Gas giant Santos to axe 10pc of staff, consider asset sales
Santos, Australia’s second-largest oil and gas producer, plans to cut one in 10 jobs in a cost-cutting effort and may sell some of its assets after a year of lower fossil fuel prices contributed to a faster-than-expected profit decline.
The Adelaide-based energy giant, which has been under pressure to boost shareholder returns after the sudden collapse of a $30 billion takeover bid from an Abu Dhabi-led consortium last year, said on Wednesday net profit had fallen by a third to $818 million in the 12 months to December; this was a weaker result than analysts had predicted.
Chief executive Kevin Gallagher told investors Santos now plans to target a reduction in headcount of “around 10 per cent”; He said the move would “right-size” the business as it exits a period of high capital expenditure on growth projects in the Timor Sea and Alaska and focuses on reducing costs.
With a workforce of approximately 4,000 employees, a 10 percent reduction in headcount at Santos could mean up to 400 jobs.
Santos, which extracts and processes oil and natural gas in Australia for domestic energy use and for shipment overseas as liquefied natural gas (LNG), said on Wednesday it would also conduct a “strategic review” of its Australian operations. Investment analysts said this pointed to the possible sale of some assets outside major LNG export businesses in Queensland and the Northern Territory, including projects spanning the Cooper Basin and Western Australia and the proposed $3.6 billion Narrabri gas project in northern NSW.
Last year Santos faced calls to explore asset sales or the breakup of its business after takeover talks with a bidding group led by Abu Dhabi state oil company broke down just 48 hours before the blockbuster deal was due to close. The deal, if it had gone ahead, would have been the largest all-cash acquisition in Australian corporate history and among the largest ever in the global energy sector.
Gallagher said on Wednesday that as two major growth projects – the Barossa gas project off Darwin and the Pikka oil project in Alaska – begin production, the review will assess whether some of its domestic projects can compete for capital against top assets in the company’s portfolio.
“We’re doing a strategic review to see what’s competitive and what’s not competitive going forward,” he said.
But he said the outcome of the review would not be known until it was completed. “Everyone is speculating,” he said. “We will return at the beginning of May”
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Nick Toscano is a business correspondent for The Age and the Sydney Morning Herald.Connect with: X or email.
