Santos Ltd. and Woodside Energy Group Ltd. have decided not to pursue merger talks that could have created an Australian LNG super giant reportedly worth $52 billion.
Both firms disclosed Wednesday that months-long talks had ended without a mutually beneficial deal. Combined, the companies control more than 40 million metric tons/year (mmty) of liquefied natural gas export capacity in the Pacific and substantial global oil and gas production assets.
Woodside CEO Meg O’Neill said the firm was searching for “value accretive deals” for shareholders, including in the global LNG space.
“We continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders,” O’Neill said. “While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation.”
Each company has been developing projects to increase domestic natural gas production and secure more LNG volumes outside Australia after completing massive mergers in 2022. They also face similar challenges with dwindling production in legacy offshore fields and regulatory headwinds.
However, despite their commonalities, Santos confirmed that “sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders.”
The potential combination was expected to follow other blockbuster U.S. deals announced last year, including ExxonMobil’s $60 billion acquisition of Pioneer Natural Resources Co. and Chevron Corp.’s $53 billion purchase of Hess Corp.
Santos boasts assets that stretch from North America to Australia. It operates the Papua New Guinea, Darwin and Gladstone LNG terminals, with combined capacity of 20 mmty. The company’s production rose slightly during the fourth quarter to 23.4 million boe/d because of more sales gas production. However, overall production declined 11% year/year, according to the 4Q2023 earnings report.
In January, Santos reported that a federal injunction halting construction on its Barossa field gas project in Australia has been lifted, allowing the firm to continue pipe laying. It also resumed drilling in December. The Barossa project would extend the life of Darwin LNG by replacing reserves from the dwindling Bayu-Undan field offshore North Australia and Timor-Leste. The project has been stalled since early last year.
Woodside has a global portfolio of assets in Australia, the Gulf of Mexico, as well as Trinidad & Tobago. It operates the Pluto and North West Shelf LNG export facilities in Australia, with combined capacity of more than 21 mmty. The company reported record full-year production in 2023 of 187.2 million boe, or 513 million boe/d.
Woodside’s plan to grow its North American LNG portfolio has faced uncertainty. The company moved to supplement its U.S. volumes from Cheniere Energy Inc.’s Corpus Christi LNG with offtake contracts with the Commonwealth LNG project in Louisiana and Mexico Pacific Ltd.’s Saguaro Energia LNG on Mexico’s western coast.The Biden administration’s recent order to freeze Department of Energy export authorizations for U.S. terminals could potentially impact seven commercially advanced projects, including Commonwealth.
