Further speculation is emerging about discussions surrounding a possible sale of BHP’s oil and gas assets to Woodside Petroleum, with suggestions that a scrip deal has been in the making.
It is understood that a proposal has been mooted where Woodside buys BHP’s oil and gas business and pays for the deal with Woodside shares.
Those shares would then be distributed to BHP shareholders.
Sources say Woodside has been actively working on the proposal – one that has been pitched to the $21bn Australian energy producer by investment bankers over the past year.
DataRoom revealed this week that there has been talk in the market that Woodside has been in negotiations about buying oil and gas assets from BHP.
This followed renewed suggestions that BHP has been looking to divest its global petroleum division in recent days.
While some say a deal in which Woodside buys BHP’s entire global petroleum unit is on the table, others believe the negotiations are for the oil and gas business in Australia.
Some believe recent positive talk surrounding crude oil by BHP is an indicator that it is keen to hold on to its more valuable oil and gas assets in the Gulf of Mexico.
Woodside declined to comment, only saying that the company was focused on the execution of its Sangomar project in Senegal and achieving its targeted final investment decision on the Scarborough and Pluto Train 2 developments in Western Australia.
BHP has also declined to comment on its petroleum unit.
Woodside and BHP are already joint venture partners on Australian assets, including the Scarborough gas field off WA and the North West Shelf project. The speculation comes amid 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, as it told the market this week.
Woodside has recently launched the sales process for a 49 per cent stake in its Pluto Train 2 development in WA through Morgan Stanley and Rothschild and has been considering a selldown of its Scarborough asset.
A sale of BHP’s petroleum division would create a pure-play miner that would be more attractive to investors from an environmental perspective.
BHP is also offloading coal assets, another deterrent for environment-conscious funds.
One point of difficulty for dealmakers will be navigating the 50 per cent interest BHP has in the Gippsland Basin oil and gas development it has in the Bass Strait with Exxon that is considered unattractive to buyers due to its large remediation liabilities.
Market analysts believe there would be few buyers for the BHP Australia petroleum business.
As well as stake in Gippsland Basin and North West Shelf and Scarborough, BHP also owns interests in the Macedon and Pyrenees domestic gas projects in WA with Santos that could be worth up to $US1bn ($1.4bn).
Goldman Sachs has been working with BHP over solutions for its Australian oil and gas assets since 2019.
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