Both parties confirmed yesterday after weeks of media speculation that yes, they had been in talks, but the proposed all-scrip deal has not been announced.
Groups including 350 Perth, The Conservation Council of Western Australia and others were joined by around 50 others outside the BHP building, demanding the company wind down its petroleum assets, rather than sell them down to Woodside, a company that they view as far less environmentally responsible.
BHP's petroleum assets include several large projects in the Gulf of Mexico, Trinidad and Tobago, the Bass Strait, as well as partner interests in several projects offshore Western Australia, including the proposed Scarborough development, which it shares with Woodside in a 73.5-26.5 split.
BHP's executive is facing growing shareholder pressure to exit petroleum, according to JPMorgan Metals & Mining head Lyndon Fagan, given it is not the main source of earnings, their assets would fetch a good price off the back of strong commodity prices, and due to ESG concerns.
Petroleum represents around 10% of total revenue.
350 campaigner Anthony Collins acknowledged that BHP shareholders wanted to get out of petroleum over similar concerns around climate and social license that sees the same protestors turn out in the first place.
"What we want is for BHP to manage down their assets and their fossil fuel projects, rather than just moving the problem elsewhere," he told Energy News, while admitting it would not make much business or commercial sense.
"Instead they have sold them to a company that has clearly demonstrated that it has no interest in anything other than producing as much oil and gas as possible," he said.
JPMorgan said there is ‘some logic' to the merger, noting for Woodside's part it would give the company scale and clean up ownership of the North West Shelf and Scarborough and would greatly diversify the company's product and asset base.
The protestors argued that BHP should keep its interest in the Scarborough development and in turn act as a roadblock to stop the project from going ahead, which given long term tolling disagreements that prevented the planned sanction through 2019, you could argue it had already done.
Woodside is expected to make a final investment decision on the Scarborough project in the second half of the year, with first gas expected in 2026.
The Conservation Council of Western Australia argues that the emissions from the project would make it impossible for the Western Australian government to achieve its net-zero emissions by 2050 aspiration.
Commenting on the proposed deal, RBC Capital market analyst Gordon Ramsay wrote yesterday that the firm has "yet to see justification of [BHP] giving away cash-generating, high-quality petroleum assets below forward curve or consensus prices".
"Furthermore, with BHP trading at a premium to peers, we question if a demerged Petroleum business would obtain a lower multiple than where it is valued in the market currently".
RBC values BHP's Petroleum assets at around US$14.5 billion at a long-run US$60 per barrel oil price.
BHP only last month approved capex spend of close to A$1 billion for Trion and Shenzi North and also a countercyclical acquisition in 2021, Ramsay noted.
"So why would BPH give the GOM away at a discount to complete a Woodside transaction?"
Ramsay wrote that fiscal risk and shifting stakeholder sentiment around petroleum could be a factor.
"Clearly in recent months, following a new legal and board pressure (Shell, Exxon) and with sharply higher carbon prices BHP may be looking to the future," he wrote.
"Petroleum is a notably ESG negative exposure within a rapidly-greening and, in parts, decarbonisation enabling mining industry."
