Oil Co (Adnoc) is unlikely, even as Santos engages in discussions with third parties to unlock asset value.

Despite the market’s skepticism, the possibility of international takeover interest remains. MST Marquee analyst Saul Kavonic acknowledges the potential for a bid, noting that Santos’ weakened share price and strategic pressures could attract international interest. Santos has been under scrutiny following the collapse of an $80 billion merger proposal with Woodside Energy earlier this year and ongoing investor pressure to restructure.

Recent reports from Bloomberg News suggested that Aramco and Adnoc had examined potential bids for Santos, drawing renewed attention to the possibility of a takeover. However, market sources quickly downplayed the likelihood of a serious offer from either entity. Aramco, the world’s largest oil producer, and Adnoc had previously formed an alliance with Santos on carbon capture and storage, but a full acquisition seems improbable.

Kavonic pointed out that the speculation might indicate more advanced discussions with another bidder. He identified European energy majors, EIG-owned MidOcean Energy, and ConocoPhillips as potential suitors, though each faces challenges related to value, funding, or strategic priorities. EIG, which previously attempted a $14.4 billion bid for Santos in 2018, is seen as particularly keen on expanding its presence in Australia’s gas sector.

Santos’ spokeswoman declined to comment on the market speculation. The company’s shares have remained relatively flat this year, closing at $7.68 on Wednesday, valuing the company at $24.9 billion.

The speculation comes as Santos is considering the sale of two assets: the Dorado oil and gas field in Western Australia and the Pikka oil project in Alaska. However, a spin-off of Santos’ LNG interests, suggested by some investors, appears unworkable due to the dominant role of LNG in the company’s portfolio.

Santos continues to focus on delivering key growth projects. These include the Moomba carbon capture and storage project in South Australia, the $5.8 billion Barossa gas project in the Timor Sea set to supply Darwin LNG by 2025, and the Pikka venture in Alaska expected online in 2026. Meanwhile, the $15 billion Papua LNG venture faces delays, with a final investment decision now expected in 2026.

The company’s slower expansion has led to significant job cuts, with 200 positions slashed in April. This, combined with ongoing capital expenditure and criticism from environmental groups, underscores the challenging landscape Santos navigates as it seeks to balance growth and shareholder value.