BHP is in talks to sell its petroleum business to Australia’s top gas producer Woodside Petroleum in exchange for shares, the companies confirmed.
The world’s biggest miner also said it had begun a strategic review of its oil and gas business — made up of assets in Australia, the Gulf of Mexico, Trinidad and Tobago, and Algeria – that analysts value at between $10 billion and $17 billion.
BHP has been facing calls to detail how and when it will exit fossil fuels. It has already sold some coal assets.
For Woodside, an acquisition of BHP’s oil and gas assets would roughly double its annual underlying earnings to around $8 billion. For BHP, a petroleum exit would strip out just 5 percent of underlying earnings.
“A Think Big Woodside, merged with BHP Petroleum, would present a globally significant LNG weighted company, with a diversity of low risk geographic exposure and growth options,” Credit Suisse analyst Saul Kavonic said in a note.
BHP’s assets would double Woodside’s annual output to 200 million barrels of oil equivalent. That would be nearly twice the combined volume produced by rivals Santos and Oil Search, which are set to merge.
A deal would remove the main obstacle to Woodside’s biggest growth project, the $12 billion Scarborough / Pluto Train 2 development, which BHP has stalled amid protracted talks over a gas processing fee.
CLSA analyst Daniel Butcher said BHP’s Gulf of Mexico assets would open up new growth avenues, relieving Woodside of its narrow focus on West Australia, where it is totally dependent on the Scarborough/Pluto Train 2 project for growth.