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Shares of Australia’s Santos jumped to a five-week high on Friday on news the company is in talks to merge with Woodside Energy.

Santos and Woodside Energy, two of Australia’s largest oil and gas producers, have opened talks to discuss a potential merger in what could create an 80 billion Australian dollar ($52 billion) oil and gas behemoth.

“Concurrently, Santos is assessing a range of alternative structural options with a view to unlocking value,” according to a statement issued by Santos on Thursday.

Shares of Santos spiked 11% in early trade on Friday while Woodside slipped 0.7%.

Santos, which has a market capitalization of around AU$22 billion, said during an investor briefing last month that it was working on options to lift its value. Woodside boasts a market capitalization of around AU$57 billion.

Discussions are still at an early stage — in statements to the press, both companies emphasized there is “no certainty” the discussions would lead to a deal.

In June last year, Woodside merged with BHP Group’s oil and gas arm. Santos in 2021 acquired energy exploration company Oil Search, but a multibillion-dollar gas drilling project has been derailed by a court challenge.

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Santos shares rose to a five week high

There has been a frenzy of consolidation in the global oil and gas space.

In October, two major U.S. deals were struck, with energy heavyweight Exxon Mobil buying out shale rival Pioneer Natural Resources, and Chevron purchasing Hess in an all-stock deal valued at $53 billion.

Just last week, the Wall Street Journal reported Occidental was in talks to acquire shale driller CrownRock.

The Woodside-Santos talks follow the recent collapse of a $13 billion bid by Brookfield to acquire Australia’s largest power retailer Origin Energy, when the latter’s shareholders rejected the deal earlier this week.

“We believe there could be many positives and a few cons; potentially Woodside fixing its stagnating portfolio and Santos fixing its balance sheet,” said Citi’s head of energy, James Byrne.

The “biggest sticking point” is likely Woodside’s board finding the right value that would appease frustrated Santos shareholders, Byrne wrote in a note following news of the talks.

Byrne also cautioned that Santos shareholders could inherit risks from exposure to the Scarborough shoal, which both Philippines and China have laid claims to.

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