Woodside and Santos negotiate to create US$52 billion gas giant

Australia’s Woodside Energy and Santos said Thursday they are in preliminary talks to create a global energy giant. Petroleum and the gas of 8,000 million Australian dollars (US$52,000 million), at a time of consolidation of international energy companies.

The combination of two of Australia’s largest oil and gas producers would be the country’s biggest corporate deal in several years, during which buyout activity has been tempered by rising interest rates and volatility in financial markets.

If carried out, the operation would create Australia’s largest producer of liquefied natural gas (LNG), the world’s second largest exporter of this supercold fuel, which is expected to grow for decades to meet the energy needs of the Asian transition.

Perth-based Woodside, the larger of the two companies, said talks with Santos are confidential and incomplete and there is no certainty a deal will materialise. Its market capitalization amounts to 56.91 billion Australian dollars, while Santos is valued at 22.1 billion.

“Woodside continually evaluates a number of opportunities to create and deliver value to shareholders”declared in a statement to the Australian stock exchange.

Both companies face increasing pressures from decarbonization, as well as challenges in their current projects. Woodside’s share price has fallen 15.4% so far this year, while that of Santos has dropped one 4.3%.

The combined production of crude oil and gas from both stands at just over 260 million barrels of oil equivalent, while the total proven most probable reserves are 5.39 million barrels of oil equivalent, according to 2022 data from the companies.

According to Neil Beveridge, an analyst at Bernstein, an agreement between the two would create an LNG powerhouse with annual sales of 60 million tons. “It would be an Australian power that would have better leverage with buyers and the ability to optimize that LNG portfolio given the number of terminals,” he pointed.