Australia's Santos Chief executive bets on cash-flow boost as third bidder walks away

Kevin Gallagher, Santos' boss, said on Friday that he does not plan to retire. He expects the company to see a dramatic increase in cash flow over the next few decades. This comes after the third takeover bidder in seven years backed out of a deal.

A consortium led by Abu Dhabi National Oil Company, or ADNOC, failed to make a $18.7-billion bid for Santos due to disagreements over commercial terms. This led analysts and investors alike, including the company's CEO Gallagher (in office since 2016), speculate that he may be under pressure.

Gallagher stated that the cash flow improvements due to the start-up of two new projects in Australia, Alaska and Canada should improve Santos' stock price. The share price has underperformed the market significantly in the last three years.

"The last three to four years were tough for Santos. Our share price has been suppressed by the fact that we were hammered in COVID, and also because of heavy investments from 2022 to today. He said: "That's just a fact."

"But I am looking forward to a lower intensity of capital expenditure over the next two-years, higher cash flow from new production in Barossa or Pikka that will complement the strong portfolio."

Within the next six-months, the $4.5 billion Barossa Gas Project off the coast of northwestern Australia as well as the $3.1 billion Pikka Oil Project in Alaska will begin production.

Jarden, an investment bank, estimates that Santos free cash flow will increase from $293 millions in 2025 to $2.448 trillion in 2027.

Gallagher stated that while Santos will evaluate any takeover, including asset sales and sell-downs the company does not have to find a buyer.

"We don't run a sales process in the company." Gallagher, a reporter on a press conference, said that people were looking at Santos because of our portfolio.

He said that the assets of the company have a high development potential near existing infrastructure.

Gallagher stated, "That is a dream scenario for an industry today."

He said that as long as the shareholders and board want him to be in his job, "I am happy to stay here." Key shareholders also asked him to focus on the business.

Santos' shares rose 0.82% to A$6.80 on Friday, after dropping by 13% in the previous trading session.

XRG was shocked to learn that capital gains taxes were due on Santos assets in Papua New Guinea soon, according a source familiar with the situation.

(source: Reuters)