Woodside agrees deal to buy BHP’s $20bn petroleum business

There is now speculation BHP’s petroleum boss Geraldine Slattery will be named as the new chief executive of the merged venture.

Woodside Petroleum and its adviser, Gresham, is understood to have agreed to a deal in principle to buy BHP’s $20bn petroleum business, but the key terms of the transaction are not expected to be finalised until after this week.

Woodside confirmed reports in DataRoom last month that it was in talks to buy the BHP unit.

Speculation that a transaction was in train was fuelled when BHP’s petroleum boss, Geraldine Slattery, sold her Houston home, as reported by DataRoom on August 2.

Last week, it was understood that Ms Slattery had been in quarantine in Perth, and there is now speculation she will be named as the new chief executive of the merged venture.

BHP is understood to be working with Goldman Sachs on the transaction and, while Woodside is working with Gresham, some suspect other banks, such as UBS or Barrenjoey Capital Partners, could emerge in its corner down the track.

Sources told DataRoom on Monday that while Woodside and BHP would provide an outline of the transaction when reporting their results this week, it was not “fully baked”.

It is understood that the transaction is subject to the finalisation of documents and due diligence.

Woodside also confirmed reports in DataRoom last month that the transaction involved payment for the division with Woodside scrip to BHP.

The energy giant has been tight-lipped on the transaction until now, but some suspect the company confirmed that it was in talks to gauge market reaction.

Woodside shares closed down $1.01, or 4.55 per cent, at $21.18 on Monday, while BHP shares closed 74c higher at $52.07.

Not all shareholders are impressed with the idea of a transaction, including Simon Mawhinney, managing director of Allan Gray Australia, which holds about 5 per cent of Woodside shares. He said he would only back the offer if the price was exceptionally low.

As reported by DataRoom last month, speculation started growing that a deal was close after BHP shifted the announcement of its results to the close of market on Tuesday, and Woodside moved its results announcement to Wednesday, from Tuesday.

Woodside and BHP are already joint venture partners on Australian assets, including the Scarborough gas field off Western Australia and the North West Shelf project.

BHP also owns valuable petroleum assets in other parts of the world, including in the Gulf of Mexico.

Analysts estimate that, collectively, the entire portfolio is worth about $US15bn ($20.4bn).

The least attractive part of its portfolio is its oil and gas joint venture in the Gippsland Basin.

That project has large remediation costs associated with it.

In a period of industry consolidation to create industry giants that can better fund project development, Santos is also attempting a $22bn mega merger with Oil Search.