Oil's slump claims another casualty as Santos CEO steps down

Santos CEO David Knox is stepping down amid a rout in energy markets, stoking speculation the company could become a takeover target.
Santos CEO David Knox is stepping down amid a rout in energy markets, stoking speculation the company could become a takeover target.PHOTO: BLOOMBERG

SYDNEY (BLOOMBERG) - Oil's collapse claimed its next victim.

Mr David Knox, chief executive officer of Australia's Santos Ltd., is stepping down amid a rout in energy markets, stoking speculation the company could become a takeover target.

Santos has been approached by companies interested in "strategic opportunities" and is carrying out a review of its options, the Adelaide-based company said in a statement on Friday (Aug 21) after reporting an 82 per cent drop in first-half profit. Mr Knox, who has been in the role for about seven years, will depart once a successor has been named.

Oil's plunge has punished explorers and shaken the economies of producers from Norway to Venezuela. Slumping prices for raw materials have wiped out more than US$2 trillion from the shares of commodities companies since the middle of last year.

"Underperforming companies that lose their leadership are the ones that get taken out," said Mr Neil Beveridge, an analyst at Sanford C. Bernstein & Co. in Hong Kong. "Santos pursued an overly aggressive growth strategy, and the fall in commodity prices has left them very exposed given the high levels of debt within their business."

Perth-based Woodside Petroleum Ltd. and France's Total SA are the most likely potential buyers, according to Mr Beveridge.

The commodity slide comes as Santos prepares to start its US$18.5 billion liquefied natural gas project in Queensland state. LNG prices in northeast Asia have slipped about 60 per cent since climbing to a record high in February 2014, while Brent crude has lost about half its value in the last year. Energy prices have plummeted amid sustained output from the Organization of Petroleum Exporting Countries and the US

The Australian producer has cut spending and jobs while flagging potential asset sales. Santos rose as much as 5.2 per cent to A$5.90 in Sydney intraday trade on Friday, after falling earlier to the lowest since 2003. Shares have lost about 60 per cent in the last year, compared with a 28 per cent decline for rival Woodside.

"In light of the continuing pressure on the Santos share price in recent months and approaches from other parties concerning various assets and strategic opportunities, the board has decided to conduct a full strategic review to examine all options," Santos said.

Santos will talk with parties that have approached the company as part of the review, and "with this announcement there may well be new expressions of interest," Mr Knox told analysts on a conference call.

Chairman Peter Coates will assume the role of executive chairman and take responsibility for conducting the strategic review, Santos said.