Wednesday, 18 June, 2025 / Edition 63

Hello from Copenhagen! My better half and I will be visiting Scandinavia during the next three weeks. We are starting by enjoying some much-needed hygge in Denmark.

Let’s dive into two pieces of energy news from the past week.

Shangyou Nie

Editor, Well Read

ADNOC Offers to Buy Australia’s Santos for $19 Billion

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On 15 June, Santos Limited announced it had received a final offer of $18.8 billion from an ADNOC-led consortium. This will be the largest upstream oil and gas M&A deal announced in 2025 thus far. It will also be the largest acquisition by ADNOC’s XRG investment vehicle since its formation last year.

About the deal:

• According to the WSJ, Santos claims the all-cash offer of AU$8.89 (Australian dollars or U.S. $5.76) per share is “final.”

• The buyers are ADNOC’s newly created subsidiary XRG and private equity firm Carlyle.

• The offer represents a 28 percent premium over Santos’ previous closing price on the Australian Securities Exchange.

• XRG made an earlier offer in March for AU$8.00/share. It then made another offer the same month for AU$8.60 per share. The newest offer represents a 3 percent increase over the second offer.

• XRG said that a key deal driver is “unlocking additional gas supply for Santos’ customers.”

About Santos:

• The Australian independent company has a market cap of AU$25.3 billion.

• Santos’ share price shot up 15 percent upon the acquisition news, albeit just over half of the offered premium.

• Santos has oil and gas assets in Australia, Alaska, and Papua New Guinea, with a 78:22 gas and oil split.

• Two key areas of strength for Santos are its growing LNG portfolio in Papua New Guinea and Australia and CCS in Moomba, South Australia.

• Santos has been the target of other takeover offers for the past two years. In 2024, rival Australian company Woodside Energy attempted to acquire Santos.

About XRG:

• ADNOC officially launched XRG on 27 November 2024 to accelerate ADNOC’s international expansion, with an enterprise value of $80 billion.

• XRG has three focus platforms: international gas, global chemicals, and low-carbon energies.

• XRG plans to build an LNG portfolio of between 20–25 million tonnes per annum by 2030.

• Leadership:

  • Executive chairman of the board: Dr. Sultan Ahmed Al Jaber, the UAE’s minister of industry and advanced technology and ADNOC managing director and group CEO

  • Board members include:

    • Jonathan Gray, Blackstone president and COO

    • Bernard Looney, former BP CEO

What’s next:

• Santos’ board is recommending its shareholders accept the offer, “in the absence of a superior proposal.”

• XRG said that it will maintain Santos’ headquarters in Adelaide. It will also keep its brand, and operational footprint in Australia, as well as its key international operating hubs worldwide.

• XRG will work closely with Santos’ management team to “accelerate growth,” especially “its gas and LNG-focused business.”

• The deal is conditional upon both parties reaching a binding Scheme Implementation Agreement and receipt of customary regulatory and shareholder approvals.

• In addition to Australia’s Foreign Investment Review Board, the Committee on Foreign Investment in the United States, and the Securities Commission of Papua New Guinea will also need to approve the deal.

• Transaction timing has not been specified.

🚨Trend alert:

• The ADNOC-Santos deal is the latest example of M&A activities accelerating in the oil and gas industry, as many companies refocus on oil and gas.

• The deal is among several recent countercyclical deals. More M&A deals are likely to come as companies with large war chests try to “buy low.”

• Will another company make a higher offer for Santos?

For details on Santos’ portfolio, read here.

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EIA Projects U.S. Production Drop in 2026 After Anticipated Peak in Q2 2025

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Average production in 2026 is expected to reach 13.4 million barrels per day, following an anticipated peak in oil levels in Q2 2025, according to the Energy Information Administration. Lower oil prices and reduced rig counts are among key reasons for the expected decline.

About the report: Each month, the EIA issues a Short-Term Energy Outlook (STEO).

Key Report Takeaways

On crude production:

• In Q2 2025, U.S. crude production will reach a record level of 13.5 million barrels per day.

• By Q4 2026, U.S. crude production will decline to 13.3 million barrels per day.

• Average U.S. crude production will remain the same in 2026 as it was in 2025, but it will increase over the reported 13.2 million barrels per day in 2024.

• In the Federal Offshore Gulf of Mexico (Gulf of America), offshore crude production will average 1.80 million barrels per day. This is an increase of 1.7 percent over the 1.77 million barrels per day in 2024.

• Gulf of Mexico (Gulf of America) production will grow to 1.81 million barrels per day in 2026.

• The average Brent price will decrease to $61 per barrel by year’s end 2025 and average $59 per barrel in 2026. Brent prices averaged $66 per barrel in 2025 and $81 per barrel in 2024.

On electricity and renewables:

• Natural gas will lead U.S. electricity production in 2026 (40 percent), followed by renewables (27 percent), nuclear (18 percent), and coal (15 percent).

• Renewable-generated electricity will increase 2 percentage points in 2026, while coal- and nuclear-generated electricity will decrease 1 percentage point each.

• Gas-generated electricity will remain at 40 percent.

What to watch:

• Will the Q2 2025 U.S. production record high truly represent a production peak for the U.S.?

• More independents might start looking for overseas E&P opportunities, similar to Houston-based EOG’s entry into the Middle East and Continental Resources’ entry into Turkey.

• Reduced production and lower activity levels might lead to fewer jobs in the industry, which is already trying to leverage more AI.

You can read the latest EIA Short-Term Energy Outlook report here and its offshore production report here.

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✉️ To get in touch with Shangyou, send an email to editorial@aapg.org.