Woodside and BHP announced in August that Woodside would take all of the integrated miner's petroleum assets in a 52-48 split, with the former's shareholders taking the larger portion. 

Petroleum revenue for FY2021 decreased by US$100 million to $3.9 billion due to lower production offset by higher average realised prices. Underlying petroleum EBITDA increased by $100 million to $2.3 billion due to a combination of stronger oil prices but lower production. 

The merged Woodside and BHP Petroleum will have production of around 200 million barrels of oil equivalent per year, based on the financial 2021 output of each and turn it into a Top 10 independent producer, overtaking European mergers like Repsol, however it still needs the approval of shareholders. 

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 said controllable cash costs decreased by $43 million thanks to lower maintenance activity at its Australian assets due to COVID-19 restrictions and lower exploration seismic activity, but was offset by higher workover activity at Atlantis in the Gulf of Mexico, restructuring costs and increased development activity in Mexico due to Trion in Mexico progressing into the pre-feasibility stage. 

Petroleum unit costs increased by 11% to $10.83/boe, compared to $9.74/boe in 2020, as a result of lower volumes and the rising US dollar, but was offset due to a reduction in price-linked costs.   

The company has delivery commitments of around 1.1 billion metric cubic feet of gas and LNG through 2031, and 9MMbbls of crude oil commitment through to 2024. BHP said it had sufficient proved reserves and production capacity to meet the commitments. 

Meanwhile it has $41 million worth of contracted pipeline capacity through to FY2025.

BHP's total FY2021 production came to 102.8MMboe.

Production is expected to be between 99 and 106MMboe in FY2022, thanks to a full year of owning the additional 28% in the Shenzi development in the US Gulf of Mexico it acquired from Hess in November last year. 

Shenzi is expected to see a boost in production from infill wells, it is also expected to see an increase in production from Ruby, in Trinidad and Tobago, following first production in May, offset by natural field decline across the portfolio. 

In FY2021, petroleum capex came to $994 million - $197 million of which was spent in Australia on Scarborough gas field development; Greater Western Flank 3 and Lambert Deep subsea tieback development in the North West Shelf; Karratha Gas Plant maintenance work and West Barracouta subsea tie back development in the Bass Strait. 

Gulf of Mexico capex came to $599 million, which was spent across Atlantis, Mad Dog and Shenzi, while $152 million was spent in Trinidad and Tobago. 

Unit costs in FY2022 are expected to be around US$11-12 per barrel, as a result of an increase in exchange rate and the oil price. BHP noted it expects unit costs to be kept at around US$13/bbl in the medium term, based on an exchange rate of A/US$0.78, due to natural field decline.

Petroleum capital and exploration spending commitments are expected to total US$2.3 billion in FY 2022. The outlook does not take the proposed merger with Woodside into consideration.

On the merger, BHP said it continues to assess the full financial reporting impacts of the takeover, saying the preliminary terms of the merger did not provide an indicator of impairment for its petroleum assets as of  June 30 2021.

The merger is expected to be completed in the first half of next year.

Once complete BHP would derecognise the carrying value of its petroleum assets, which as of June 30 included property plant and equipment and closure and rehabilitation provisions of around $11.9 billion and $3.9 billion respectively. 

Decarbonisation and the turning of attention to ‘future facing commodities' was at the forefront of BHP chief Mike Henry's messaging in today's report, but he also promoted the partnership that shareholders would benefit from once its global petroleum business merged with Woodside. 

"The combination of a clear strategic outlook, increasing operational excellence and greater exposure to future facing commodities is expected to enable us to deliver positive returns and grow more value for all of our stakeholders in the years ahead," he said. 

BHP also released its Climate Transition Action Plan today, which maps out detailed plans to reach net zero in its operations by 2050.

It also expanded on its scope 3 emissions targets and is now targeting net zero operational greenhouse gas emissions of its direct suppliers and net zero from the shipping of its products.

Australasian Centre for Corporate Responsibility director of climate & environment Dan Gocher called BHP's US$65 million commitment into steel decarbonisation research as "nothing short of pathetic".

"BHP can and must do more to reduce the emissions from steelmaking," he said.

"BHP must use its unique position of leadership to push for more ambitious emissions reductions before 2030."  

ACCR has peppered oil and gas companies with shareholder resolutions urging them to commit to more ambitious emissions reduction targets with varying degrees of success.