By Simon Evans
Santos chief executive Kevin Gallagher has signalled he intends to lead the oil and gas group until at least 2028 to guide it through the next stages of major projects, outlasting chairman Keith Spence who announced he would step down next April.
The two have worked closely at Santos, with Spence as chairman since 2018 and Gallagher chief executive since 2016.
However, both have come under increasing pressure from investors following a string of failed takeover approaches and a disappointing share price performance in recent years.
Some shareholders have criticised the board as being too close to Gallagher, saying the chief executive has become an all-powerful presence in the boardroom.
Speaking after the company’s annual meeting in Adelaide on Thursday, Gallagher said it was up to the board, not him, to decide on his departure timetable.
“I mean, I’m not arrogant enough to say that it’s up to me, right?” Gallagher told The Australian Financial Review.
“I’m very committed to the cause – this is my 11th year on the job.
“There will be a point in time when it’s the right time either from my perspective or from the board’s perspective, but right now, I’m as committed as ever, and energetic.”
Former chief financial officer Sherry Duhe had been viewed as a potential successor to Gallagher before she left Santos abruptly in October, citing concerns over the CEO’s leadership style.
Beach Energy boss Brett Woods and Amplitude Energy chief Jane Norman have also been touted by analysts as potential replacements.
But Gallagher appeared to be in no mood to hand over the reins yet.
He outlined big strategic decisions ahead on projects including in Papua New Guinea, saying it was important to have strong leadership as the $4.5 billion Pikka operation in Alaska and $6 billion Barossa project in the Timor Sea scaled up production.
“All of those things I’m talking about take you through 2027 into 2028 and take you towards a point where you get ready to take an FID [final investment decision] on the next development project,” said Gallagher.
“It’s those moments that I think represent hand-off times if you were thinking about a smooth transition.
“You want continuity for the management team, for investors, and for the board.”
Earlier, Spence told the meeting he would depart in April 2027.
“Given the timing of my retirement and the CEO’s ongoing commitment to his role, the board expects that appointment of Santos’ next CEO will be a matter for the board and my successor,” he said.
Wilson Asset Management portfolio manager John Ayoub said it would be better if Spence departed earlier.
“We would prefer to see a more expedient transfer of the chair role, in order to give Kevin and the rest of the management a new lease of life. April 2027 is a long time in these markets,” said Ayoub.
Vote against pay
Large superannuation fund HESTA said on Thursday that it was concerned about a fall-off in spending by Santos on clean energy projects, and voted against the company’s remuneration report.
In a statement, HESTA chief executive Debby Blakey said Gallagher’s pay – at just over $9 million in 2025 including short- and long-term incentives – was “not adequately justified given underlying company performance and the breakdown of a third acquisition proposal in seven years”.
Santos, which produces liquefied natural gas in Australia and Papua New Guinea, was the subject of an Abu Dhabi-led takeover proposal last year that valued Santos at $36.4 billion including debt.
The proposal collapsed in September, raising questions about the company’s direction.
That followed previous approaches from Australian rival Woodside Energy in 2024 and US group Harbour Energy in 2018, both of which came to nothing.
Almost 23 per cent of shareholder votes went against the executive pay report, just short of the 25 per cent threshold for a first strike, which would threaten a board spill at the following year’s annual meeting.
On the disruption in energy markets caused by the Middle East conflict, Gallagher said such periods of turbulence sometimes stoked more mergers and acquisitions activity once volatility subsided and the pricing of assets became more stable.
“Quite often, depending on how companies get impacted by the volatility, it creates a lot of opportunities coming out of that period,” said Gallagher.
He said some companies may find themselves with weaker balance sheets.
Brent oil prices have jumped more than 50 per cent since the first US-Israeli strikes on Iran on February 28, while Asian liquefied natural gas prices have more than doubled.
Spence told the meeting that turbulence in the energy market was the biggest since the 1970s, “with impacts likely to persist for years to come”.
Santos shares have rallied sharply on the back of the energy crunch, rising about 23 per cent this year, but have lagged gains in the benchmark S&P/ASX 200 index in the past three years.
Since the collapse of the Abu Dhabi-led deal, Santos has focused on bringing two large projects into production, while cutting about 10 per cent of its workforce to keep costs down.
The Pikka project in Alaska, which is 49 per cent owned by Spanish major Repsol, is expected to produce 80,000 barrels of oil a day once fully online, at a production cost of less than $US8 a barrel.
Santos is also banking on strong returns from the Barossa project in the Timor Sea off Darwin, which began production this year, but was hit by an outage in March.
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