Santos share price goes red as takeover rumours turn into hot air

Was there ever an offer?

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The Santos Ltd (ASX: STO) share price is pushing lower on Friday and is currently trading less than 1% down at $7.68 apiece.

This move follows a sharp decline from the weekly high of $8.16 per share on Thursday, as speculation mounted that Santos had found itself a potential buyer.

Who else than Saudi Aramco, the majorly state-owned Saudi Arabian oil company, was the prospect, according to Bloomberg.

However, the Saudi oil giant debunked reports about a potential takeover today. Whilst there is no direct evidence investors are unhappy about this, the Santos share price has subsequently drifted lower on Friday.

Here's a closer look.

Aramco denies interest in Santos

Saudi Aramco has clarified that media reports suggesting it was considering a bid for Santos are false, according to Reuters.

This statement came in response to Bloomberg's report on Thursday, which indicated that Saudi Aramco and Abu Dhabi National Oil Company were exploring bids for Santos.

The Santos share price surged on speculation about the possible takeover. On Thursday, shares climbed around 4% to $8.00 as investors reacted to the news.

But without any confirmation from Santos or Saudi Aramco on the matter, the excitement was short-lived.

In an emailed statement on Thursday, the Saudi oil giant clarified it had no intentions to buy Santos, nor was it considering an offer to buy the company.

It said that reports "it was considering an offer for Santos are inaccurate", per Reuters.

The question was never whether Saudi Aramco has the means to buy Santos.

In 2023, it posted net income of US$32.6 billion. That's more than Apple Inc's income of $19.8 billion and Google owner Alphabet Inc's $19.7 billion net profit for the same year.

This isn't the first time Santos has been in the merger spotlight. Just six months ago, the company engaged in preliminary discussions with Woodside Energy Group Ltd (ASX: WDS) for a potential merger.

However, these talks ended without a deal.

What's next for the Santos share price?

Despite the recent decline, brokers are positive on the Santos share price.

Goldman Sachs reinstated Santos as a buy in a February note with a price target of $8.35. It highlights expected production growth at its key sites over the next three years.

With key growth project Barossa materially de-risked following the Federal Court's Jan 15 Judgment to lift the injunction halting pipeline installation and a lack of challenges to NOPSEMA project approvals, we see attractive valuation.

Meanwhile, consensus rates Santos a buy, according to CommSec.

While the initial excitement around a potential takeover has faded, it's crucial to stay informed and consider the broader market dynamics before making any investment decisions.

Santos is up nearly 5% in the past year.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, and Goldman Sachs Group. The Motley Fool Australia has recommended Alphabet and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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