Activist investors seek action against Santos’ growth plans, management pay

:Activist shareholders opposed Santos’ growth strategy on Thursday, saying that executive incentives are driving up investments in upstream growth projects and potentially raising carbon emissions and reducing shareholder value.

Activist investor groups Snowcap Research and Market Forces have separately highlighted the Australian oil and gas explorer’s executive incentives driving new high-cost, high-risk and decades-long upstream production, calling it misaligned with shareholder interests and climate goals.

Market Forces filed a statement on behalf of 100 shareholders urging all Santos’ investors to vote against its remuneration report that has already received its “first strike”, when it was opposed by 25.3 per cent shareholders at last year’s annual general meeting.

“Santos’ rampant pursuit of new fossil fuel production, sanctioned by the board and incentivised with big executive bonuses, represents an abject failure of corporate governance,” said Will van de Pol, acting executive director at Market Forces.

According to Australian corporate governance rules, if the remuneration report gets a “second strike”, with 25 per cent or more shareholders voting against it, the entire board of directors would be required to stand for re-election.

Shareholders will vote on the report on April 6 at their upcoming annual general meeting.

A Market Forces analysis revealed Santos’ increasing oil and gas production plans were likely to see its total emissions increase by 40 per cent from 2022 to 2030, while Woodside Energy was projected to emit 40 per cent more from 2022 to 2027.

“We urge all investors to address the climate risk failures of Santos and Woodside boards at the upcoming general meetings,” van de Pol said.

London-based Snowcap, which did not disclose its stake in Santos, said Santos had “lost its way”, and in a letter called for an overhaul of its “misguided and reckless” growth strategy, advocating for reforms it claims could increase shareholder value by as much as 50 per cent.

Santos has committed to $7 billion of new growth projects since 2021 and has another $6 billion of potential spending targeted for final investment decisions, which represents “by far the most aggressive upstream capex plan” in the sector, Snowcap said.

Snowcap also demanded it set up a target to return its entire market value to shareholders within a decade.

Santos was valued at A$24.25 billion ($15.97 billion) as of Wednesday. For fiscal 2022, Santos returned $755 million in form of dividends to shareholders.

Santos and Woodside did not immediately respond to Reuters’ request for comments. Santos shares were up 1.2 per cent as at 0316 GMT, while Woodside shares traded 1 per cent higher, against a flat-to-high ASX 200 index.

($1 = 1.5181 Australian dollars)

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