Oil and gas producer Santos says talk that it is being eyed by a Chinese company as a possible takeover target is "pure speculation.''
"Santos is aware of continued speculation in the media regarding possible third party initiatives regarding Santos, including an article in this morning's South China Morning Post,'' it said in a statement to the stock exchange. "So far as Santos is aware this is pure speculation.''
Shares in Santos, Australia's third-largest oil and gas firm, rose as much as 16%, boosted by the takeover speculation and despite an announcement by the company today that it has put a gas project on ice due to the global economic crisis. Shares closed $1.10, or 9%, higher at $13.25.
The speculation began after the South China Morning Post newspaper, citing unnamed market sources, said China's largest integrated oil and gas company, China National Petroleum Corp, was mulling a joint bid for Santos with a foreign oil company.
"It would probably be a European firm that doesn't have a huge presence in Australia already,'' the Hong Kong paper quoted one source as saying.
"I think the timing is perfect given the share price and commodity price meltdown,'' said Gordon Kwan, head of CLSA's China Energy Research, adding CNPC was well capitalised.
"This is clearly a win-win: Santos can monetise its reserves and CNPC can ensure the long-term energy security of China,'' Mr Kwan said. "I would not be surprised if BP is CNPC's partner. BP has significant JVs with oil companies in China, so I think BP and CNPC would make good partners - this is the time to do it.''
Santos today also said it has halted the development of its Reindeer gas project off Western Australia due to the global economic outlook that has impacted the project's main customer.
The project, at Devil Creek, involved an offshore gas development and onshore processing facilities, and was supposed to go into production in 2010."The decision was made due to adverse changes in the global economic outlook that have impacted the proposed foundation gas customer,'' Santos.
Deferral of Reindeer means Santos, and its project joint venture partner Apache Corp, will have to suspend or terminate engineering and construction contracts.
"Work, however, will continue on regulatory approvals to ensure a timely re-start of the project once gas sales agreements that support the development have been agreed,'' it said.
Santos has a 45% interest in Reindeer, with operator Apache holding the remainder.
Other potential bidders for Santos include Chevron, BP, Eni and Total, the South China Morning Post said, without giving further details.
Takeover speculation has swirled around Santos after the South Australia state government removed a 15% shareholder cap on the company, imposed in 1979 amid concerns over the security of gas supplies. The cap was lifted on November 29.