Santos, Australia’s third biggest oil and gas firm, flatly rejected the AU$7.1 billion (US$5.1 billion) bid from merchant bank and investment syndicate Scepter Partners, saying it was not interested.
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Scepter has offered A$6.88/share in cash, representing a 26% premium to Santos’ closing price of A$5.46/share on October 19 and was 40% above its average trading level over the past 30 days. “The proposal is considered to be opportunistic in nature and does not reflect the fair underlying asset value of the company”.
“The proposal was also subject to numerous conditions, a few of which would be adverse to Santos’ continued evaluation of other alternatives in its current strategic review process”, the company added.
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Santos shares have surged after the embattled energy giant revealed it has rejected a $7.1 billion takeover bid.
Oil and gas producer Santos will cut its 2015 capital expenditure by a further 10 per cent to $1.8 billion, as it looks to ride out the impact of weak oil prices.
Santos shares have soared this morning on the back of the offer, jumping 95 cents to $6.39 at 8.20am. It said the A$6.88-a-share bid was “opportunistic” and undervalued its assets, which include its flagship Gladstone gas-export project on Australia’s east coast, shared with Total SA, and a stake in an Exxon Mobil Corp.-led gas development in Papua New Guinea.
Santos chairman Peter Coates and departing ceo David Knox have their hands full with Scepter Partners making a tilt.
We struggle to see anyone willing to buy Santos’ stake in GLNG, certainly not for close to the price the market values it at, given the lack of uncontracted volumes, huge reserve shortages and a pair of buyers who are not exactly desperate for the gas themselves. Santos’s shares jumped as much as 21% after the bid was disclosed on Thursday.
The Scepter syndicate investors include Asia and Gulf-based ruling families, ultra-high net worth industrialists and sovereign investors, according to the website. Brent crude oil, used as a benchmark for energy prices, has slumped 43 percent in the past year. Unexpected maintenance work required at oil fields in Western Australia and Vietnam contributed to the downgrade, which was only partly mitigated by stronger than anticipated performance from the Papua New Guinea LNG venture. Brunei’s Prince, Abdul Ali Yil Kabier, is the founder and director of the firm with financier Rayo Withanage.
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Apart from the GLNG project, Santos has another jewel in its crown, with a 13.5 per cent stake in the successful PNG LNG project operated by Oil Search.
