Santos, the second-largest Australian oil and gas producer, is planning to cull 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 steeper-than-expected profit fall.
The Adelaide-based energy giant, which is under pressure to lift shareholder returns following the abrupt collapse of a $30 billion takeover offer from an Abu Dhabi-led consortium last year, on Wednesday revealed its net profit had declined by a third to $818 million in the 12 months to December, a weaker result than analysts had been forecasting.
Managing director Kevin Gallagher told investors Santos now intended to target a headcount reduction of “around 10 per cent”, a move he said would “rightsize” the business as it moved out of a period of high capital expenditure on growth projects in the Timor Sea and Alaska and focused on cutting costs.
With a workforce of around 4000 employees, a 10 per cent headcount reduction at Santos could be as many as 400 jobs.
Santos, which extracts and processes oil and natural gas in Australia for domestic energy use and for shipping overseas as liquefied natural gas (LNG), on Wednesday also said it would carry out a “strategic review” of its Australian operations. Investment analysts said this suggested the possible sale of some assets outside its huge 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.
Santos last year faced calls to investigate asset sales or a break-up of its business following the breakdown of takeover talks with a bidding group led by the Abu Dhabi state oil company just 48 hours before the blockbuster deal was due to be finalised. The deal, if it had proceeded, would have been the biggest all-cash takeover in Australian corporate history, and among the biggest in the global energy industry ever.
Gallagher on Wednesday said the review would assess whether some of its domestic projects would still be able to compete for capital against the top-tier assets in the company’s portfolio as two large growth projects – the Barossa gas project off Darwin and the Pikka oil project in Alaska – begin production.
“We are doing a strategic review to see what does and doesn’t compete on a go-forward basis,” 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 revert in early May.”
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.