Woodside Petroleum’s agreed all-stock merger with fellow Australian BHP’s petroleum division is in the best interest of its shareholders, according to independent expert KPMG.

"BHP Petroleum's asset base provides Woodside with immediate access to significant development and growth opportunities, within a timeframe that is unlikely to otherwise have been available to Woodside as a standalone entity," said KPMG.

On completion of the merger, which was announced on 22 November last year, the combined company is expected to have a high margin oil portfolio, long-life liquefied natural gas assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.
The merged entity’s assets will include 100% of the Scarborough gas project in Australia plus 51% equity of Pluto Train 2, which will receive feedstock from Scarborough. The merged entity will also hold a majority operated 82% stake in the Sangomar field development offshore Senegal, for which Modec is constructing the floating production, storage and offloading vessel.

The companies’ combined resources as of end-2021 stood at 3.609 billion barrels of oil equivalent of proven plus probable (2P) developed and undeveloped reserves, and 8.373 billion boe of best estimate contingent (2C) resources.

Woodside on Friday published an explanatory memorandum and notice of meeting for its shareholder vote. The company also released KPMG’s Independent Expert’s Report prepared for its shareholders, which concluded that the merger is in the best interests of Woodside’s shareholders, in the absence of a superior proposal.

The company added it expects to achieve its annual cost synergies of more than $400 million by early 2024 following the merger - including cutting executive jobs and other staff losses - but said cautioned there would be one-off costs of $500 million to $600 million en route to those future cost savings.

Crucial vote next month

Woodside shareholders are due to vote on 19 May at the company’s Annual General Meeting whether to approve the touted merger with compatriot BHP’s oil and gas portfolio. Woodside has unanimously recommended its shareholders vote in favour of the deal.

BHP noted that completion of the deal is on track and targeted for 1 June, subject to satisfaction of conditions precedent including approval by Woodside shareholders. The merger will have an effective date of 1 July 2021.

Based on Woodside’s share price of US$25.55 on 6 April 2022, the implied value of BHP Petroleum is US$23.4 billion.

At this valuation, which is subject to change, the in specie dividend would be US$4.62 with US$1.98 of franking credits being distributed per BHP share.

Woodside will retain its primary listing on the Australian Stock Exchange and is seeking a standard listing in London and a sponsored Level III ADR programme on the New York Stock Exchange from completion of the merger.

Woodside expects in mid-April to publish its UK prospectus and US registration statement under the US Securities Act of 1933.