Miner BHP moves toward oil and gas exit amid journey to green future: reaction
The mining group, which is listed on stock exchanges in both London and Sydney, told shareholders that it has started a strategic review to reassess the position of the petroleum business within its portfolio.
It noted that a “number of options are being evaluated”, including a potential merger with Woodside Petroleum.
The FTSE 100 group added that any merger deal for its oil and gas assets with Woodside could see shares in the Australian business distributed to BHP investors.
In a statement to investors, BHP said: “We confirm that we have been in discussions with Woodside. While discussions between the parties are currently progressing, no agreement has been reached on any such transaction.
“A further announcement will be made as and when appropriate.”
Andrew Harwood, research director at Edinburgh-founded consultancy Wood Mackenzie, said: “A merger would create a new international ‘super independent’ built for scale and resilience, with a long-term focus on LNG [liquefied natural gas] but exposure in the medium term to high-margin, deepwater oil.
“An exit from its petroleum business has been long rumoured for BHP, and as it faces rising pressure from the energy transition, it would seem that the mining conglomerate has determined now to be the optimum moment to achieve maximum value.
“The terms of any merger announcement will be closely examined to see exactly what value has been achieved.
“Following hot on the heels of Santos’ proposed merger with Oil Search, a Woodside-BHP combination is further evidence of oil and gas operators seeking solace from longer term uncertainty through scale, and doubling down on long-term, cash-generative, resilient resource themes.”
He added: “For the wider Australia exploration and production sector, a second merger proposal will give Australia another homegrown heavyweight that can compete on the international scene.
“The inevitable optimisation of enlarged portfolios will also provide opportunities for other players looking to squeeze value from assets deemed surplus to requirements by these newer and bigger entities.”
Analysts at Bernstein have estimated that the BHP petroleum division could be valued at some $13 billion (£9.4bn).
The potential exit from oil and gas comes amid increasing pressure on large mining companies to reduce their exposure to fossil fuels and align more closely with the ambitions of the Paris climate agreement.
Last year, BHP also said it planned to reduce the size of its coal operation, selling its stake in a joint venture which operated two coking coal mines.
Mike Henry, who took over as chief executive in 2020, has said the group will expand further into commodities which can be used for low-carbon power generation and look further towards higher quality raw materials.
In February, the firm reported profit from operations of $9.8bn for the six months to the end of December, up 17 per cent on a year earlier.
Henry said at the time: “BHP has delivered a strong set of results for the first half of the 2021 financial year.”
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