Saudi Aramco Bids for Australian Energy Major

Saudi Aramco is considering a takeover bid for Australian energy major Santos, Bloomberg has reported, citing unnamed sources, who also said the UAE’s Adnoc was also studying an offer for the company.

The bids were a demonstration of Middle Eastern energy companies’ interest in expanding their natural gas business internationally, the report said. This would make Santos quite the popular acquisition target after local rival Woodside tried to take over the company earlier this year.

News of a tie-up between the two Australian energy majors first emerged in December when the two confirmed reports they were discussing a merger. It followed two megadeals closed by Exxon and Chevron in the U.S. in previous weeks.

Talks broke through by February, however, as Woodside investors worried the company would need to pay a hefty premium on Santos’ shares. "We continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders," Woodside chief executive Meg O’Neill said in a statement at the time.

Reuters noted in a report on the news that Santos had a market cap of some $16.63 billion as of Wednesday, which rose after the news of the possible bids broke earlier today.

The reason Santos is so popular among potential buyers is its LNG business, including the Darwin LNG and Gladstone LNG projects in Australia, and the PNG LNG project in Papua New Guinea.

"I think Santos is an attractively priced company with a handful of great assets, but despite this, I find it hard to imagine a would-be buyer flagging its interest prior to making an offer," Simon Mawhinney, managing director of Allan Gray, told Reuters.

Aramco recently entered the LNG game by inking a non-binding agreement to buy a 25% stake in Sempra Energy’s Port Arthur LNG project. Separately, it signed a deal to buy LNG from NextDEcade’s Rio Grande LNG facility on a long-term basis.

By Irina Slav for Oilprice.com

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