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Australian energy group, Santos Limited (ASX:STO) announced this week that managing director and chief executive officer Kevin Gallagher would receive an one-time growth projects opportunity.
Santos is expected to pay the incentives in the form of share acquisition rights worth A$6 million face value, with an aim to ensure Gallagher completes the company’s major growth projects and energy transformation plan by 2025.
The move came when rival Woodside Petroleum Ltd. (ASX:WPL), is seeking a new CEO. Woodside’s current CEO Peter Coleman is retiring this year after serving for a decade. History depicts that Gallaghar missed the opportunity to be at Woodside in 2011.
Source: ASX update, 12 April 2021
Both the companies will have an annual meeting on Thursday and a further update is expected about the search of a new CEO. The internal list of Woodside candidates is led by a pair of senior female executives.
According to Refinitv, improved commodity demand and stock draws could push further upside in oil over the next 12 months. STO's ventures are well placed to provide product and geographic diversification as well as reasonably high returns.
Early this year, Santos announced the final investment decision (FID) for the Bayu-Undan project offshore Timor-Leste. The project's Phase 3C infill drilling programme has been approved for US$235 million.
Santos is also planning to sell a 25% interest in its Darwin LNG project and Bayu-Undan field to SK E&S for A$390 million.
Santos' performance during Gallagher tenure
Gallagher joined Santos in February 2016. He has overseen a major transformation. Santos is now a financially stable and resilient company with strong free cash flow. The simple and consistent Transform-Build-Grow approach, discipline, and a low-cost operating model, have been critical to the turnaround of the company.
During Gallagher's tenure, Santos has increased its share price to over 2X. Its overall shareholder return is 159%, including dividends, as compared to 83% for the ASX 200 Index and 37% for the ASX Energy Index.
Source: ASX update, 12 April 2021
He has brought the company's costs under control, but the turnaround's success has been measured in terms of growth. While the average oil price in 2016 was similar to that in 2020, Santos' free cash flow has risen threefold.
Gallagher also turned down a series of takeover offers from Harbour Energy in 2018, which were pitched at a significant premium to the stock price at the time.
Santos Share Price Movement
Santos closed at A$7.020 per share on 14 April 2021. The Santos stock price had soared from $2.92 in 2016 to $9.00 just before the COVID-19 market crash in 2020.
In the last one year, Santos’ share price has gone up by ~60%. The company's stock reached a 52-week high of A$7.80 in early March as oil prices bounced back after the OPEC's output cuts.
Woodside Petroleum Ltd
Woodside Petroleum Ltd. (ASX:WPL), a leading natural gas providing firm based out of Australia, was established in 1991.
In February, the company announced a sale purchase agreement (SPA) with RWE Supply & Trading Gmbh (RWE) through its unit Woodside Energy Trading Singapore Pte Ltd for the supply of ~0.84 MMT LNG per annum for a seven-year period starting from 2025.
RWE is a German energy trading business, which specialises in power, coal, commodities, and carbon emission certificates. For its customers, the company offers energy procurement solutions as well as risk management principles.
WPL’s shares were trading at A$24.21 on Tuesday while writing this article.