The Santos Ltd (ASX: STO) share price is down 5% on news that the merger with Woodside Energy Group Ltd (ASX: WDS) is off.
Santos and Woodside are two of the biggest oil and gas businesses in the region. They were considering a merger before today’s ASX announcements.
Woodside-Santos merger is off
Today, the two companies confirmed to the ASX that discussions between Santos and Woodside about a potential merger have ceased.
Santos said after an initial exchange of information, “sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders.”
What now for Woodside?
Woodside noted that, as a global energy company, it “continuously assesses” a range of organic and inorganic growth opportunities.
The Woodside CEO Meg O’Neill said that for every opportunity it assesses, it conducts “thorough due diligence, and will only pursue a transaction” that adds value for shareholders. O’Neill then said:
We continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders. While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation.
Woodside’s world-class global portfolio, growth pipeline and strong balance sheet underpin our attractive investment proposition for Australian and global investors.
What does this mean for Santos shares?
Santos said it has a clear strategy to deliver long-term shareholder value and it has a “strong balance sheet” and continues to “review options to unlock value for shareholders.”
While nothing has come of its discussions with Woodside, I’d suggest there are other large energy businesses which may well be interested in some sort of transaction with Santos.
Final thoughts on the Santos and Woodside share price
The share prices of both of these businesses have fallen over the last few months. If energy prices to rise from here, they could be contrarian opportunities, but I think the last four years has shown the futility of trying to predict what prices are going to do.
