Monsters of Rock: Woodside seals the deal on BHP mega merger

Woodside AGM sets scene for marriage with BHP Petroleum as merger vote passes with ease
Company records big protest vote against its climate action report
Woodside CEO Meg O’Neill remains hopeful on Browse development despite decades of roadblocks

Graced by protestors on entering the Perth Convention and Exhibition Centre and facing a more than three hour grilling on their company’s ESG credentials, Woodside (ASX:WPL) chairman Richard Goyder and CEO Meg O’Neill came out of the oil and gas producer’s AGM today weary but with the main prize secure.

Shareholders overwhelmingly voted to back the firm’s super merger with BHP’s (ASX:BHP) globally significant petroleum division and support its name change to Woodside Energy.

The moniker sets Woodside up for its new life as a global Top 10 producer of oil and gas with a rough production profile of in and around 200 million barrels of oil equivalent.

It will put an even larger target on the back of the company, which more than any other in Australia is the focus of climate activist groups and investors due to its plan to open major new gas reserves in WA’s north.

The final hurdle for Woodside’s proposed merger with the global mining giant’s energy business, a shareholder vote to approve the deal was resounding with more than 98% backing the deal.

That will see around 914.7 million Woodside shares distributed to BHP shareholders at a ratio of one Woodside unit for every ~5.53 shares held by BHP owners, with Woodside holders emerging with 52% of the combined entity.

It had appeared a foregone conclusion heading into the vote.

None of the major proxy advisors objected and even early critics of the tie-up had turned positive in recent weeks.

At current oil and gas prices, analysts think the addition of BHP’s assets in the Gulf of Mexico will be a money spinner, with Woodside’s enlarged scale and lower gearing enabling it to fund major developments at Sangomar in Senegal and Scarborough off the WA coast before selldowns.

The deal was backed in a report by independent expert KPMG leading up to the vote, and looks far more attractive now than it did when the deal was first announced in August last year.

A surge in oil and LNG prices, lifted by high demand over the northern winter and Russia’s war with Ukraine, has seen Woodside shares rise from $20.29 when the merger was revealed to $29.89 today.

The deal is expected to clear on June 1.

Woodside Petroleum (ASX:WPL) & BHP (ASX:BHP) share price today:

Woodside hit with big protest vote on climate report

It is not just activists and traditional owners at Woodside’s North West operations asking questions about environmental damage caused by the energy firm.

A vote on the approval of Woodside’s climate action report saw more than 45% of shareholders in the poll record a no vote after proxy advisors Glass Lewis and ISS recommended their clients knock it back.

Goyder admitted the votes were likely to reveal a significant amount of disapproval in his opening address.

“We recognise that a significant portion of shareholders who have already voted on this item have not supported the report,” he said.

“Woodside stands by the quality of both the climate report and Woodside’s overall climate strategy and is confident of our ongoing role to responsibly provide our customers with the energy they need in a lower carbon world.

“We will continue incorporating feedback from our shareholders on this important issue as we further develop and evolve our approach.”

Opportunity to move Browse forward

While Russia’s invasion of Ukraine has supported higher LNG prices in the short term, Woodside boss Meg O’Neill says it will provide support for the company to continue expanding despite its stated alignment with the Paris Agreement.

Woodside is a believer in the idea LNG will continue to be sought after by Asian markets into the middle of this century as a lower carbon alternative to coal and diesel.

Efforts to excommunicate Russia from the global economic community have shown the role energy security could play in supporting demand for oil and gas production from places like Australia into the future.

That includes the potential development of Browse, a large field Woodside owns the biggest stake and operating rights in which has sat undeveloped since its discovery in the 1970s due to its remoteness and more recently high CO2 content.

“So Browse of course is a very significant asset, it’s three different gas fields. It is the largest undeveloped gas resource in Australia and that’s why we have been working very hard at commercialising it in the 50 years since it was discovered,” O’Neill said.

“It is a challenging resource because it is a long way from any existing infrastructure. The concept that we have today which would bring Browse gas to the Karratha gas plant … we think is the right concept.

“We have oilage opening up already in the Karratha Gas Plant, there are three priorities for Woodside to progress Browse.

“First off we need to address the carbon challenge as Richard mentioned, with about 10% CO2 in the reservoir, we recognise in today’s decarbonising world we need to solve that problem first and the team’s looking at CCS.”

O’Neill said Woodside needs to secure environmental approvals and complete complex commercial negotiations with its partners in both Browse and the NWS JV.

“But I think the opportunity is ripe for Browse,” she said.

“I think we have good alignment within the venture and when you put it in the context of Russia’s invasion of Ukraine and the world’s need for secure energy from safe places like Australia, I think we do have an opportunity to move Browse forward.”

Its new US$12 billion Scarborough development, which has seen off legal challenges to secure environmental approval from State and Commonwealth Governments is expected to be operational by 2026.