Australian LNG bid target Santos names Gallagher from Clough as new CEO

Tuesday, 17 November 2015

Santos said Gallagher would start as CEO of Santos in early 2016, subject to agreement on a release date with Clough.

Delighted

Santos Executive Chairman, Peter Coates, said he was delighted at the appointment of Gallagher. “Kevin has nearly 25 years’ experience in managing oil and gas operations in Australia, the USA and North and West Africa,” Coates said.

Santos recently shipped the first cargo from its Gladstone LNG project, built in the Australian state of Queensland at a cost of US$18.5 billion. The other GLNG shareholders are France's Total, Malaysia's Petronas and Korea Gas Corp.

Just after the sending out of its first cargo, Santos was approached by an equity fund with a proposal to take over the company.

Santos is also a stakeholder in two other LNG production projects, the Darwin LNG plant run by ConocoPhillips and the Papua New Guinea liquefaction plant operated by ExxonMobil.

The bidders for Santos, called Scepter Partners, valued its bid proposal at around A$7 billion (US$5Bln).

Scepter has its head office in Bermuda and other operations based in New York and Hong Kong. That takeover move is now likely to be discouraged by the appointment of new CEO Gallagher and the additional announcement of a share placement and sale to raise about $3.5Bln (US$2.6Bln) in fighting funds for Santos.

The share offering also means selling around 7.5 percent of its shares in placements with several buyers, including two of Asia's leading equity funds, Singapore state fund Temasek and Hony Capital of China.

Santos Chairman Coates stated that Gallagher was ideally suited to lead Santos “as we move from a focus on major strategic developments to delivering strong operational results” in a continuing low oil price environment.

During his time at Clough, Gallagher transformed the energy engineering and construction business, delivering record financial and operational performance while working on some of Australia’s main LNG projects and seeking new markets in North America.

“Kevin will bring fresh insight and a proven track record of achievement for shareholders from a career that spans international oil experience with Mobil, the Woodside operated North West Shelf LNG venture and most recently, as CEO of Clough since 2011,” Coates said.

“I have said through the course of this year that with the major LNG project investment phase ending and the oil price outlook remaining low, Santos had to take action to become a more agile, low cost producer delivering attractive shareholder value.

“The company has made good progress towards that goal through the year with a $900M reduction in capital expenditure and about $370M per annum in cost savings through headcount reductions of some 770 positions, together with meaningful supply chain savings,” he added.

“However, the strategic review which we have just completed has shown that we can further simplify the business and enhance financial discipline,” Coates said.

Gallagher said of his move: “My career foundations are in oil and gas and I believe the Santos portfolio offers some truly exciting, world class opportunities, irrespective of the current global oil price environment.

“I am very proud to have led Clough for the last 4 years during which I have gained an in-depth insight and understanding of the oil and gas contracting sector to complement over 20-years of oil and gas operating experience.

“I believe I leave Clough strongly positioned, with an excellent management team in place,” the new Santos CEO said.

Clough said it was starting a global search for Gallagher’s successor as CEO that will commence immediately. The company said it would consider both internal and external candidates.

Clough revealed on October 12, 2015, it had acquired its second company in North America in buying privately-held Canadian firm Enercore Projects to win more work in the US and Canada as the market in Australia peaks.

Enercore, based in Calgary, specializes in the provision of engineering, procurement and construction management services to the Canadian oil and gas sector.

The acquisition builds on Clough's North American presence, which commenced in the US in early 2014 with the establishment of a Clough engineering team in Houston, Texas.

This was followed by the acquisition in August 2014 of LNG engineering and consulting specialists CH-IV based in Baltimore, Maryland.

Since then the Clough North America business has won several US LNG project contracts, including one from Freeport LNG in Texas.

The latest Clough acquisition was small in terms of size, giving Clough around 70 additional personnel in Canada and the US, though it is regarded as providing a firmer foothold in the market.