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Santos boss Gallagher given $4.5m bonus to pull out of Woodside race

Cashing in: Origin sells down share of APLNG
Cashing in: Origin sells down share of APLNG

Santos chief executive Kevin Gallagher, reportedly one of the top candidates to replace Peter Coleman as Woodside chief executive later this year, has been offered a one-off, A$6 million ($4.5 million) “growth projects incentive” to see through the delivery of major developments at the Australian company until 2025.

The move, which will be voted on at the firm’s annual meeting later this week, seems to be an attempt by the company’s board to nail down Gallagher, who has turned around Santos since taking over in early 2016.

In December 2020, Santos’ rival and compatriot, Woodside Petroleum, announced that Coleman would retire as chief executive in the second half 2021 after a 10-year term.

Gallagher has been mooted as a potential replacement given his popularity with equity investors and familiarity with Woodside’s business. He used to run Woodside’s North West Shelf asset and was a contender for the top job before Coleman took the helm in 2011.

“There is a Kevin premium factored into the Santos share price given management is well regarded by the market, that is at risk of being lost if Kevin were to move to Woodside. Regardless of how seriously the Woodside board considered his candidacy, it appears Kevin has managed to leverage the possibility of his departure to gain more incentives from the Santos board to stay on, as any good dealmaker would,” Saul Kavonic, head of energy research at Credit Suisse in Sydney told Energy Voice.

Santos chairman Keith Spence said in a statement today that Gallagher is well-recognised as one of Australia’s leading chief executives with a proven track record of delivering value for shareholders.

“Kevin is critical to the successful delivery of the company’s strategy, major growth projects and driving the energy transition over the next five years,” said Spence.

Santos’ share price has more than doubled during Gallagher’s tenure, generating a total shareholder return of 159% including dividends, compared to 83% for the ASX 200 Index and 37% for the ASX Energy Index, reported Santos.

“Santos is now moving into a growth phase consistent with the company’s strategy for disciplined growth utilising existing infrastructure around the company’s core assets. Major growth projects include Barossa, Dorado, and Moomba carbon capture and storage,” added the company.

“It is a privilege to lead Santos. We have made significant progress on our transformation journey, but the job is not yet done. I am delighted to commit to continuing to drive the delivery of our growth strategy, the transition to a leading clean fuels business and to achieve our net-zero emissions targets,” said Gallagher.

“The growth projects incentive will be delivered in the form of Share Acquisition Rights (SARs) with a face value at grant of A$6 million. Vesting of the SARs will be subject to strict performance hurdles related to the successful delivery of major growth projects, the energy transition strategy and continued employment,” said Santos.

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