A merger commitment deed agreed to by Woodside Petroleum and BHP Group is set to create a global top ten independent energy company, and become the largest publicly-listed energy company in Australia.
BHP’s oil and gas portfolio will merge with Woodside, with 52 per cent ownership to existing Woodside shareholders and 42 per cent distributed to BHP shareholders.
The combined company will have a high margin oil portfolio and long life LNG assets, and is expected to deliver strong profile growth, with a plan to achieve targeted Scarborough financial investment decision (FID) in the 2021 calendar year and estimated synergies of more than US$400 million per annum.
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 one operating assets and low-cost and low-carbon growth opportunities.
“The proposed transaction de-risks and supports Scarborough financial investment decision 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, “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.”
Woodside and BHP have developed a plan to target a final investment decision (FID) for Scarborough (Australia) by the end of the 2021 calendar year, prior to the proposed completion date for the merger.
As part of this plan, Woodside and BHP have agreed an option for BHP to sell its 26.5 per cent interest in the Scarborough Joint Venture to Woodside and its 50 per cent interest in the Thebe and Jupiter joint ventures to Woodside if the Scarborough Joint Venture takes a FID by 15 December 2021.
The option is exercisable by BHP in the second half of the 2022 calendar year and if exercised, consideration of US$1 billion is payable to BHP with adjustment from an effective date of 1 July 2021.
An additional US$100 million is payable contingent upon a future FID for a Thebe development.
Subject to due diligence, the merger is expected to be completed in the second quarter of the 2022 calendar year with an effective date of 1 July 2021.