BHP Group (NYSE:BHP) has agreed to sell its petrol business to Australia’s Woodside Petroleum in a $28 billion U.S. deal that will create a top 10 independent oil and gas producer.
BHP's exit from petroleum, which made up just 5% of its annual earnings, speeds up its exit from fossil fuels amid pressure from environmentally-conscious investors. BHP said in a news release that it remains committed to metallurgical coal used in steel making.
BHP shareholders will be paid in Woodside stock, giving BHP investors a 48% stake in the merged company. The deal values BHP's petroleum arm at about $13 billion U.S., roughly in the middle of analysts' valuations of between $10 billion U.S. and $17 billion U.S.
For Woodside, the deal is transformational, doubling its oil output, expanding its footprint in liquefied natural gas, removing the main obstacle to its $12 billion U.S. Scarborough gas project, and giving it near-term growth options in the lucrative Gulf of Mexico.
The two companies said the merger would generate annual savings of more than $400 million U.S. starting in 2023, the year after the deal is expected to close. Woodside plans to put the share issue to a vote in the second quarter of 2022.
