Street Talk Energy sector tipped for M&A action PRINT EDITION: 14 Feb 2013 Edited by Sarah Thompson and Anthony Macdonald A nice little jump in Santos shares on Thursday has sparked chatter of an impending corporate play, if only perhaps because action elsewhere in the market is on the quiet side outside of earnings reports. The stock price gained as much as 2.8 per cent to $12.49 at one stage, with talk of a couple of hedge funds piling in on expectation of some M&A action. Others pointed to the unrecognised value in Santos stock after its underperformance through much of 2012. By the by, in terms of potential corporate appeal, the names typically bandied about are Shell and France’s Total. The reasoning given for the former is the potential $3 billion of synergies that could be achieved through merging Shell’s Arrow LNG project in Queensland with Santos’ GLNG venture, although Shell hasn’t been sounding too keen on Australian LNG lately, so whether it would want to swallow Santos seems rather doubtful. Total’s name comes up due to the French oil major’s stated keenness to take on an operating interest in an LNG project, rather than as a non-operator at present in the GLNG project and in Inpex’s Ichthys project. Although with Santos’ strong position in domestic gas supply in Australia, a predatory move by either Shell or Total would raise some political sensitivities. Others view Santos more as an acquirer than a target, particularly given anticipated consolidation this year between some of the energy plays in the Cooper Basin – Santos’ original heartland. Santos is thought to have run the ruler over both Drillsearch Energy and Senex Energy as it considers securing a toehold in the emerging oil play in the Western Flank of the Cooper Basin. Drillsearch shares were up 6.7 per cent on Wednesday on no particular news.
SXY Price at posting:
63.5¢ Sentiment: LT Buy Disclosure: Held
