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Australia’s Woodside and Santos Weigh Asset Sales in $52B Merger Talks

 |  December 10, 2023

In a bid to address potential regulatory concerns over their proposed A$80 billion ($52 billion) merger, Australian oil and gas giants Woodside and Santos are reportedly considering selling off some of their smaller domestic assets, according to a source with knowledge of the confidential discussions.

The source, revealed that the companies are exploring options to alleviate any “significant concerns” raised by Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC).

Both Woodside and Santos have declined to comment on the ongoing negotiations. However, Santos issued a statement on Thursday stating that it was “assessing a range of alternative structural options.”

The merger discussions between Woodside and Santos were confirmed after market hours on Thursday, with the potential union creating a major oil and gas entity boasting assets in Australia, Alaska, the Gulf of Mexico, Papua New Guinea, Senegal, and Trinidad and Tobago.

Analysts estimate that the merged entity would hold approximately 26% of Australia’s east coast gas market and 35% of the Western Australian domestic gas market. Such a significant market share could trigger concerns from the ACCC, which has been actively investigating the east coast gas market for several years.

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The ACCC’s investigation has been prompted by the Australian government’s push to drive down gas prices for households and businesses. The regulator’s scrutiny is expected to intensify with the potential consolidation of two major players in the oil and gas sector.

While the source did not specify the assets that could be divested to address regulatory concerns, analysts have pointed to potential candidates, including Santos’ Varanus Island asset, a crucial gas supplier in Western Australia, and its Cooper Basin gas business, a key contributor to the east coast gas supply.

Investors responded positively to the news of the merger talks, as Santos shares experienced a notable increase on Friday. However, caution lingers among investors due to uncertainties surrounding competition and valuation hurdles associated with the proposed deal.

The ACCC announced on Thursday that it would closely monitor the progress of the merger talks and consider whether a public review would be necessary to assess the potential impact of the merger on Australia’s oil and gas landscape. The regulator is particularly concerned about the consolidation’s effects on gas prices and supply in both the east and west coast markets, with potential implications for consumers and businesses.

Source: Finance Yahoo