Wednesday 18 August 2021

Woodside Petroleum Ltd (“Woodside”) and BHP Group (“BHP”) have entered into a merger commitment deed to combine their respective oil and gas portfolios by an all-stock merger (the “Transaction”) to create a global top 10 independent energy company by production.

On completion of the Transaction, BHP’s oil and gas business would merge with Woodside, and Woodside would issue new shares to be distributed to BHP shareholders. The expanded Woodside would be owned 52 per cent by existing Woodside shareholders and 48 per cent by existing BHP shareholders. The Transaction is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and other approvals.

With the combination of two high quality asset portfolios, the proposed merger would create the largest energy company listed on the ASX, with a global top 10 position in the LNG industry by production. The combined company will have a high margin oil portfolio, long life LNG assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.

Attractive strategic and financial rationale

The combination of Woodside and BHP’s oil and gas business is expected to deliver substantial value creation for both sets of shareholders from across a range of areas, including:

• Greater scale and diversity of geographies, products and end markets through an attractive and long-life conventional portfolio

• Resilient, high margin operating cash flows to fund shareholder returns and business evolution to support the energy transition

• Strong growth profile with a plan to achieve targeted Scarborough FID in the 2021 calendar year and capacity to phase the most competitive, high-return options within the portfolio

• Proven management and technical capability from both companies

• Shared values and focus on sustainable operations, carbon management and ESG leadership

• Estimated synergies of more than US$400 million (100 per cent basis, pre-tax) per annum from optimising corporate processes and systems, leveraging combined capabilities and improving capital efficiency on future growth projects and exploration

• Greater financial resilience, relative to Woodside’s and BHP’s standalone petroleum businesses.

This Transaction delivers significant benefits for both Woodside and BHP shareholders by creating a long-life conventional portfolio of scale and diversity of geography, product and end markets.

On a proforma basis, the combined business will consist of:

• High quality conventional asset base producing around 200 MMboe (FY21 net production)

• Diversified production mix of 46% LNG, 29% oil and condensate and 25% domestic gas and liquids (FY21 net production)

• Wide geographic reach with production from Western Australia, east coast Australia, US Gulf of Mexico, and Trinidad and Tobago with approximately 94% of production (FY21 net production) from OECD nations

• 2P reserves of over 2 billion boe comprising 59% gas, and 41% liquids. Resilient operating cash flows to fund shareholder returns and business evolution to support the energy transition

Significant operating cash flow will support continued strong returns to shareholders over time. Woodside will maintain its focus on disciplined growth investment and continued dividends. It is expected that Australian shareholders will benefit from the distribution of Woodside’s significant franking credit balance.

Strong growth profile with a plan to achieve targeted Scarborough FID in 2021 and capacity to phase high-return options

The Transaction will deliver expanded growth optionality for shareholders with the flexibility to phase and selectively progress near and longer term high-return options.

Full story here.