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Santos discussions with Woodside progress as Barossa pipeline costs blowout

The Adelaide-based oil and gas giant said it had agreed to exchange information with West Australian Woodside as the two consider the merits of a potential merger.

Jan 25, 2024, updated Jan 25, 2024
Santos HQ in Adelaide. Photo: Tony Lewis/InDaily

Santos HQ in Adelaide. Photo: Tony Lewis/InDaily

Alongside the release of Santos’ fourth quarter figures, the CEO and managing director Kevin Gallagher provided an update on the potential merger of the Adelaide company with Perth’s Woodside.

Gallagher said the company was still in “early-stage discussions to evaluate the merits of a potential merger with Woodside”, but progress appears to have been made.

“The parties have agreed to exchange information to assess the benefits for our shareholders,” Gallagher said.

“Santos continues to consider alternative options to accelerate value for shareholders.

“There is no certainty that any transaction will eventuate from these discussions.”

Santos confirmed in December 2023 that it had “engaged in preliminary discussions with Woodside regarding a potential merger”.

It led to vocalised concern from the likes of Energy and Mining Minister Tom Koutsantonis, who said the state government would “do everything it can to ensure South Australian jobs are protected and that companies headquartered in South Australia remain in South Australia”.

The Minister also said the government would use powers, including those governing the licensing of gas extraction, to ensure that Woodside was brought to the negotiating table with the government, should it seek to “relocate” Santos resources out of the state in a merger.

The update comes alongside the release of Santos’ fourth-quarter results. The company achieved sales revenue of US$1.5 billion (AU$2.3 billion), and quarterly gas production was slightly up on the previous period.

“The fourth quarter brought free cash flow for the full year to $2.1 billion, an outstanding achievement in what has been a challenging year,” Gallagher said.

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“It positions us well to deliver shareholder returns, backfill and sustain our existing business, complete our major projects, Barossa and Pikka, progress our decarbonisation plans and grow our Santos Energy Solutions business.”

Santos – Adelaide’s largest company by market capitalisation – also provided an update on its multi-billion dollar Barossa Gas Project which was held up in court by Tiwi Islanders concerned about potential damage to cultural heritage in the area.

The company saw the legal challenge dismissed by the Federal Court earlier this month, and today Santos reported the project was now 66.4 per cent complete.

Due to delays and the legal challenge, the company now expects the Barossa Gas Project to cost nearly AU$7 billion.

“I am very pleased to see that the Barossa pipelaying and drilling activities are now fully underway with first gas still expected in 2025,” the CEO said.

“Given the challenges of the past two years, we have updated our cost and schedule guidance for the project.

“The team has done a great job in keeping Barossa close to the original schedule and managing the costs of delay.”

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