By Scott Murdoch

Copyright reuters

SummaryCompaniesCEO Gallagher says key shareholders want him to stayNew production in Australia, Alaska set to boost cash flowSantos is open to takeover offers, asset sales and selling down assets, CEO says

SYDNEY, Sept 19 (Reuters) – Santos (STO.AX), opens new tab CEO Kevin Gallagher said on Friday he has no plans to retire and expects a sharp jump in cash flow in the next few years to boost the Australian gas producer’s shares, after its third suitor in seven years did not proceed with a takeover bid.

An $18.7 billion bid for Santos by a consortium led by Abu Dhabi National Oil Company (ADNOC) collapsed on Wednesday over disagreements on commercial terms, which sparked analyst speculation that Gallagher, in the job since 2016, may face pressure to quit.

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Gallagher said cash flow improvements as two new projects in Australia and Alaska start producing should help Santos’ share price, which has significantly underperformed the market in the past three years.

“The last three or four years have been tough for Santos. We got smashed in COVID and then of course with the heavy investment period from 2022 through to today and that has suppressed our share price. That’s a fact of life,” he said.

“But I’m looking forward now to a lower capital expenditure intensity over the next two years, higher cash flows from new production from Barossa and Pikka, supplementing the strong portfolio.”

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The $4.5 billion Barossa gas project off northwestern Australia and the $3.1 billion Pikka oil project in Alaska are due to start producing within the next six months.

Investment bank Jarden estimates Santos’ free cash flow will jump from $293 million in 2025 to $2.45 billion in 2027.

Gallagher said while Santos would evaluate any takeover approach, including asset sales or sell-downs, the company did not need to find a buyer.

“We’re not running a sales process for the company. The reason people are looking at Santos is because we’ve got a good portfolio,” Gallagher told reporters on a conference call.

“There’s a lot of future value that we want to develop in a disciplined way for our shareholders,” he said, highlighting that its assets have development potential close to existing infrastructure.

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“That’s a to-die-for scenario in an industry these days,” Gallagher said.

He said as long as shareholders and the board wanted him in the job, “I’m happy to stay here,” adding that key shareholders were asking him to remain focused on the business.

Santos shares closed 0.45% higher on Friday at A$6.77 after falling by more than 13% on Thursday in the first trading session since ADNOC’s overseas unit XRG said it was walking away from its proposed takeover offer.

XRG baulked after it was revealed capital gains tax payments were due soon on Santos’ assets in Papua New Guinea, according to a person familiar with the matter.

After the market closed on Friday, Santos announced it had signed a non-binding agreement to supply the Narrabri council with 3.2 petajoules of gas per year for up to 10 years from the company’s Narrabri gas project. Santos has yet to make a final investment decision on the A$3.6 billion ($2.37 billion) project in Australia’s New South Wales state.

($1 = 1.5170 Australian dollars)

Reporting by Scott Murdoch and Renju Jose in Sydney; Editing by Sonali Paul and Jamie Freed

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Scott MurdochThomson ReutersScott Murdoch has been a journalist for more than two decades working for Thomson Reuters and News Corp in Australia. He has specialised in financial journalism for most of his career and covers the Australian financial services sector and superannuation. He is based in Sydney.