Merger rumours between Aussie oil company Woodside Petroleum and BHP in $40 billion deal

A Perth company is rumoured to be in a $40 billion merger with a competitor, so that it can keep up its top spot in the sector.

Australia’s largest oil and gas producer is rumoured to be in talks with a global competitor to undergo a $40 billion asset merger.

Woodside Petroleum, a Perth-based company, is looking to buy out the Australian assets of international mining giant BHP, according to The Australian.

Should the merger go ahead, Woodside would retain its top spot in Australia’s oil industry.

However, if the talks fall through, Woodside will drop down from its number one position as two of its competitors merge.

Earlier this month, Oil Search announced a $21 billion merger deal with Santos, positioning Santos as the new leader in the sector.

BHP’s global petroleum chief Geraldine Slattery is currently in quarantine in Western Australia, after flying in from the US on Friday.

BHP is reporting its annual results on Tuesday while Woodside is slated for Wednesday.

However, some suspect that the oil guru’s trip to Australia is for more than just result season.

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Woodside Petroleum's head office in Perth. Picture: Kim Christian

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Ms Slattery is apparently trying to sell her house in Houston, prompting some to think her move to Australia might be more permanent.

BHP has oilfields in the Gulf of Mexico and Australia’s Bass Strait.

Both BHP and Woodside have investments in Western Australia’s North West Shelf and Scarborough oil projects.

Woodside would own more stakes in those oilfields if the merger happened.

According to The Australian, Woodside would pay the $40 billion through shares.

BHP would likely hold onto a 15 to 20 per cent stake in Woodside.

Woodside has 964 million shares worth $21.38 billion.

The merger is expected to double those amount of shares.

BHP is currently engaged in talks with Woodside. Picture: William West/AFP

Credit Suisse energy analyst Saul Kavonic said it made sense for BHP to get out of the oil game.

BHP has owned its oil assets since the 1960s but the company now makes most of its profit from iron ore and copper.

“BHP Petroleum simply no longer fits within BHP’s portfolio or future-facing strategy,” he told the AFR.

“A Think Big Woodside, merged with BHP Petroleum, would present a globally significant LNG-weighted company, with a diversity of low-risk geographic exposure and growth options.”

Originally published as Merger rumours between Aussie oil company Woodside Petroleum and BHP in $40 billion deal