Can Woodside snare BHP’s oil assets for $13bn?

Woodside Energy’s plan to buy BHP’s petroleum business has trigggered a lot of debate about the amount that should be paid for the division. Picture: Omar Torres/AFP

Following confirmation by Woodside Energy that it is in talks about acquiring BHP’s petroleum business, the attention amongst its investors has turned to price.

Analysts such as those at Macquarie Group have valued the BHP petroleum business at $US15bn ($A20bn), with it contributing 13 per cent of earnings before interest, tax, depreciation and amortisation on average over the last five years.

But the understanding is that this is not the view of Woodside shareholders.

Some say that should Woodside pay that price for the portfolio, it would be unlikely to gain support from shareholders.

However, if Woodside was able to pick up the portfolio for about $13bn, it would be highly attractive, they believe.

It would provide the company significant opportunities for growth, with BHP’s Gulf of Mexico assets the most attractive in the portfolio.

Woodside’s market value is about $20bn, whereas BHP has a market value of about $270bn.

The sense in the market is that BHP is keen to distance itself from assets like petroleum and coal to appease investors keen to meet Environmental, Social and Governance requirements and a sale is not so much about price.

Also, given the scale of BHP, $13bn-$15bn is not considered significant, is one view, and the resources giant may be comfortable making the divestment around that mark.

BHP delivers its results after market Tuesday, while Woodside hands down its numbers on Wednesday.

The understanding is that the pair have agreed a deal for a petroleum transaction involving Woodside paying BHP in its scrip, but details such as the price are still to be finalised.

Working with Woodside is Gresham while BHP is advised by Goldman Sachs.

BHP’s portfolio includes the Atlantis, Mad Dog and Shenzi assets in the Gulf of Mexico, of which it owns 44 per cent, 23.9 per cent and 72 per cent respectively, and in Australia, its Bass Strait, North West Shelf and Scarborough projects, of which it owns 50 per cent, 12.5 to 16.67 per cent and 26.5 per cent respectively.

The Pyrenees and Macedon oil and gas assets off the coast of Western Australia are also within its portfolio.

Macquarie analysts said in a research note that of the $US15bn valuation it ascribes to the portfolio, $US5.6bn is for the Australian assets and $US7.1bn is for those in the Gulf of Mexico.

The remaining $US2.3bn is for other assets and exploration and undeveloped assets.