Article on WDS in the fin review today. WDS on the lookout for aquisitions. Whilst no mention of Namibia, it could bode wll for our little PCL.

Woodside may hunt acquisitions post merger talks

WoodsideEnergy could look more aggressively towards acquisition opportunities overseasafter talks on a merger with domestic rival Santos were scrapped and as itseeks to tap opportunities in the global LNG sector.

Analystsassessing the prospects for a standalone Woodside after the news on Wednesday that thetalks had collapsed said they expected “inorganic” growth options to be a topic for discussion at the oil and gas producer’s full-year results late this month.

“ForWoodside we expect an increase in focus on inorganic growth, particularly whereit expands the company’s LNG production or trading positions,” Jarden energyanalyst Nik Burns said, adding the possible transaction with Santos always hada low probability of success.

Hesuggested the Gulf of Mexico could provide Woodside with greater flexibility inLNG supply and increase its options for investment over the medium to longterm.

But MrJarden pointed out that any potential deals big enough to “shift the needle” atWoodside may need a fresh injection of equity, given Santos was probably theonly material transaction the company could have done with scrip rather thancash.

“Woodsideappears to be more aggressive in pursuing growth, with management noting theopportunities in the global LNG sector,” JPMorgan analyst Mark Busuttil said.He pointed to chief executive Meg O’Neill’s comment in Wednesday’s statementthat the company considers the global LNG sector “provides significantpotential for value creation”.

A mergerwith Santos would have created one of the world’s biggest independent LNGexporters with more than 16 million tonnes a year of capacity across sixseparate ventures in Australia and Papua New Guinea. However, the talks foundered as itbecame clear Santos shareholders would demand a healthy premium for their shares, while Woodside had promised its shareholders it would remain “disciplined” and only do a deal that added value for shareholders.

For Santos,the ditching of the discussions triggered immediate calls from Melbourne-basedinvestor L1 Capital for a demerger of Santos to be put on the table amidongoing frustration over its underperforming share price. However, Allan Grayportfolio manager Simon Mawhinney voiced doubts that splitting the company intwo would create long-term value for shareholders.

Shares inSantos, which sank 5.5 per cent on Wednesday, extended that loss on Thursday,down 3.5¢ at $7.375 in early afternoon trading. Woodside shares, which rose 1per cent on Wednesday, were down 0.3 per cent at $32.365.

Woodside isunderstood to have entertained the idea of a merger with Santos for about ayear, signalling it saw clear merit in the combination. Some sources say thedecision to walk away from a deal now – triggering a drop in Santos’ shares –may leave scope for it to re-engage with the Adelaide-based player down thetrack, if the softness in Santos share price persists.

“We can seea scenario whereby Santos’ share price languishes over the coming year or so,which could see Santos shareholder expectations reduce, and room for a dealspace to re-emerge in the future (although we expect Woodside will be morecautious on any future discussions after last year’s leak did damage),” MSTMarquee analyst Saul Kavonic said in a note to clients.

Jarden’s MrBurns noted that Woodside has a trio of existing growth projects, involving the$16.5 billion Scarborough LNG venture in Western Australia, the Sangomar oilproject in Senegal which is due to come online this year, and the Trion oil project offshoreMexico. But beyond those, its “growth cupboard from an oil and gas perspective appears to be pretty bare”, he said, aside from the potential Calypso gas development in Trinidad.