BHP Group PLC (LON:BHP) has signed an agreement on the merger of its petroleum business with Woodside Petroleum Limited (ASX:WPL), expected to complete in the second quarter of 2022. The merger is expected to unlock more than $400m in synergies from cost savings and operating efficiencies.
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BHP CEO Mike Henry said, “Merging our petroleum business with Woodside creates a large, more resilient company, better able to navigate the energy transition and grow value while doing so.” The deal is still subject to certain regulatory and shareholder approvals.
The shares rose 1% following the news.
BHP's Merger Agreenment With Woodside
Matt Britzman, Equity Analyst at Hargreaves Lansdown:
“BHP has signed on the dotted line for the expected merger of its petroleum business with Woodside. As part of the agreement, BHP shareholders will receive new Woodside shares totalling around 48% of the new business.
It’s a positive move and one that helps the group transition away from the oil & gas industry. Investors who have avoided oil & gas assets can consider investment once again - although sizeable coal exposure may still prove too much of a hurdle. For those wanting to retain their exposure, the new business is expecting over $400m in synergies from cost saving and optimisation. And those that don’t, can simply sell the new shares once they’ve been issued.
All-in-all, BHPs petroleum business only accounts for around 6.5% of revenues. The core business remains intact, and that should remain the basis of any investment case. The group has low cost, high margin assets that make its mines profitable in most market conditions. And with net debt much reduced and huge free cash flows, shareholder returns can remain generous if the group chooses.”
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