Australian independent Woodside Petroleum will merge with the petroleum arm of Australian-UK resources firm BHP in an all-share deal, which will see Woodside shareholders owning 52pc and BHP investors owning the remaining in a firm that will be Australia's largest upstream group with production of around 550,000 b/d of oil equivalent (boe).
The merger comes a day after the two firms said they were in talks that would see BHP exit the oil and gas business after more than 50 years and focus on its mining activities that stretch from iron ore and coking coal to copper and nickel mining. BHP's petroleum assets have been valued at $14bn-18bn.
The Woodside-BHP tie-up follows another merger between two of Australia's top five producers Santos and Oil Search, which will have a combined output of around of 325,000 boe/d.
The merger of Woodside and BHP's petroleum arm could lead to cost savings of more than $400mn/yr pre-tax on a 100pc basis combining corporate processes and systems, and spending on future production projects and exploration, Woodside said.
The combined production of the merged company will be 46pc LNG, 29pc oil and condensate and 25pc domestic gas and liquids based on current net production of both businesses, Woodside said. Production assets will combine interests in three LNG projects offshore Western Australia (WA), domestic gas in eastern Australia and oil projects in the US Gulf of Mexico, and Trinidad and Tobago. More than 59pc of the combined proven and probable reserves will be natural gas and 41pc liquids.
The deal is expected to be completed in the April-June quarter of 2022.
Woodside and BHP are already partners in the 13 trillion ft³ (368bn m³) greater Scarborough fields in the Carnarvon basin offshore WA, which they plan to make a final investment decision (FID) on by the end of this year for the gas to be used as feedstock for a second 5mn t/yr train at the 4.3mn t/yr Pluto LNG venture offshore WA.
As part of this plan, Woodside and BHP have agreed an option for BHP to sell its 26.5pc interest in the Scarborough joint venture to Woodside and its 50pc interest in the Thebe and Jupiter joint ventures to Woodside if the Scarborough project takes an FID by 15 December 2021, Woodside said.
The option is exercisable by BHP in the second half of the 2022 calendar year and if exercised, consideration of $1bn is payable to BHP with adjustment from an effective date of 1 July 2021. An additional $100mn is payable contingent upon a future FID for a Thebe development, Woodside said. Thebe is part of the greater Scarborough field.
Woodside and BHP are also partners in the 16.3mn t/yr North West Shelf (NWS) LNG venture offshore WA, the country's biggest LNG plant, where they each own a 16.6pc stake. Some of the Scarborough gas is also earmarked to provide backfill to the NWS LNG plant.
Woodside separately said it has appointed Meg O'Neill as chief executive officer (CEO) of the firm, following her role as acting CEO since the departure of former head Peter Coleman.
