Woodside Energy and Santos find insufficient synergies.

Last Updated: 9. Februar 2024By

Phrase with X, that was a bust. The marriage between the two oil and gas producers Woodside Energy and Santos has been called off. The deal would have reshuffled the deck; the acquisition of Santos‘ portfolio would have made Woodside one of the largest liquefied natural gas producers in the Asia-Pacific region – a region that is poised for further demand growth.

This drew a final line under weeks of merger talks to create a company with a combined market capitalization of about 86 billion AUD (56 billion dollars).

While the shares of the smaller Adelaide-based producer Santos took a hit after the news, the stock of Woodside Energy was able to benefit slightly from the abandoned merger negotiations.

Woodside Energy Group: Global Energy Giant from Australia Woodside Energy was founded in June 2022 through the merger of Woodside and BHP Petroleum. The company operates in Australia, Timor-Leste, Senegal, and the United States. The group is engaged in the exploration and production of crude oil. Over 3,000 employees are employed by the company worldwide.

In the past half-year, which ended on June 30, 2023, the Australians generated revenue of 7.4 billion dollars. The bottom line was a profit of 1.7 billion dollars in the books. For comparison: Santos achieved a net profit of 801 million dollars on half-year revenue of 2.96 billion dollars.

Synergies not enough Santos made it clear that after an initial exchange of information, the two Australian energy companies had not identified enough synergies to justify a merger in the best interests of their shareholders. Currently, Woodside is valued at around 39 billion dollars, while Santos is valued at 16 billion dollars.

Santos under pressure In November, Santos hinted that it was working with advisors on possible strategy changes after the company’s market valuation lagged behind that of other companies. After Santos announced on Wednesday that „no sufficient combination advantages had been identified to support a merger,“ the company stated that it would continue to explore „options to increase value.“

One way that investors have already considered is separating the liquefied natural gas (LNG) assets – which are estimated for their proximity to the growing demand centers in Asia – from other activities in Australia and Alaska. This could attract large investors who focus on LNG growth.

Woodside keeps its eyes open Woodside, which has increased its production in the past two years and is developing projects such as the Scarborough project, continues to see favorable growth in the LNG sector. „The global LNG sector offers significant value creation potential,“ said Chief Executive Officer Meg O’Neill in a statement, adding that the company would pursue mergers and acquisitions in a disciplined manner.

LNG is expected to play a long-term role in the energy transition, especially as developing countries try to meet the growing demand for energy and reduce their dependence on coal.