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Talks Over a $52 Billion Oil and Gas Merger Between Woodside and Santos Begin

In a further indication of the global oil and gas industry’s consolidation, Australia’s two biggest oil and gas corporations have begun discussions over a possible near-A$80 billion ($52 billion) merger to establish a national leader in liquefied natural gas production. On Thursday, Woodside Energy and Santos announced that negotiations had begun over a possible merger that, if completed, would virtually combine Australia’s LNG industry into a single publicly traded business. A$57 billion company Woodside stated that negotiations were “incomplete” and that there was “no certainty that discussions would lead to a transaction.”

Worth A$22 billion and long-rumored as a takeover target, Santos declared that the discussions were only “preliminary” and that it was evaluating “a range of alternative structural options” in order to maximize value.

The negotiations follow two significant US mergers that were finalized in October: ExxonMobil agreed to purchase Pioneer for $64 billion, including debt, and Chevron agreed to purchase Hess for $60 billion, including debt. The largest firms are trying to use their enormous earnings from the energy crisis to acquire prospects in the oil market, which is why they are engaging in takeovers.

Although Woodside and Santos have recently made ground-breaking agreements, they have found it difficult to go forward with important development projects, which has put pressure on investors. After Woodside, a corporation located in Perth, completed its acquisition of BHP’s petroleum division in 2022, the company was able to expand globally, acquiring holdings in the US, Canada, and Algeria. The acquisition took place at a time when oil and gas prices were surging, leading to the company’s record earnings. However, due to uncertainty and opposition to a development project in Western Australia, its shares have dropped by almost 20% over the previous year.

Last year, Santos closed a A$21 billion deal to acquire rival Oil Search. However, a multibillion dollar offshore drilling project was halted by a legal challenge by the native people of the isolated Tiwi Islands, over whose seas the project will pass.