Shares in BHP Group and Woodside Petroleum have dropped after BHP announced it would merge its petroleum business with Woodside. This could indicate that the market hasn’t exactly cheered the deal that would create a $29 billion combined company, analysts said. BHP’s shares dropped 8.4% in Sydney two days after the deal was announced, while Woodside’s share slid 4.2% over the same period.
However, BHP’s stock to retreat might reflect other factors, including the fall in iron ore prices and investors’ profit-taking after the company reported its best earnings since 2012. However, analysts also pointed out the company’s struggle to attract buyers to sell its Mount Arthur thermal coal mine in Australia’s New South Wales after putting it on sale for more than a year.
Analysts said BHP might have to pay somebody to take the mine, which is odd considering the thermal coal market is seeing its best year since 2008, with the Newcastle Weekly Index tripling since its 2020 low to $168.71 per ton last week. This highlights the toxic status of coal. South32 paid about $250 million to offload its thermal coal mines in South Africa.
Analysts said oil and gas assets might go down the same path as coal. Companies will likely find it difficult to find buyers for their oil and gas assets amid investors’ concern about the environment and a global focus on mitigating climate change even as demand and prices remain strong.
