BHP Group has signed a merger commitment deed with Woodside Petroleum to combine its oil and gas business with the latter to create a A$41bn ($29.8bn) energy company.
A sales and purchase agreement (SPA) in this regard is expected to be signed by the parties in October 2021.
The consideration will involve the distribution of Woodside’s shares to BHP. Post-merger, Woodside’s shareholders will have a stake of 52% in the enlarged company, while BHP’s shareholders will own the remaining 48% stake.
The combination is expected to create one of the top 10 energy companies in the world on the basis of production volumes.
The enlarged firm will have nearly 200 million barrels of oil equivalent (MMboe) production in 2021. Of this, 46% will be liquefied natural gas (LNG), 29% will be oil and condensate, and 25% will be domestic gas and liquids.
Its 2P reserves will be 2,023MMboe, while the 2C resources will be 8,356MMboe.
The enlarged entity will have production assets in Australian waters, the US Gulf of Mexico, offshore Trinidad and Tobago, and Senegal.
BHP has been reportedly planning an exit from oil and gas operations as part of its efforts to shift away from fossil fuels.
BHP CEO Mike Henry said: “The merger of our 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.
“The merger will also enable the skills, talent and technology of both organisations to build a resilient future as the world’s needs evolve.”
As part of their deal, Woodside and BHP have come up with a plan to target final investment decision (FID) for the Scarborough project in Australia by the year-end.
In this connection, BHP will have an option to sell its stake of 26.5% in the Scarborough joint venture (JV) to Woodside.
The company also agreed to divest its 50% stake in the Thebe and Jupiter joint ventures to Woodside, subject to the Scarborough JV reaching an FID by 15 December 2021.
Should the deals take place, then BHP will be entitled to a payment of $1bn and a contingent amount of $100m, which will be subject to an FID taken on the Thebe development in the future. The option is exercisable by the company in the second half of next year.
Woodside CEO and managing director Meg O’Neill said: “Merging Woodside with BHP’s oil and gas business 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.”
The merger, which is expected to be closed in Q2 2022, will be subject to confirmatory due diligence, negotiation and signing of transaction documents, and shareholder, regulatory, and other preceding conditions.
