Shares in BHP Group and Woodside Petroleum dropped on Wednesday as investors raised questions over the proposed $29-billion merger. BHP agreed to sell its oil and gas operations to Woodside in a nil-premium merger. The deal will make Woodside a top 30 global oil and gas producer. However, shareholders are concerned about the strategic sense of acquiring ageing assets with high decommissioning costs at a time when investors are decarbonizing their portfolios.
Woodside’s shares dropped 4%, reflecting the jittery, while BHP’s stock price fell 6%, which also reflected its move to end its UK dual listing. While analysts said Woodside got BHP’s assets relatively cheaply, Woodside would have to fund the Scarborough project by itself if it made a final investment decision on the project by December 5.
Woodside’s new CEO, Meg O’Neill, said investors might be concerned about BHP’s ageing assets in Australia. However, he said that BHP’s Gulf of Mexico oil stakes are top-tier assets that could be cash accretive to the combined company. Woodside plans to hold a vote on the deal in the second quarter of 2022. Analysts said shareholders would likely vote for it to avoid a serious balance sheet overhang.
