BHP’s Potential Exit From Oil and Gas, Mulls Woodside Merger

The multinational miner BHP has begun discussing potentially leaving the oil and gas industry and merging its hydrocarbon division with Woodside Petroleum, Australia’s top independent gas producing company.

BHP announced on Monday that a merger with Australia’s Woodside was one of the options being considered as part of a strategic review of its oil and gas business. This merger agreement could also result in possible Perth-based energy group’s shares to be distributed among BHP shareholders. 

Currently, analysts estimate that BHP oil and gas sector is worth $13 billion and Woodside is estimated at a market value of $15 billion. 

“While discussions between the parties are currently progressing, no agreement has been reached on any such transaction,” said BHP. “A further announcement will be made as and when appropriate.”

The choice to discuss and review BHP’s petroleum business comes as more companies are beginning to brainstorm and convert to ‘green’ and environmentally friendly methods. Fewer fossil fuels are being used intra-industry as well as big mining companies are starting to seriously think about the effects of climate change, and how they can electrify their operations.

They plan to merge all of their oil and gas assets, including oil and gas fields in Australia, Algeria, and the Gulf of Mexico to focus more on producing metals that can help the environmentally friendly movement. 

BHP promised around this time last year that they would sell off their remaining coal mines by this time next year, as part of their future plan to be a low carbon company. Only 12% of BHP’s revenues come from fossil fuels after they cut their oil and gas production in half from the sale of its US shale business in 2018. The company’s oil and gas production fell from 235m barrels in 2013 to about 103m in the 12 months to June. 

Saul Kavonic, an analyst at Credit Suisse Group, believes that “petroleum no longer fits with BHP’s portfolio or future-facing strategy.” 

“After waiting too long to divest thermal coal, and now having to resort to selling cents on the dollar, BHP should know it’s better to exit petroleum sooner rather than later,” said Saul Kavonic. 

Although they plan to get rid of their remaining coal mines, BHP will remain to pursue a venture that produces coking coal. This coal is used in the process of making steel and could eventually help steelmakers cut carbon emissions and adopt cleaner processes. 

However, some shareholders are criticizing the company for continuing with investments in the oil and gas division, since they are directly linked to the climate crisis and the rising of carbon in the atmosphere. 

At the company’s shareholder meeting last October, the BHP chief executive, Mike Henry, said the company saw oil and gas as “something to invest in for the short to medium term”.

Ken MacKenzie, the chair, said even though BHP accepts “the science around climate change” he believes that “the reality is that all current plausible scenarios show that fossil fuels will be part of the energy mix for decades.” 

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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