BHP and Woodside Petroleum will combine their respective oil and gas portfolios with an all-stock merger in a move expected to create a global top 10 independent energy company in terms of production.
The two companies have entered into a merger commitment deed which, on completion, will see BHP’s oil and gas business merge with Woodside.
Woodside will issue new shares to be distributed to BHP shareholders.
The expanded Woodside will be 52 per cent-owned by its existing shareholders and 48 per cent by existing BHP shareholders.
Under an option also announced this week, BHP has the right to sell its 26.5 per cent stake in the Scarborough joint venture, along with its half shares in the associated Thebe and Jupiter gas fields, to Woodside for up to $US1.1 billion if the Scarborough development is approved by December 15.
Woodside chief executive officer and managing director Meg O’Neill said the merger delivers a stronger balance sheet, increased cash flow and enduring financial strength to fund planned developments in the near term and new energy sources into the future.
“The proven capabilities of both Woodside and BHP will deliver long-term value for shareholders through our geographically diverse and balanced portfolio of tier 1 operating assets and low-cost and low-carbon growth opportunities,” O’Neill said.
“The proposed transaction de-risks and supports Scarborough FID later this year and enables more flexible capital allocation. We will continue reducing carbon emissions from the combined portfolio towards Woodside’s ambition to be net zero by 2050.”
BHP chief executive officer Mike Henry said the merger of the company’s petroleum assets with Woodside will create an organisation with the scale, capability and expertise to meet global demand for key oil and gas resources the world will need over the energy transition.
“Bringing the BHP and Woodside assets together will provide choice for BHP shareholders, unlock synergies in how these assets are managed and allow capital to be deployed to the highest quality opportunities,” Henry said.
“The merger will also enable the skills, talent and technology of both organisations to build a resilient future as the world’s needs evolve.”
The transaction is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and other approvals.
BHP’s share price is $51.33 per share at the time of writing.