Woodside Petroleum Limited (ASX: WPL) shares are in focus on talks that it may be about to buy the oil business of BHP Group Ltd (ASX: BHP).
What’s happened between Woodside and BHP?
Nothing has happened yet. But after some media speculation, BHP has come out and addressed the issue.
BHP said it noted the recent press speculation regarding its petroleum business. It regularly reviews its portfolio of assets to find opportunities to maximise long-term shareholder value.
So what’s the potential transaction?
BHP confirmed it had initiated a strategic review of its petroleum business to re-assess its position and long-term strategic fit in the BHP portfolio. A number of options are being evaluated.
The resources giant acknowledged it’s in talks with Woodside and said that one option is a potential merger of the petroleum business with Woodside Petroleum and a distribution of Woodside shares to BHP shareholders.
However, while discussions between the parties are currently progressing, no agreement has been reached on any such transaction.
Just to explain the deal a little more, the Australian Financial Review reported a potential deal would see the oil giant offer Woodside shares to BHP for the petroleum business, and those shares would be given to BHP’s shareholders immediately to ensure there was no change of control as part of the transaction.
Would this be a good deal?
It would be a very interesting deal. Scale can increase profitability for resource businesses, so a bigger Woodside business could be good for shareholders, if it gets a good deal. Issuing more shares is easy, getting the right price is important.
For BHP, it would give it a good opportunity to exit one of the ‘fossil fuels’ that environmental investors want it to exit.
I’d prefer to be a BHP shareholder in this deal considering the good recovery of the oil price since early 2020 and the long-term trajectory of oil demand.
But due to the inconsistency of resource profits, there are other ASX dividend shares I’ve got my eyes on right now.
