‘No plans to retire’: Kevin Gallagher hits back after failed Santos sale

Santos chief executive Kevin Gallagher has hit back at suggestions he will step down following the eleventh-hour collapse of a $29 billion takeover bid from an Abu Dhabi-led consortium while defending the company’s handling of the deal.

Mr Gallagher on Friday denied the oil and gas giant has “failed” after the suitors, which included the Abu Dhabi National Oil Company’s XRG and wealth fund and private equity group Carlyle, walked away from the deal on Wednesday after three months of due diligence.

Santos had been pressuring the consortium to finalise a binding bid by Friday’s extended deadline after endorsing a cash offer of $US5.76 ($8.89) a share in mid-June. It was reduced to $US5.626 by the company’s last dividend.

The announcement shocked the market and sent Santos shares plunging as much as 14 per cent. The stock finished flat at $6.77 on Friday after losing more than 10 per cent of its value over the past week.

Some analysts suggested the abandoned deal would likely result in mounting shareholder pressure on Santos to pivot to a new strategy and refresh its leadership.

Mr Gallagher on Friday acknowledged the commentary about him “taking his cheque and retiring” but said he wanted to remain CEO beyond 2027, which is the year chairman Keith Spence is due to step down after Santos’ annual general meeting.

“My plan was to stay on and work with XRG if they became the new owners. It made no difference to me who the owners were going to be,” Mr Gallagher told media on Friday.

“My plan would have been to work on. Now maybe after six months, they got tired of me and kicked me out anyway. They decided they had enough of me. But the plan was that management team would be retained as part of that transaction.

“And so I’ve got no plans to retire anytime yet.”

Mr Gallagher said “I’d like to think I’ll still be the CEO beyond” 2027 after Mr Spence departs the company. However, he said it would ultimately be a question for Santos’ board.

XRG said on Wednesday it had walked away because of “a combination of factors” that had “impacted the consortium’s assessment of its indicative offer”.

Sources privately said two issues had materially affected the offer price and undermined the bidders’ confidence in Santos’ disclosures: Santos’ insistence that the consortium assume liability for a capital gains tax payment due to the PNG Government next year and media disclosures last month of a methane leak at the company’s Darwin LNG project.

Mr Gallagher said the company should not be held accountable for the failure of the deal — which would have been Australia’s biggest ever cash takeover — and insisted there was “no animosity” with XRG.

“I love the way that you use the term failed. Who failed? We’re not actively out selling the company, so we haven’t failed,” Mr Gallagher said.

“If someone’s trying to buy the company and they don’t buy the company, I guess you can say they’ve failed. But you’d have to ask them that question, not me.”

Mr Gallagher rejected the company was in a “stressed position where it’s looking to get sold”, claiming that the reality was the opposite.

“It’s never been stronger as a company than it is today, and you know, there’s a lot of eyes on it because of the wealth of opportunities around the growth forward,” he said.

“That doesn’t surprise me. It may or may not be the last time we see someone come forward looking to buy it.”

Santos on Friday said it had signed a non-binding agreement for the potential supply of natural gas from its $3.6 billion Narrabri gas project in NSW to a new industrial precinct.

Under the deal, Santos would supply the Narrabri Shire Council with up to 3.2 petajoules of gas a year for up to 10 years.

Mr Gallagher said Narrabri gas would be a competitive source of domestic gas supply for the east coast market, which faces looming shortages.