Oil Prices

[greengiraffe]

Woodside’s Coleman: energy sector takeover dance just begun

• THE AUSTRALIAN
  
• OCTOBER 27, 2015 12:00AM
  

0

Matt Chambers
[Image: matthew_chambers.png]
Resources Reporter
Melbourne

[Image: 197522-0d89291e-7bba-11e5-80ed-95011193132b.jpg]
Woodside CEO Peter Coleman: “You don’t always have to sweeten deals”. Picture: David GeraghtySource: News Corp Australia
[b]Woodside Petroleum managing director Peter Coleman says the energy sector takeover “dance has just begun” and that he will continue to stalk Oil Search, hoping the market turns things in his favour.[/b]
But at the same time, he has not ruled out raising the $11.7 billion scrip bid for Oil Search or a tilt at Santos, the other big locally listed oil and gas company that has become a takeover target.
In television interviews with Bloomberg and CNBC in Singapore yesterday, Mr Coleman said events in the sector last week — Santos knocked back a $7.1bn cash bid from Brunei-backed Scepter Partners, and Beach Energy agreed to an all-scrip merger with Drillsearch — signalled a more rational approach to mergers.
“You don’t always have to sweeten deals,” the Woodside chief said when asked about Woodside’s plan regarding the ­rejected $11.7bn all-scrip offer for Oil Search.
“What happens is, over time, expectations come together, and I think you’re starting to see some M&A in Australia post the ­approach we made to Oil Search where you can see people’s view of the world start to get a little ­closer.”
Oil Search has rejected Woodside’s one-for-four all-share offer as “grossly undervaluing” the Papua New Guinea-focused ­target and being “highly opportunistic”.
Woodside investors have ­queried the logic of going after a company that is not in any financial distress at a time of low prices.
Yesterday, Mr Coleman talked up Woodside’s strong capital ­returns.
“We think the strength of our dividend really becomes a compelling thing for Oil Search shareholders to look at,” he said. “I’d encourage them to look at that very strongly.”
While describing the offer for Oil Search as “very fully priced and something that is just going to take time”, Mr Coleman did not rule out raising the bid when asked specifically if a $13bn bid would win over investors.
“That’s a good question, we’ll just have to see how time plays that one out. I really can’t comment one way or the other on where we are going to go,” he said.
“I’d just watch the marketplace and I think the market is going to give us some signals.”
Mr Coleman stepped up his description of a potential merged Woodside and Oil Search, which he had previously described as forming a “regional oil and gas champion”.
“It would become not just a significant regional player, but a significant player on the world stage,” he said.
The Woodside boss would not say whether he was “kicking the tyres” on Santos, which is investigating selling assets while the company conducted a strategic review.
Santos executive chairman Peter Coates wants to get better value for shareholders than the Scepter offer.
“That’s the $64 million question and of course we’re not going to comment,” Mr Coleman said.
“But it’s been an interesting week in the M&A world, and I think you’ll see more of this. The dance has just begun, it’s going to be an interesting one.”
The only agreed energy merger of any size of late was the Beach-Drillsearch tie-up, where the Drillsearch board reversed earlier disinterest in a tie-up, not because it was distressed but because it had limited options to grow.
“Many companies are into cost-cutting mode. They’ll quickly move into a mode of saying ‘we can survive now in this environment but how do we grow and thrive?’ ” Mr Coleman said.
“I think that’s a different conversation that will play out over the next few months as I think the industry in total will start to realise oil prices are going to be at this level for some time, so they can’t wait for oil prices to bail them out.
“They are going to have to fundamentally change their business model and think really hard about what the future means for them as they go forward.”