Australian Oil Producer Woodside to Complete Major $41 Billion Merger

An undated handout photo shows Australian resources giant Woodside's Cossack Pioneer oil production facility in the North West Shelf gas project in Western Australia. -/AFP via Getty Images

A merger between two of Australia’s largest oil and gas producers is expected to be complete by May 19.

At the annual general meeting, Woodside will ask its shareholders to give the green light to the $41 billion (US$28.5 billion) all-stock merger with the petroleum business of BHP, a giant in the mining and metal industry.

If approved, the merger would double Woodside’s production capacity and transform it from a local liquefied natural gas (LNG) manufacturer to a global oil and gas company.

In addition, Woodside would become one of the top 10 independent oil companies in the world outside the seven “super majors.”

At the same time, the company’s market cap would jump to around $63 billion, surpassing Fortescue Metals to become the eighth-most valuable company on the Australian stock exchange.

No organised opposition to the merger has popped up so far, and all that is needed for the deal to be finalised is consent from Woodside’s shareholders—the final expected date of completion is June 1.

“Should the merger proceed, the new Woodside would be very well positioned,” Woodside CEO Meg O'Neill said in comments obtained by AAP.

The CEO noted that the new oil company would have “the scale, the geographic and product diversity, and the balance sheet strength” to supply the energy needs of the world.

A BHP sign adorns the side of their headquarters in Melbourne, Australia, on Feb. 19, 2019. William West/AFP via Getty Images

On the BHP side, the company shareholders do not need to approve the merger and will receive one Woodside share for every 5.5340 BHP shares they own. Together, BHP shareholders will hold a 48 percent stake in the new oil company.

BHP’s oil and gas assets span four continents, including oil wells in the Australian states of Victoria and Western Australia, the Gulf of Mexico, as well as exploration rights in Barbados, Canada, Mexico, Trinidad and Tobago, the Gulf of Mexico, and Egypt.

After the merger, production capacity of oil in the new merged entity will rise by approximately 207 million barrels of oil compared to the 91.1 million barrels produced a year earlier.

Furthermore, Woodside said the merger would optimise its corporate processes and systems, resulting in over US$400 million in cost-efficiencies each year. It will also brings down the company’s gearing from 22 to 8 percent.

Management will also look at additional listings on the London and New York stock exchanges.