Australia’s Woodside Energy, Santos scrap talks on $52-billion merger

AUSTRALIA’S Woodside Energy and Santos said on Wednesday they had ended talks to create a possible A$80-billion ($52-billion) global oil and gas giant, and Santos flagged it would look for other ways to bolster its value.

Woodside, which is more than twice as large as Santos in terms of market value and revenue, said it would only pursue a deal that would add value for its shareholders.

Santos shares fell nearly 9% after the announcement and were last down 6% while Woodside’s stock was up 1%.

The talks fell apart as the two companies could not agree on a valuation level, according to two sources with direct knowledge of the matter who could not be named discussing confidential information.

A firm bid did not emerge from Woodside following the almost two months of due diligence and negotiations that the parties undertook, one of the sources said.

Santos said in a statement that after “an initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders.” If the merger had taken place, it would have created a major global liquefied natural gas (LNG) producer that could attract more offshore investors as gas is seen as a key bridging fuel in the shift to cleaner energy.

“While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation,” Woodside chief executive officer Meg O’Neill said in a statement.

Woodside had faced pressure from some investors not to pay a premium for Santos in what would have been one of the largest corporate takeovers in Australian history.

For Woodside, this is the second time in just over eight years that it has ditched a deal that would have given it gas assets in Papua New Guinea, prized for their low production costs and proximity to big LNG buyers in north Asia.

Santos, which has long underperformed the wider energy sector, said on Wednesday it would continue a months-long review into ways to unlock value for shareholders.

Analysts and investors said Santos could try to sell all or part of its 51% share of the Pikka oil project in Alaska.