Harbour - Due diligence, page-14

Here is is anyway.....
Oil price rise puts heat on Harbour bid for Santos
MATT CHAMBERS MAY 14, 2018
Santos shares closed up 5c at $6.25 yesterday. Picture: Jack Tran
Pressure is mounting on US private investor Harbour Energy to sweeten its $13.5 billion offer for South Australian energy major Santos, given the recent run-up in oil prices over the past month.

The oil surge — Brent crude last night traded at $US77 a barrel — has buoyed industry sentiment and prompted Santos chairman Keith Spence to say recently that Harbour might have to stump up more than the $13.5bn that secured it due diligence.

Citi analyst James Byrne is tipping a 5 per cent increase will be needed. “Harbour will likely need to sweeten its bid to about $7 a share to compensate shareholders for the recent increase in oil price,” Mr Byrne said.

“When we spoke to investors in late 2017 at the time of the first (rejected) bid, the price at which most holders were willing to part with the stock was $6.00 to $6.50 a share. Since then, this seems to have crept up to a range of $6.50 to $7 from our discussions.”

Debt repayment by Santos that exceeded expectations has also driven higher expectations.

Harbour, run by former Shell executive Linda Cook, was granted due diligence in April with a $US4.98 per share approach that translated at the time to $6.50. A fall in the Australian dollar has boosted the value to $6.67 a share, but that still may not be enough.

Shares closed up 5c at $6.25 yesterday.

Santos chief Kevin Gallagher will make a much-anticipated speech this morning at the Australian Petroleum Production and Exploration Association conference in Adelaide. Another address will come from South Australian Premier Steven Marshall, who will be wanting assurances Santos stays in Adelaide in any approvals of the takeover.

But he is not expected to repeat a 2011 performance from then West Australian premier Colin Barnett, who used his APPEA address to out BHP as having made an approach to Woodside Petroleum and declaring he would not let it happen.

Mr Marshall’s speech is expected to emphasise the importance of the industry to South Australia and government’s role in promoting best practice.

Another APPEA theme will be how to improve collaboration to maximise value from $200bn of boomtime investment coming to the end of its construction phase, to improve community standing in the face of activism, and reduce the strain on domestic gas buyers.

Shell Australia chairwoman Zoe Yujnovich, who is also APPEA chairwoman, will use her opening address to urge the industry to become more engaged in national debate and collaborate after a period of investment in projects that have been substantially written down to secure more community support.

“We have taken the debate to Canberra and to the business pages of our broadsheets but this is no longer enough,” Ms Yujnovich will say in her opening speech.

“We must extend the conversation to the lounge rooms, train stations and coffee queues across the country where 60sq cm of screen has become the only battleground that really matters.”