Woodside will take all of the integrated miner's petroleum assets, which skew to oil over the Perth company's preferred commodity gas. The merger, recommended by both boards, is expected to complete in the second quarter of 2022.
The new company will have production of around 200 million barrels of oil equivalent per year, based on the financial 2021 output of each. The portfolio can be broken down to 46% LNG, 29% oil and condensate and a large domestic gas footprint of 25%. Its 2P reserves will stand at 2 billion boe; 59% gas and 41% liquids.
The new assets give Woodside both more existing production, from assets in the US Gulf of Mexico assets and more growth options in the same area. The only new project on Woodside's horizon has been the offshore Western Australia gas field Scarborough.
Woodside shareholders keep 52% of their company and via the issue of its own bodyweight in stock BHP shareholders take 48%. The company will become a top10 independent global oil and gas producer, overtaking European majors like Repsol.
It will have a global top 10 LNG position and a high margin oil portfolio as Woodside takes BHP's oil assets on both sides of the Gulf of Mexico, giving it ready cash it can plough back into development.
The two said on a pro-forma basis the combined entity will have a large earnings base with revenue of more than US$8 billion and EBITDA of US$4.7 billion, as well as operating cash flows of more than US$3 billion. Gearing will be 12%.
BHP will sell its Scarborough stake and its 50% stake in the Thebe and Jupiter fields to Woodside for US$1 billion provided FID comes before December 15. BHP can exercise its option in the first half of 2022. It gains an additional $100 million if Thebe is sanctioned.
Also mentioned as a longer term Australian growth option in today's release was Browse, the distant field whose sanction has been delayed three times in its latest development iteration and is widely seen as dead in the water by analysts and industry watchers.
A larger stake in the North West Shelf LNG facility, one third over the current one sixth, might give Woodside a little more leverage if it ever goes back to NWS partner discussions over backfill of the facility.
The joint release also stated Woodside expects synergies of "more than" US$400 million per annum, on a 100%, pre-tax basis. This will largely be around corporate processes and systems and leveraging combined capabilities.
"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," Woodside CEO Meg 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 CEO Mike Henry said that "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."
Woodside will remain listed on the ASX with listings on additional exchanges being considered, it said. BHP announced it will end its London listing after 20 years.
BHP Petroleum head, Irishwoman Geraldine Slattery, was widely tipped to take over from O'Neill as chief of the merged entity. What role she will have in the new business is not known, but she may become part of the $400 million per annum worth of corporate and other synergies announced today.
O'Neill, meanwhile, was named interim CEO in April after her boss' unexpected early departure and has overseen staff layoffs and other changes at the company.
The US-born, former ExxonMobil woman has been rewarded for patience as she now oversees a company twice the size of what Peter Coleman ran for a decade.
More to come.
