Industry Trend Analysis - Santos Takeover Interest On LNG, EM Exposure - JAN 2018

BMI View : Interest in a potential takeover of Australia's Santos will be strong, due to the firm's excellent position in LNG growth markets via stakes in export ventures, as well as a diversified portfolio of upstream assets across major EMs in the Asia-Pacific region.

Australia's second largest oil and gas producer Santos is becoming the subject of intense takeover interest, after rebuffing a AUD9.5bn (USD7.2bn) bid from Harbour Energy, a joint-venture between Noble Group and EIG Global Energy Partners. With expectation for stronger oil prices down the line, deals will need to be secured in the coming quarter to maximise the value upside. However, this will likely lead to drawn out processes with widening differences in buyer and seller valuations.

A number of IOC-owned oil and gas assets in Asia are set to exchange hands, while the region has also seen completion of several takeover deals in recent months, including Rosneft and Trafigura's USD12.9bn purchase of India's Essar Oil in August and ExxonMobil's USD2.5bn takeover of InterOil in February. In addition, New Zealand's NZOG is also a takeover target, with Zeta Energy and Ofer Global Group among the interested parties.

LNG Assets To Command Investor Interest
Australia & PNG Net LNG Exports, bcm (LHC) & % Share Of LNG Exports By Destination (RHC)
* Includes LNG exports from Darwin LNG, Gladstone LNG and PNG LNG. Note: Malaysia = Petronas portfolio. f = BMI forecast. Source: JODI, Bloomberg, BMI

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