By Angela Macdonald-Smith
Dec. 8 (Bloomberg) -- Santos Ltd., Australia’s third- biggest oil and gas producer, jumped in Sydney trading after the South China Morning Post said China National Petroleum Corp. is considering linking with a partner for a bid.
Santos rose as much as 16 percent to A$14.08 on the Australian stock exchange, and was at A$13.47 at 12:16 p.m. local time, headed for the largest gain in nine days. The benchmark energy index advanced as much as 6 percent.
China National Petroleum has examined two potential partners for a bid without making any approaches, the newspaper reported, citing a person it didn’t identify. Potential partners may include Chevron Corp., BP Plc, Eni SpA and Total SA, it said. Santos owns Australia’s biggest onshore gas venture, which supplies the local market, as well as stakes in liquefied natural gas ventures.
“It would be difficult to put together a consortium where everyone gets their wants and requirements met,” said Andrew Williams, an oil and gas analyst at Credit Suisse Group in Melbourne. “Its just not an easy set of assets for anyone; if you want LNG what do you do with the domestic gas? If you want domestic gas what do you do with the LNG?”
Adelaide-based Santos won’t comment on speculation, said Matthew Doman, a spokesman. Liu Weijiang, a Beijing-based spokesman on overseas projects at China National Petroleum, didn’t immediately answer calls seeking comment.
A bid may need to be priced at about A$18 a share to “start to get interest” and about A$20 to succeed, Williams said.
Deutsche, Caliburn
South Australia on Nov. 29 removed a 15 percent limit on individual shareholdings in Santos, clearing the way for potential takeover bids. The company hired Deutsche Bank AG and Caliburn Partnership to advise it should it receive bids, the newspaper reported.
Santos is planning a A$7.7 billion LNG venture with Petroliam Nasional Bhd. in Queensland state and owns a stake in Exxon Mobil Corp.’s proposed Papua New Guinea LNG venture. It also has an interest in ConocoPhillips’ producing LNG project in Darwin, northern Australia, and in oil and gas fields in Western and southeastern Australia.
Santos’s LNG growth prospects, rather than its maturing Cooper Basin venture in central Australia, make the company a potential takeover target in the absence of the shareholder cap, Citigroup Inc. said in a Nov. 24 report. Santos has 60 percent of the Gladstone LNG, or GLNG, project with Petronas and the partners are due to start engineering and design work by the end of the year.
“Burdened by mature, low-margin legacy assets Santos has lagged its peers,” Citigroup analysts led by Di Brookman said in the report. “We believe this situation is changing as the company looks to bring to market two material projects in GLNG and PNG LNG.”
Beijing-based China National Petroleum, the state-owned parent of PetroChina Co., is the nation’s largest oil producer.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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