A Middle Eastern consortium led by the Abu Dhabi-based consortium XRG has walked away from its pursuit of Santos, withdrawing an indicative takeover proposal after weeks of negotiations with the Australian gas producer's board.
The group – consisting of Abu Dhabi National Oil Co (ADNOC), state investor ADQ and US private equity giant Carlyle – said a combination of commercial hurdles and the strict terms of a proposed scheme implementation agreement meant it could not proceed with a binding offer.
"While disappointed not to move forward, XRG and its consortium partners are responsible, disciplined investors with a clear focus on creating value for our shareholders and driving long-term growth," the company said in a statement.
The move ends months of speculation that Santos could become the target of one of the largest foreign takeovers in the Australian energy sector. The consortium had positioned itself as a strategic partner willing to commit to long-term investment in domestic gas supply and regional energy security, while signalling confidence in Australia's investment environment.
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Although the indicative offer has been shelved, XRG said it would continue to pursue gas, LNG, chemicals and energy transition assets globally as it seeks to expand its portfolio of investments to help power energy-intensive industries including artificial intelligence.
Carlyle's international energy arm, which manages about $6 billion in oil and gas investments across Europe, Africa, Asia and Latin America, had also been part of the consortium. ADQ, one of Abu Dhabi's most active sovereign wealth investors, controls a portfolio spanning power, water, nuclear and waste assets.
The decision leaves Santos facing ongoing pressure to lift shareholder returns after recent criticism of its dividend stability and acquisitions strategy.
Santos' response
Santos says throughout XRG's extended due diligence period the consortium did not find anything that would lead it to withdraw its takeover bid.
The announcement of the collapse of the deal follows an instruction from the Santos Board to the XRG consortium on Monday that they expected to enter into an SIA at the agreed offer price of US$5.626 if a binding proposal was received from the XRG Consortium on acceptable terms on or prior to 19 September 2025.
In response XRG released their statement and withdrew.
"The Santos Board had expressed its concern to the XRG Consortium about delays in agreeing the SIA. The XRG Consortium would not agree to acceptable terms which protected the value of the Potential Transaction for Santos shareholders, having regard to the likely extended timeframe to completion and the regulatory risk associated with the transaction.
"Further, the XRG Consortium would not agree to an appropriate allocation of risk between the XRG Consortium and Santos shareholders under the SIA. This included the obligation of the XRG Consortium to secure regulatory approvals and the provision of a reasonable commitment to the development and supply of domestic gas" Santos said in a statement, outlining some of the frustrations that have arisen dealing with the bid's drivers.
Seeking to reassure shareholders and steady the ship, Santos' chair, Keith Spence, added: "With production set to rise as Barossa and Pikka phase 1 come online, and unit production cost expected to trend lower over time, our strategy is clear: generate cash, reward shareholders, reinvest to backfill and sustain our infrastructure, and build and grow our production, while continuing to operate safely and reliably.
"Santos has a clear strategy, strong leadership and high-quality growth opportunities across our global portfolio. The Board is confident these strengths will deliver long-term value for shareholders."
This article will be updated.
