Business and Finance

Britain’s BG Group (BG.L: Quote, Profile, Research, Stock Buzz) could turn its sights on Australia’s Santos Ltd (STO.AX: Quote, Profile, Research, Stock Buzz) after its hostile $11.1 billion bid for Origin Energy (ORG.AX: Quote, Profile, Research, Stock Buzz) was rejected — but its new target may be no less willing to succumb.

BG Group gave up on Origin on Tuesday after the Australian energy firm struck an $8 billion deal with U.S. giant ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) to jointly develop Origin’s coal-seam gas (CSG) reserves through a liquefied natural gas (LNG) project.

In its tie-up with Conoco, Origin cited an independent assessment that valued it at as high as A$30.71 per share, nearly double BG’s offer of A$15.50 a share.

But BG may still be keen to make a sizeable acquisition in Asia to dispel trader talk that it is in the takeover sights of oil heavyweight Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) as well as to support its Asian-Pacific LNG growth ambitions, which has led to recent LNG deals with Singapore and Hong Kong.

“Santos’ existing portfolio seems like a good match for BG but it could be difficult for BG to mount a takeover considering how Santos’ market cap has grown pay day loans. It may be hard for BG to buy Santos at a sensible price,” said Ivor Ries, head of research at E.L. & C.Baillieu Stockbroking Ltd in Melbourne.

Together with Malaysia’s state oil firm Petronas PETR.UL, Santos is planning a A$7.7 billion LNG project in Australia’s Queensland state using CSG — in which methane gas is pumped out of coal mines — as feedstock.

It also has oil and gas assets in Indonesia, Vietnam and the Bay of Bengal, and is a partner in an $11 billion LNG project in Papua New Guinea led by Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz).

Santos said in June that it may have stakes in four producing LNG projects by 2020, giving it access to international prices for gas, which are higher than in Australia. 

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