CEO EnergyQuest Rick Wilkinson says the Abu Dhabi National Oil Company’s cash bid to take over Santos is quite serious and is likely to be successful, adding that they have deep pockets and a long term focus, providing some certainty for the NT

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Episode Transcript

Speaker 1 (00:00):
Well, as you have heard in the news over the

(00:01):
last couple of days, the South Australian Government is warning
that any takeover of domestic oil and gas giant Santos
by the Abu Dhabi National Oil Company must preserve the
state's economic interest, saying that they've got levers that they
can pull now. Santos, which was founded as the South
Australian and Northern Territory Oil Search Company back in nineteen

(00:24):
fifty four, has agreed to a thirty billion dollar takeover
from ANDOC, announcing the indicative proposal to the ASX on
Monday morning. Now, as we know, Santos headquarters are indeed
in Adelaide, but we have got significant interests here in
the Northern Territory as well, and the prospect of foreign
control has triggered some caution, not only from the South

(00:46):
Australian government, but from others just watching and wanting to
keep a close eye on things. Now joining us on
the line is Rick Wilkinson, the CEO of energy advisory
firm energy Quest. He's also held very rolls with Santos
over fourteen years. Good morning to.

Speaker 2 (01:03):
You, Rick, Good morning Katie.

Speaker 1 (01:05):
Lovely to have you on the show. Now Rick, it
seems as though these dealers looking like it could go ahead.
Under the deal, XRG and and DOC subsidiary would acquire
all of Santos's shares for a cash price of eight
dollars eighty nine, which represents a twenty eight percent premium
on the six dollars ninety six closing price of the

(01:26):
company's stock before the announcement. I mean, how likely is
it that it's going to happen.

Speaker 2 (01:33):
Well, it's a very serious bid from my point of view.
Not every day you get more than thirty billion dollars
in cash offered for a company. Often it's complicated with
lots of shares and provisors. This is very simple. It's
the dollars to the shareholder and in that respect, and
it is that the industry normal premium of about thirty

(01:56):
percent over its normal price. So those two things means
that it's a very serious bid and right up there
with what would be considered highly likely to be successful.

Speaker 1 (02:08):
What could the takeover mean for the Santos operations? Well,
you know, like right across Australia, but particularly for us
here in the Northern Territory.

Speaker 2 (02:18):
Yes, there's a good question. Ad Aberdabi National oil company
is a very serious long term player. They've been around
for more than half a century. The beginnings are with
the large oil and majors in the Middle East. They
provide about twenty five percent of the UAE the United

(02:40):
Arab Emirates revenues, so they're extremely important to that part
of the world and underwrite most of the good things
that you see when you travel through Dubai or Abu
Dabi on an airline. So they're very competent operators. They've
been working with LNG, which is of course important in
the NT. They've been working with it for more more

(03:00):
than fifty years, so lots of experience in that respect.
They have very deep pockets in terms of cash to invest,
and they have a very long term view. So these
are not someone who's just kind of come in and
do a bunch of real quick things and flip it over.
In my view, that's less likely to be the case.

(03:20):
So that's what you want to hear from the Northern Territory.
So the two big important pieces of Sandos in the
Northern Territory of course Barossa, which is almost ready to
start up, and I think a key reason Adnock is
looking at Santos is for its LNG interest, so you
can be highly confident that they would want to support

(03:42):
and that for its life and perhaps see it grow.
The second area is of course the Beatleoo shale area,
and that's a new area for them.

Speaker 1 (03:51):
And so in terms of you know, like this takeover
and why they would want to be doing business in
a st but also why Santos would want to sell.
I mean, when we have got these big projects that
are just on the horizon, why would Santos want to sell?
I guess it is for the money, but you know,
are there other reasons behind it?

Speaker 2 (04:13):
No? I think it's a straight dollar question. When shareholders
look at Santos before this offer, they considered all of
the upside the history of the company, and that's what
determines the share price. So what abo AB is looking
at it and saying, well, it's worth that, but we

(04:35):
think we can add more value by investing in it
and growing it in other areas.

Speaker 1 (04:40):
So Rick, from your perspective, I mean, you've worked for
Santos in various roles over the years. You now obviously
have your own company, but you have worked for them
in various roles. They've been proudly South Australian, but also
proudly Australian. Is it risky to have Santos go into
foreign hands.

Speaker 2 (05:01):
Oh that's a digical one. Yes, as someone who's spent
a significant part of their life working with Santos, and
I share the view of you know, how nice it
was to see an Australians success story. But economics are
what they are, and if someone comes in and says

(05:21):
we can create more value by investing in the company
than the current ownership can, then you know, that's the
reality of it all.

Speaker 1 (05:31):
And I understand that they will need to obviously gain
you know, a number of approvals for the deal to
go through, including from the Foreign Investment Review Board, the
Australian Securities and Investment Commission, the National Offshore Petroleum Titles
Administrator and others. So it doesn't sound as though it's

(05:51):
you know, it's it's like there's obviously a lot of
steps that still need to happen at this point.

Speaker 2 (05:59):
Yes, you're quite right there, Katie. The Foreign Investment Review
Board can take very different points of view and ask
for special concessions before they wave it through. I'm sure
that the topic of supply of domestic gas will be
very important for them to make sure that there is

(06:19):
sufficient gas from this transaction to at least match whatever
the current commitments and even try and grow in a
gas available to the domestic market. So I would expect
to see some sort of concessions there which I think
could be doable.

Speaker 1 (06:35):
Well, it sounds like it is. You know, it's obviously
going to be interesting to see exactly what plays out
and how it all works. I know the South Australian government,
for example, have said that they'll pull whatever levers and
needed to make sure the deal is beneficial for their state.
Do you think they're going to need to or could
this actually be a good thing not only for South

(06:55):
Australia but also for Northern Territory.

Speaker 2 (07:00):
So the KeyPoint here will be what is adnoc's priority
is going to be in terms of investment and if
they make commitments to invest further in South Australia, there
is requirements to look at it see if they can
expand the Cooper base and find new plays, invest in expiration.

(07:20):
All of those things build the long term future of operations.
So that's sort of topics that would be coming up
between the South Australian Government and adnoc Well.

Speaker 1 (07:33):
Rick, it's great to speak with you this morning. I
really appreciate your insight and having that discussion with us.

Speaker 2 (07:39):
Lovely to talk to you, Okay, thank you, Katie, thank

Speaker 1 (07:42):
You, thanks so much,