BHP has confirmed it is in discussions to merge its petroleum business with Woodside Energy.
The company has signalled the deal would also involve a distribution of Woodside shares to BHP shareholders.
“We confirm that we have been in discussions with Woodside,” BHP stated.
“While discussions between the parties are currently progressing, no agreement has been reached on any such transaction.”
According to BHP, the company is undertaking a strategic review to reassess the position of its petroleum business.
Woodside will become the largest oil and gas company in Australia if it takes control of BHP’s assets.
BHP’s petroleum portfolio includes operations in the Gulf of Mexico and Australia’s Bass Strait.
It also operates in the North West Shelf, Pyrenees and Macedon regions of Western Australia.
The company has owned oil and gas assets since the 1960s, with the company producing crude oil and condensate, gas and natural gas liquids.
“Woodside continuously reviews the composition of its asset portfolio and opportunities to create and deliver value for shareholders,” Woodside stated in an ASX release about its discussions with BHP.
“Woodside is engaged in discussions with BHP regarding a potential merger involving BHP’s entire petroleum business through a distribution of Woodside shares to BHP shareholders.”
Woodside recorded a 15 per cent increase in sales revenue at $US1.28 billion ($1.7 billion) in the second quarter of 2021.
However, production was down 4 per cent to 22.7 million barrels of oil equivalent.
“Revenue from oil sales during the period was higher than the first quarter supported by an above-market average realised price of $US75 per barrel, while revenue from LNG (liquid natural gas) sales climbed 14 per cent,” Woodside acting chief executive officer Meg O’Neill said in July.
“Lower oil production due to scheduled maintenance activities and adverse weather impacts was partly offset by a strong quarterly performance at Pluto, which achieved 97 per cent reliability.”
BHP produced 102.8 million barrels of oil equivalent in the 2020-21 financial year, with a guidance of 99 and 106 million barrels of oil equivalent in the 2022 financial year.
Woodside’s share price was down by 1.94 per cent to $21.76 per share on the ASX at the time of writing, while BHP’s was up by 1.69 per cent to $53.70 per share.