Santos Shifts Blame to Adnoc’s XRG as Takeover Deal Collapses

Santos has pushed back against the Abu Dhabi–led XRG consortium after the collapse of the latter’s US$18.7 billion takeover bid, blaming the suitor’s refusal to accept risk-sharing on regulatory approvals and domestic gas obligations.

The statement contrasts sharply with XRG’s own account, which pointed to “commercial factors” and the terms of Santos’ proposed Scheme Implementation Agreement (SIA) as the stumbling blocks. Sources also suggested the buyer was frustrated by tax, disclosure and value issues.

Santos said on Thursday that the XRG consortium would not agree to “acceptable terms which protected the value of the transaction for shareholders,” given the long timetable and regulatory uncertainty.

The board also accused the bidders of rejecting a “reasonable commitment” to domestic gas supply, echoing political sensitivities in Australia over East Coast energy security. Santos added that it had been ready to enter an SIA at the agreed offer price of US$5.62 (A$8.48) per share had the consortium delivered a binding proposal.

The consortium led by XRG, the overseas investment arm of Abu Dhabi National Oil Co. (Adnoc), announced its withdrawal after Australia’s market close on Sep. 17, saying only that Santos’ terms were not acceptable. The other two members of the consortium are US private equity firm Carlyle and the Abu Dhabi Development Holding Co. state investment fund

A source familiar with the negotiations told Energy Intelligence on Wednesday that XRG was frustrated by Santos’ late request to shift a capital gains tax burden onto the buyers — and by the discovery of a long-running methane leak at Darwin LNG through the media rather than during due diligence.

The recriminations highlight a breakdown in trust that ultimately scuppered the deal.

“Both sides are accusing each other of being disingenuous — and both may be right,” said Saul Kavonic, head of energy research at MST Marquee. He argued the collapse points to deeper valuation doubts and credibility issues at Santos, with the board now under mounting pressure.

Shares Slump, Brokers Downgrade

Santos shares tumbled about 12% in Sydney on Sep. 18, sliding from an opening of A$7.65 to close at A$6.76, stripping away the premium built into the stock since the June takeover approach was announced.

New Zealand investment bank Jarden cut its rating to underperform, saying Santos investors will question the board’s tactics, while Citigroup noted the failure of a third approach since 2018 puts the company’s strategic pathway back under scrutiny. Harbour Energy’s 2018 cash bid for Santos collapsed, and Woodside Energy walked away from merger talks in 2024.

“It’s rare for a management team to withstand repeated takeover approaches. Major shareholders are now likely to demand new leadership at Santos to restore confidence in the company’s direction,” noted one Australia-based analyst who wished to remain anonymous.

Kavonic of MST Marquee said the fact that Adnoc — a relatively price-insensitive buyer — walked away suggests fundamental value concerns that go beyond the issues cited publicly. He said the tenures of Santos Chairman Keith Spence and CEO Kevin Gallagher “may become untenable,” calling for a board and leadership refresh. MST Marquee cut its target price to A$7/share, warning that without M&A, Santos risks being neither a compelling growth nor yield play.

Back to Execution

Without a buyer, Santos faces renewed pressure to deliver on growth projects that underpin its investment case. Barossa gas for Darwin LNG is due to start up in the coming weeks, Pikka oil in Alaska is scheduled for 2026 and TotalEnergies-led Papua LNG in Papua New Guinea is targeting a final investment decision (FID) next year. Together, these could lift output by 30% by 2027. But execution risks — from environmental litigation to cost inflation — loom large.

Analysts expect Santos to refocus on its LNG assets and consider stake divestments in the Cooper Basin, Western Australia and of pre-FID projects such as Dorado and Narrabri. Partial sell-downs of the Exxon Mobil-operated PNG LNG facility, Gladstone LNG and Darwin LNG could help fund Alaska and PNG growth.

For Adnoc, the setback marks a second high-profile deal setback this year after EU regulators opened an in-depth probe into its agreed acquisition of German chemicals firm Covestro. The company is expected to continue hunting for LNG growth opportunities but is now seen more likely to pursue asset-level deals in Australia rather than another full-scale corporate takeover.

For Santos, the immediate task is to prove delivery — and restore credibility with investors. “Absent M&A, Santos reverts to its fundamentals,” said Kavonic. “Right now, those fundamentals point to downgrades.”