Woodside Energy may sell Gippsland Basin assets amid strategic review

Woodside chief executive Meg O'Neill.

Woodside Energy’s strategic review could see the Australian oil and gas giant revive a divestment of an oil and gas joint venture in the Gippsland Basin that was previously owned by BHP.

BHP hired Goldman Sachs almost two years ago to consider options for its oil assets, including a possible sale of the Gippsland Basin assets in the Bass Strait that were earlier thought to be worth about $US2bn. But large remediation costs have always been an impediment.

BHP then sold its global petroleum assets to Woodside in a $20bn deal last year, with Woodside advised by Gresham and Morgan Stanley.

Now, with Woodside announcing its strategic review last week, some are wondering whether it is considering a similar move.

Woodside told investors and analysts last week that it was looking at “the asset portfolio holistically” and ensuring “effort and resources” were allocated to “the highest priority opportunities”.

The review comes after it strengthened its balance sheet and is progressing its Scarborough project in Western Australia through development that could be worth between $500m and $1bn.

Morgan Stanley was appointed in 2019 for a selldown of the energy giant’s stake in the Scarborough gas field.

The company told investors and analysts last week that it was for sale, but not at fire sale prices.

The price of Brent crude increased 38 per cent in the past year to $US92.71 thanks to Russia’s invasion of Ukraine.

Sources say that with Woodside cashed-up, it is no longer under pressure to sell down projects for funding reasons.

Macquarie analysts said last week that Woodside could now have a meaningful review with some genuine choices, including whether to proceed with a final investment decision next year at its $US5bn Trion greenfield development in the Gulf of Mexico, versus a sale or exit.

Other options are a more sophisticated capital management and dividend framework, and selling WA oil assets at a time of high prices versus sweating the assets until the end of their life.

Infrastructure deals on North West Shelf joint venture assets and accelerated investment in CCS, renewables and hydrogen could also be on the table.

Market experts say that ExxonMobil is the Gippsland Basin operator, and Woodside which is not overly enthusiastic about domestic gas projects.

Another question is whether it rationalises its Browse Basin gas joint venture, about 425km north of Broome.

The challenge for oil and gas companies trying to sell assets in the current high oil price environment is that a number of vendors do not see the current oil price as sustainable.