The UBS report came in response to recent speculation about whether Santos could unlock value by selling off the Cooper Basin gas and coal seam methane assets and splitting the company into two entities.

In such a scenario, it was suggested Santos would control the remaining assets in Western Australia, the Northern Territory and overseas, to produce a potentially high-margin, high growth international oil and liquefied natural gas company.

But separating Santos’ Cooper Basin assets “takes away from its core foundation asset base, even though it is broadly acknowledged as being mature and in decline”, according to UBS.

“It would also be hard to separate out Cooper Oil and CSM, which are considered attractive to Santos.”

UBS values Santos’ eastern Australian assets at $4.46 billion, or $7.46 a share, and the rest of the business at $3.16 billion, or $5.28/share.

As a result, it upgraded its recommendation on Santos to Neutral 2 from Reduced 2.

According to a report in the Australian newspaper, some investors are speculating that AGL Energy may launch a takeover proposal for Santos, after its merger proposal for Origin Energy was rejected.