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Rivals Woodside and Santos join forces

merging Santos Woodside

The two gas companies are currently in preliminary talks of a potential alliance to form an A$80 billion Australian gas giant.

A deal, if it goes ahead, would create the biggest liquefied natural gas (LNG) producer in Australia, the world’s number two exporter of the super-chilled fuel that is expected to see decades of growth to meet Asia’s energy transition needs.

Perth-based Woodside, the larger of the two companies, said the talks with Santos were confidential and incomplete and that there was no certainty an agreement would materialise.

Its market capitalisation stands at A$56.91 billion, while Santos is valued at A$22.1 billion.

“In response to recent media speculation, Woodside confirms it is in discussions regarding a potential merger with Santos,” said Woodside in a statement to the Australian stock exchange.

“Discussions remain confidential and incomplete, and there is no certainty that the discussions will lead to a transaction.

“As a global energy company, Woodside continuously assesses a range of opportunities to create and deliver value for shareholders.

“Woodside will continue to update the market in accordance with its continuous disclosure obligations.”

Santos published a media release confirming the media speculation it had engaged in preliminary discussions with Woodside regarding a potential merger.

“Santos continuously reviews opportunities to create and deliver value for shareholders,” it said.

“Concurrently, Santos is assessing a range of alternative structural options with a view to unlocking value as referred to on Santos’ investor day on 22 November 2023.

“The consideration of any merger is at an early stage and there is no agreement between the parties. There is no certainty that any transaction will eventuate from these discussions.

“Santos will continue to update the market in accordance with its continuous disclosure obligations.”

Both companies face rising pressures of decarbonisation as well as challenges in their current projects.

Woodside’s share price has dropped 15.4 per cent this year so far, while Santos’ stock is down 4.3 per cent.

A deal between them would create an LNG powerhouse with annual sales of 60 million metric tons, said Bernstein analyst Neil Beveridge.

“It’s an Australian powerhouse that would have better leverage with buyers and the ability to optimise that LNG portfolio given the number of terminals,” he said.

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