Woodside is planning to acquire the BHP petroleum business by buying the company and effectively issuing new Woodside shares to BHP shareholders via BHP.
ACCC approves Woodside-BHP merger
The Australian Competition & Consumer Commission will not oppose the Woodside proposed acquisition.
It was noted by the ACCC that Woodside and BHP Petroleum supply domestic natural gas in Western Australia, and export liquefied natural gas (LNG), liquefied petroleum gas (LPG), condensate and oil from Australia.
It was the supply of natural gas into WA that the ACCC focused on. The customers are either offshore or in areas where Woodside and BHP do not overlap.
The ACCC Chair Rod Sims said:
“We found that post acquisition, Woodside would continue to face competition from a range of suppliers of domestic gas, including major producers Chevron and Santos Ltd (ASX: STO), and from several other smaller suppliers including Shell and ExxonMobil. Woodside’s share of domestic gas after the acquisition will be approximately 20%.
“In Western Australia, gas exporters are required to reserve the equivalent of 15% of their export production for the domestic market, ensuring that domestic gas will continue to be available from Woodside and BHP Petroleum’s export assets, and from a range of other competitors.”
The ACCC also believes that Woodside would be unlikely to have an incentive to reduce supply of natural gas from BHP Petroleum’s majority-owned, domestic-only site at Macedon. This is because gas from Macedon can only be supplied to the Western Australian domestic market.
On top of that, the ACCC said the number of competing suppliers in that market are also likely to constrain Woodside from constraining gas supply.
Summary thoughts on Woodside’s merger with BHP
There are a lot of benefits to the merger including huge potential cost savings and better financial strength in many ways, including the cashflow and the balance sheet. It’s a positive for the Woodside share price in my opinion.
I think oil investors will love the deal, but I’m not looking to add it to my own portfolio. There are other ASX dividend shares I’ve got my eyes on.