BHP to Offload USD14.7bn Oil and Gas Business to Woodside Petroleum

BHP [BHP:US] unveiled that the group would sell its whole oil and gas business to Australian company Woodside Petroleum [WPL:AU], valued at about AUD20bn (USD14.7bn), as reported by Bloomberg on August 16. Woodside would issue new shares to BHP’s shareholders for acquiring the latter’s oil units. The merger is expected to be completed in the second quarter of 2022. Once the deal is finalized, Woodside’s existing shareholders would hold 52% shares of the merged firm and BHP would own a 48% stake. Meanwhile, Woodside would take over BHP’s oil and gas assets in Western Australia, the US Gulf of Mexico, and Trinidad and Tobago, making it the largest energy company listed in the Australia Stock Exchange (ASX).

BHP has been reevaluating its petroleum business to optimize its asset portfolio in the long run. The firm’s consideration to exit from the oil and gas business is also amid the global trend of energy transition through mergers of petroleum assets and the decarbonization needs. Previously, in 2018, BHP had sold its shale oil and gas assets in the US to BP [BP:US] for USD10.5bn and to a subsidiary of Merit Energy for USD300m. In the meantime, the retreat from the oil and gas units referred to the adjustments of BHP’s corporate structure. Following that, on August 17, the firm declared that it would end its dual primary listing by keeping ASX as its primary listing location, while leaving the London Stock Exchange (LSE), as well as the FTSE100 Index.

Besides, BHP’s core operations are iron ore and copper, while the company’s oil and gas units only contribute a small part. During the fiscal year ended on June 30, 2021, BHP reported an underlying EBITDA of USD37.4bn, soaring 69% YoY, drove by the high prices of iron ore and copper prices. Among them, the petroleum business accounted for 6.2% of the company’s underlying EBITDA and 6.4% of the total revenue of USD60.8bn, with an output of 102.8m barrels of oil equivalent. In addition, BHP’s CEO Mike Henry said this March that apart from iron ore, copper, nickel, other mineral resources would also become the core of the firm’s future strategy, which are crucial raw materials of electrification and energy storage facilities. On August 17, BHP also announced a USD5.7bn investment plan in the Jansen potash project in Canada, expected to produce about 4.35m tons of potash per year and start production in 2027.

Sources:

https://www.bloomberg.com/news/articles/2021-08-16/bhp-says-holding-talks-with-woodside-on-deal-to-exit-oil-and-gas

https://finance.yahoo.com/news/bhp-holding-talks-woodside-deal-012250966.html

https://www.upstreamonline.com/energy-transition/bhp-eyes-oil-and-gas-exit-australian-resource-giant-confirms-talks-to-sell-petroleum-portfolio/2-1-1052405

https://www.abc.net.au/news/2021-08-17/bhp-woodside-merger-oil-energy-company/100385084

https://www.caixin.com/2021-08-16/101755745.html

https://www.reuters.com/article/us-bhp-divestiture-bp-idUSKBN1KG34V

https://m.21jingji.com/article/20210817/herald/b2759b719b94712534ba3b7562e8b5e6.html

http://www.proactiveinvestors.co.uk/companies/news/957870/bhp-reports-jump-in-full-year-earnings-record-final-dividend-and-plans-to-end-its-dual-listing-in-london-957870.html

https://www.bhp-china.cn/media-and-insights/news/2021/7/bhp-operational-review.html