BHP will sell Scarborough stake if Woodside deal falls through
BHP has flagged delays in finalising the deal with Woodside to sell its petroleum assets and will make a call on its $16bn Scarborough project by December 15.
BHP shareholders will get a close look at the details of the sale of its petroleum assets to Woodside Petroleum by the end of November, with the timetable slipping slightly from original plans and the pair remaining locked in discussion over the final terms of the all-scrip deal.
The terms suggest the pair will make a final investment decision (FID) on the $16bn Scarborough gas project by December 15, with the two agreeing BHP will sell its interest in the gas field to Woodside if a merger deal does not go ahead, according to BHP’s quarterly production report.
“BHP and Woodside (the operator) have developed a plan towards Scarborough FID by the end of the 2021 calendar year prior to the proposed completion date for the merger,” said BHP’s quarterly report.
“As part of this plan, BHP and Woodside have agreed an option for BHP to divest its 26.5 per cent interest in the Scarborough Joint Venture (JV) to Woodside and 50 per cent interest in the Thebe and Jupiter JVs to Woodside if the Scarborough JV takes a FID by 15 December 2021 and the merger does not proceed.”
BHP announced the divestment of its petroleum assets into Woodside in August, in a $40bn deal that would transform Woodside into a global oil and gas giant.
When the deal was announced BHP said it would take until October to complete negotiations over the final details of the deal.
BHP released its quarterly production report on Tuesday saying that, although it still expects the deal to close by the end of the current financial year, it now expects to deliver the final transaction documents to shareholders in November.
“Execution of a Share Sale Agreement and Integration and Transition Services Agreement is expected to take place in November 2021. Following receipt of all approvals, the merger is expected to be completed in the second quarter of the 2022 calendar year with an effective date of 1 July 2021,” BHP said.
The company said its integration team was still working closely with Woodside’s staff.
BHP said its plans to abandon its dual-listed corporate structure were also still on tract, saying discussions with major shareholders and regulators had been “constructive”, and the company was on track to move to a new structure by the end of March 2022.
BHP’s iron ore output softened in the September quarter, with its Pilbara mines producing 71 million tonnes of iron ore, down 3 per cent from the June quarter.
BHP said planned maintenance in the period was largely responsible for the production drop, but said “temporary rail labour shortages related to COVID-19 related border restrictions also had a minor impact”.
The global mining major booked softer output across the vast majority of its operations, with copper output down 7 per cent for the period, to 376,000 tonnes, metallurgical coal production down 25 per cent, and nickel production down 21 per cent.
Copper output falls were led by a sharp drop in output from its Olympic Dam operations in South Australia as the company wound down its smelter ahead of a major maintenance campaign, with output from the giant Escondida mine in Chile down on lower grades being fed through the mill.
Output at BHP’s Queensland metallurgical coal mines fell as BHP launched major maintenance campaigns at its operations, with maintenance at its Kalgoorlie nickel smelter and WA concentrators also hitting nickel production.
BHP’s petroleum assets delivered the only bright note in its quarterly production report, with crude and condensate output up 4 per cent compared to the June quarter to 12.8 million barrels of oil equivalent, and natural gas production flat at 88.4 billion cubic feet.