BHP sparks talk of oil assets sale

BHP could be preparing the market for a selldown of its $10bn-plus Australian oil and gas portfolio after telling market participants the assets were under review and a point of focus. Some wonder whether the resources giant could be working with an investment bank to help it assess options.

BHP petroleum boss Geraldine Slattery has been meeting with market participants and has described the company’s Australian oil and gas interests as mature assets, saying the company was reviewing all options and very focused on them. The company also said BHP had a very disciplined capital allocation framework in relation to the assets.

It comes as there is talk in the market that JPMorgan has a major sell-side mandate in the oil and gas space in addition to its work with Exxon on its $US2bn-plus Gippsland Basin oil and gas development in Bass Strait.

Some are wondering whether the US investment banking powerhouse is working with BHP, although given it has a role with Exxon for its Bass Strait sell down, it might be too conflicted.

JPMorgan did not comment when approached by DataRoom and BHP did not say whether an investment bank had been hired.

In Australia, BHP owns a 16.67 per cent interest in the North West Shelf project, which some estimate could be worth between $6bn and $8bn; a 50 per cent interest in the Gippsland Basin oil and gas development in Bass Strait with Exxon; a 25 per cent interest in the Scarborough project off the coast of Western Australia, with Woodside Petroleum owning the rest; and smaller oil interests with Santos.

Overall, the assets are thought to be worth at least $10bn.

While questions remain whether BHP will divest oil interests in Australia, some investors are urging the company to embark on this course.

Investment bank Morgan Stanley was recently hired by Woodside Petroleum to sell its Scarborough interests, and many have questioned whether BHP would follow suit.

BHP has until next month to determine whether to buy another 10 per cent in Scarborough as part of its pre-emptive rights as a joint venture owner of the asset.

Some say the message BHP has delivered to investors is that it is eager to invest more in its oil and gas assets, but some believe that its interests in Australia could be the exception.

Goldman Sachs recently released research that estimated its global oil and gas portfolio to be worth about $US29bn. Some believe a demerger of the Australian assets is likely.

Alternatively, Woodside Petroleum could buy BHP’s oil and gas interests, while Beach Energy could also be a keen buyer of its Bass Strait assets.

One investor spoken to by this column supported a spin-off or sale of Australian oil and gas assets, saying BHP now is simply too big.