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BHP, Woodside investors jittery over $29 billion petroleum merger
Shares in BHP Group and Woodside Petroleum fell on Wednesday as investors on both sides raised questions about the value of the Perth-based oil and gas group’s proposed $29 billion merger with BHP’s petroleum arm.
While a 6per cent fall in BHP’s share price was linked to a decision to end its UK dual listing, where its shares have traditionally traded at a large discount, a fall of up to 4per cent in Woodside reflected concerns about the expansion, they said.
“Woodside is one of the worst-performing companies within the energy sector globally post-COVID; the company doesn’t yet have a strong mandate to enter a deal of such questionable value and this could further drag on Woodside’s shares,” said Jamie Hannah, deputy head of investments at Van Eck Australia, a shareholder in both companies.
BHP agreed to hive off its petroleum business to Woodside in a nil-premium merger, in return for new Woodside shares which will go to BHP shareholders, who will own 48per cent of the enlarged group.
The deal will make Woodside a top 10 global independent oil and gas producer, giving it oil assets in the Gulf of Mexico, gas in Trinidad and Tobago and ageing assets in Australia’s Bass Strait, while doubling its stake in North West Shelf LNG.
However, it raised concerns about the strategic sense of expanding in oil and taking on ageing gas assets with big decommissioning costs.
Investors said the fall in Woodside shares was also partly due to worries about an overhang of stock as BHP investors who want to get out of fossil fuels would look to dump the shares.
The stock was down 1.2per cent in afternoon trade, underperforming a 1per cent rise in local rivals Santos and Oil Search .
Woodside’s new chief executive, Meg O’Neill, said while investors were very familiar with BHP’s Australian oil and gas assets, they did not appreciate the value of its Gulf of Mexico oil stakes – Mad Dog, Atlantis and Shenzi. “Those are just first-class top-tier assets that will be very cash accretive to the merged company,” O’Neill told Reuters.
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