BHP BHP Group Limited

Annexure A

Project Endeavour

Merger Explanatory Memorandum

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Disclaimer and important notices

General

This Merger Explanatory Memorandum is Annexure A to the notice of annual general meeting of Woodside Shareholders (“Notice of Meeting”) to be held at 10.00am (AWST) on 19 May 2022 (“Meeting”). You should read the Notice of Meeting and this Merger Explanatory Memorandum in full before making any decision as to how to vote on item 2 as set out in the Notice of Meeting (“Merger Resolution”).

Purpose of this document

This Merger Explanatory Memorandum has been prepared for Woodside Shareholders in connection with the Merger Resolution. The purpose of this Merger Explanatory Memorandum is to provide Woodside Shareholders with information that the Woodside Board believe to be material to deciding whether or not to approve the Merger Resolution.

This Merger Explanatory Memorandum does not constitute or contain an offer to Woodside Shareholders, or a solicitation of an offer from Woodside Shareholders, in any jurisdiction.

A copy of this Merger Explanatory Memorandum has been provided to ASIC and ASX. Neither ASIC nor ASX, nor their respective officers, take any responsibility for the contents of this Merger Explanatory Memorandum.

Defined terms, times and dates

Capitalised terms used in this Merger Explanatory Memorandum are defined in Section 11. Section 11.3 also sets out some rules of interpretation which apply to this Merger Explanatory Memorandum.

All times and dates referred to in this Merger Explanatory Memorandum are times and dates in Perth, Australia, unless otherwise indicated.

No investment advice

This Merger Explanatory Memorandum has been prepared without reference to the investment objectives, financial and taxation situation or particular needs of any Woodside Shareholder or any other person. The information and recommendations contained in this Merger Explanatory Memorandum do not constitute, and should not be taken as, financial product advice. The Woodside Board encourages you to seek independent financial and taxation advice before making any investment decision and any decision as to whether or not to vote in favour of the Merger Resolution.

This Merger Explanatory Memorandum is important and requires your immediate attention. It should be read in its entirety before making a decision on whether or not to vote in favour of the Merger Resolution. In particular, it is important that you consider the potential risks of the Merger, as set out in Section 8, and the views of the Independent Expert set out in the Independent Expert Report contained in Annexure 3 of this Merger Explanatory Memorandum.

If you are in any doubt as to any action to take in relation to the Merger, you should consult an independent and appropriately licenced and authorised professional adviser.

Industry and market data

This Merger Explanatory Memorandum contains industry, market and competitive position data that is based on industry publications and studies conducted by third parties as well as Woodside’s internal estimates and research. These industry publications and third party studies generally state that the information they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

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While Woodside believes that each of these publications and third party studies is reliable, Woodside has not independently verified the market and industry data obtained from these third party sources. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this Merger Explanatory Memorandum and may differ among third party sources. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described in Section 8 and in the “Forward-looking statements” paragraph below. These and other factors could cause results to differ materially from those expressed in the forecasts or estimates relating to Woodside or BHP Petroleum or in those of independent third parties. While Woodside believes its internal research is reliable, and its selection of industry publications and third party studies and the description of its market and industry are appropriate, neither such research nor these descriptions have been verified by any independent source.

In addition, references to “independent energy company” in this Merger Explanatory Memorandum exclude NOCs, companies with free float less than 60% (for example, LUKOIL, Wintershall Dea and Rosneft), major integrated oil and gas companies (for example, BP, Chevron, Eni, ExxonMobil, Repsol, Shell and Total) and Canadian oil sands companies (for example, Canadian Natural Resources, Cenovus and Suncor).

Forward-looking statements

Some of the statements appearing in this Merger Explanatory Memorandum may be in the nature of forward-looking statements. Forward-looking statements or statements of intent in relation to future events in this Merger Explanatory Memorandum (including in the Independent Expert Report) should not be taken to be forecasts or predictions that those events will occur. Forward-looking statements generally may be identified by the use of forward-looking words such as ‘guidance’, ‘believe’, ‘aim’, ‘expect’, ‘anticipate’, ‘intending’, ‘foreseeing’, ‘likely’, ‘should’, ‘planned’, ‘may’, ‘estimate’, ‘potential’, or other similar words. Similarly, statements that describe the objectives, plans, goals or expectations of Woodside are or may be forward-looking statements. You should be aware that those statements and any assumptions on which they are based are only opinions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industries in which Woodside operate (for example, price fluctuations, actual demand, currency fluctuations, geotechnical factors, drilling and production results, gas commercialisation, development progress, operating results, engineering estimates, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates), as well as general economic conditions, prevailing exchange rates and interest rates and conditions in financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward-looking statement and deviations are both normal and to be expected. If any of the assumptions on which a forward-looking statement is based were to change or be found to be incorrect, this would also likely cause outcomes to be different from the statements made in this Merger Explanatory Memorandum. Investors are strongly cautioned not to place undue reliance on forward-looking statements, particularly in light of the current economic and political climate and the significant volatility, uncertainty and disruption caused by the COVID-19 pandemic and the current conflict between Russia and Ukraine.

None of Woodside nor any of its related bodies corporate, nor any of their respective officers, directors, employees, advisers or representatives (“Beneficiaries”), nor any person named in this Merger Explanatory Memorandum or involved in the preparation of this Merger Explanatory Memorandum, makes any representation or warranty (either express or implied) as to the accuracy or likelihood of fulfilment of any forward-looking statement, or any events or results expressed or implied in any forward-looking statement. Accordingly, you are cautioned not to place undue reliance on those statements.

The forward-looking statements in this Merger Explanatory Memorandum reflect views held only at the date of this Merger Explanatory Memorandum. Subject to any continuing obligations under the ASX Listing Rules or the Corporations Act, Woodside and its related bodies corporate, and their Beneficiaries, disclaim any obligation or undertaking to distribute after the date of this Merger Explanatory Memorandum any updates or revisions to any forward-looking statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any statement is based.

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Responsibility statement

Except as outlined below, the information contained in this Merger Explanatory Memorandum has been prepared by Woodside and is its responsibility alone. Except as outlined below, neither BHP, nor any of its related bodies corporate, nor any of each of their respective officers, directors, employees or advisers, assume any responsibility for the accuracy or completeness of that information.

BHP has prepared and provided the BHP Information and is responsible for that information. Neither Woodside, nor any of its related bodies corporate, nor any of their respective officers, directors, employees or advisers, assume any responsibility for the accuracy or completeness of the BHP Information.

KPMG has prepared the Independent Expert Report (contained in Annexure 3 of this Merger Explanatory Memorandum) and takes responsibility for that report. Neither Woodside, nor any of its related bodies corporate, nor any of their respective officers, directors, employees or advisers, assume any responsibility for the accuracy or completeness of the information contained in the Independent Expert Report, except, in the case of Woodside, in relation to the information which it has provided to the Independent Expert.

Gaffney Cline & Associates has prepared the Independent Technical Specialist Report (included in the Independent Expert Report contained in Annexure 3 of this Merger Explanatory Memorandum) and takes responsibility for that report. Neither Woodside, nor any of its related bodies corporate, nor any of their respective officers, directors, employees or advisers, assume any responsibility for the accuracy or completeness of the information contained in the Independent Technical Specialist Report, except, in the case of Woodside, in relation to the information which it has provided to the Independent Technical Specialist.

Ernst & Young has prepared the Independent Limited Assurance Report (contained in Annexure 1 of this Merger Explanatory Memorandum) and takes responsibility for that report. Neither Woodside, nor any of its related bodies corporate, nor any of their respective officers, directors, employees or advisers, assume any responsibility for the accuracy or completeness of the information contained in the Independent Limited Assurance Report, except, in the case of Woodside, in relation to the information which it has provided to Ernst & Young.

No consenting party has withdrawn their consent to be named before the date of this Merger Explanatory Memorandum.

Foreign jurisdictions

The release, publication or distribution of this Merger Explanatory Memorandum in jurisdictions other than Australia may be restricted by law or regulation in those other jurisdictions and persons outside Australia who come into possession of this Merger Explanatory Memorandum should seek advice on, and observe, any of those restrictions. Any failure to comply with those restrictions may constitute a violation of applicable laws or regulations.

This Merger Explanatory Memorandum has been prepared in accordance with the laws of the Commonwealth of Australia and the information contained in this Merger Explanatory Memorandum may not be the same as that which would have been disclosed if this Merger Explanatory Memorandum had been prepared in accordance with the laws and regulations of a jurisdiction outside Australia.

Financial amounts

All financial amounts in this Merger Explanatory Memorandum are expressed in US currency unless otherwise stated.

Any discrepancies between totals in tables or financial statements, or in calculations, graphs or charts are due to rounding.

All financial and operational information set out in this Merger Explanatory Memorandum is current as at the date of this Merger Explanatory Memorandum, unless otherwise stated.

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Charts, maps and diagrams

Any diagrams, charts, maps, graphs or tables appearing in this Merger Explanatory Memorandum are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in diagrams, charts, maps, graphs and tables is based on information available as at the date of this Merger Explanatory Memorandum.

Privacy

Woodside may collect personal information in the process of implementing the Merger.

The type of information that it may collect about you includes your name, contact details and information on your shareholding in Woodside and the names of persons appointed by you to act as a proxy, attorney or corporate representative at the Meeting as relevant to you. The collection of some of this information is required or authorised by the Corporations Act.

The primary purpose of the collection of personal information is to assist Woodside to conduct the Meeting and implement the Merger. Without this information, Woodside may be hindered in its ability to issue this Merger Explanatory Memorandum, conduct the Meeting, and implement the Merger.

Personal information of the type described above may be disclosed to the Woodside Share Registry, third party service providers (including print and mail service providers and parties otherwise involved in the conduct of the Meeting), authorised securities brokers, professional advisers, related bodies corporate of Woodside, regulatory authorities, and also where disclosure is otherwise required or allowed by law.

Woodside Shareholders who are individuals and the other individuals in respect of whom personal information is collected as outlined above have certain rights to access the personal information collected in relation to them. If you would like to obtain details of information about you held by the Woodside Share Registry in connection with Woodside Shares, please contact the Woodside Share Registry.

Woodside Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at the Meeting should ensure that they inform that individual of the matters outlined above.

Date of Merger Explanatory Memorandum

This Merger Explanatory Memorandum is dated 8 April 2022.

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Letter from the Chairman of Woodside

8 April 2022

Dear Woodside Shareholder,

On behalf of the Directors, I am pleased to provide you with this Merger Explanatory Memorandum, which contains comprehensive information about the proposed Merger of Woodside and BHP’s petroleum business.

Woodside Shareholders are being asked to consider this transformative opportunity and approve the Merger and the associated issue of New Woodside Shares.

This is a significant decision for Woodside’s long-term future.

The case for the proposed Merger is compelling, bringing together the best of both organisations to create a global independent energy company with the scale, diversity and resilience to create value for shareholders and increased ability to navigate the energy transition. It will provide the financial strength to fund planned developments in the near term and investment in new energy opportunities and the Woodside Board strongly expects it to support shareholder returns through the cycle.

We are also expecting to realise pre-tax synergies of more than $400 million per annum.

Background

On 17 August 2021, Woodside and BHP announced they had entered into a Merger Commitment Deed, with an effective date of 1 July 2021, to combine BHP Petroleum assets and Woodside through an all-stock merger. On 22 November 2021, Woodside and BHP signed a binding Share Sale Agreement for the acquisition by Woodside of the entire share capital of BHP Petroleum in exchange for New Woodside Shares. Woodside and BHP also executed an Integration and Transition Services Agreement, providing for the planning of integration activities after Implementation, activities to separate BHP Petroleum and its petroleum business from the BHP Group, and a framework for transition services to be provided by BHP to Woodside after Implementation.

The merger ratio was based on the relative values of the respective oil and gas portfolios of Woodside and BHP Petroleum as at 1 July 2021, whereas accounting standards will record the respective values as at Implementation, which is expected to occur on 1 June 2022. The application of the accounting standards is likely to result in the recognition of goodwill due, in part, to the significant increase in the value of Woodside Shares during this period. Woodside Shareholders are encouraged to consider the section on Merger Consideration and the indicative Merged Group Pro Forma Historical Financial Information set out later in this Merger Explanatory Memorandum and the associated risk factors set out in Section 8.

Independent expert

To assist Woodside Shareholders assess the Merger and consider whether to vote in favour of the Merger Resolution, Woodside appointed KPMG as the Independent Expert to prepare an Independent Expert Report.

KPMG has concluded that the Merger is in the best interests of Woodside Shareholders, in the absence of a superior offer. The Independent Expert Report states that on balance Woodside Shareholders will be better off approving the Merger. A complete copy of the Independent Expert Report is contained in Annexure 3 of this Merger Explanatory Memorandum.

Woodside Board recommendation

After carefully considering all aspects, benefits and risks of the Merger and the Independent Expert Report, the Woodside Board unanimously recommends that Woodside Shareholders vote in favour of the Merger Resolution at the Meeting.

The Woodside Board’s recommendation is made in the absence of a Superior Proposal and subject to the Independent Expert maintaining the conclusion that the Merger is in the best interests of Woodside Shareholders.

Reasons why you may want to vote in favour of or against the Merger

Section 1 sets out a summary of the reasons that shareholders may wish to vote for or against the Merger Resolution. In considering how to vote, shareholders should also be aware that there are a number of risks to consider, both general in nature and those specific to the Merger and the Merged Group. These risks are covered in detail in Section 8.

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How to vote

Your vote on the Merger is important, and I encourage you to attend the Meeting, which will be held at 10.00am (AWST) on 19 May 2022 at the Perth Convention & Exhibition Centre, 21 Mounts Bay Road, Perth, Western Australia or online at web.lumiagm.com/397447934.

Information on how to vote is set out in the Notice of Meeting.

Further information

We encourage you to consider the information set out in this Merger Explanatory Memorandum, including the Independent Expert Report, both of which set out key considerations for Woodside Shareholders in deciding how to vote.

You are encouraged to seek independent financial, legal and taxation advice before making any investment decision in relation to your shares.

You can also call the Woodside Shareholder information line on 1300 631 206 (within Australia) or +61 3 9415 4393 (outside Australia) or visit the Woodside website at www.woodside.com.au.

Conclusion

The Woodside Board considers that the Merged Group will have a portfolio of complementary, high-margin oil and long-life conventional gas assets in predominantly OECD countries, expected to generate the financial strength and resilience to help Woodside to supply the energy needed for global growth and development through the energy transition.

To all our shareholders, we appreciate your ongoing support. I am pleased to present this opportunity to you on behalf of the Woodside Board and believe that it has the potential to deliver sustainable and long-term financial returns to you.

The Woodside Board remains focused on delivering value to all our stakeholders and building a stronger, more resilient, and diversified company.

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1.1 Overview

Set out below are some of the reasons why the Woodside Board unanimously recommends that Woodside Shareholders vote in favour of the Merger Resolution at the Meeting. Also set out below are some of the reasons why you may decide to vote against the Merger Resolution, notwithstanding the unanimous recommendation of the Woodside Board and that the Independent Expert has concluded that the Merger is in the best interests of Woodside Shareholders.

You should read this Merger Explanatory Memorandum in its entirety before deciding whether or not to vote in favour of the Merger Resolution.

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1.2 Reasons to vote in favour of the Merger Resolution

The key reasons for the Woodside Board’s unanimous recommendation that Woodside Shareholders vote in favour of the Merger Resolution at the Meeting are as follows:

1.2.1     The Merger will create a portfolio of complementary, long-life conventional gas and high-margin oil assets

The Merged Group is expected to be a top 10 global independent energy company by production and the largest energy company listed on the ASX.¹ The Merged Group will have a portfolio of complementary, long-life conventional gas assets and high-margin oil assets and the financial resilience to help supply the energy needed for global growth and development through the energy transition.

The Merger is expected to provide Woodside with increased scale and diversity of geographies, products and end markets through an attractive and long-life portfolio of energy assets. The combined conventional asset base will benefit from enhanced resilience through the commodity price cycle, through increased diversification, long-life assets in predominantly OECD countries and high-margin operating cash flows. This is expected to support Woodside Shareholder returns as well as investment in the evolution of the Woodside business through the energy transition.

¹ Top 10 global independent energy company by hydrocarbon production. Woodside analysis based on the Wood Mackenzie Corporate Benchmarking Tool Q4 2021, 1 December 2021. See the section titled ‘Disclaimer and Important Notices’ for clarification of independent energy company.

² Combined Woodside and BHP Petroleum total production for the 12 months to 31 December 2021. Excludes Algeria and Neptune production. Comprised of 53% BHP Petroleum production and 47% Woodside production.

³ Equivalent to 88 MMboe, combined Woodside and BHP Petroleum LNG production for the 12 months to 31 December 2021. Comprises 20% BHP Petroleum production and 80% Woodside production.

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⁴ Combined Woodside and BHP Petroleum for the 12 months to 31 December 2021. Excludes Algeria and Neptune production. Totals may not add due to rounding. For comparative purposes, on a Woodside stand-alone basis for the 12 months to 31 December 2021:

⁵ NGLs refer to a mixture of light hydrocarbons that exist in the gaseous phase in the reservoir and are recovered as liquids in gas processing plants. NGLs mostly include very light hydrocarbons (ethane, propane, or butanes).

⁶ Merged Group 2P and 2C volumes as at 31 December 2021. Excludes Algeria and Neptune volumes. For comparative purposes, Woodside stand-alone volumes as at 31 December 2021:

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Further information on the portfolio of the Merged Group is set out in Section 6.

1.2.2     The Merger strengthens free cash flow generation through the investment cycle and adds substantial balance sheet capacity

The Merged Group’s enlarged and diversified portfolio of producing assets is expected to support significantly increased and sustained cash flows. Woodside’s strong balance sheet is expected to be strengthened by the addition of unlevered BHP Petroleum assets and the improved financial resilience of the merged portfolio. The increased balance sheet capacity is expected to enable the Merged Group to deliver growth while maintaining an investment-grade credit rating (as affirmed by ratings agencies following the announcement of the Merger).⁸

On a pro forma basis (12 months to 31 December 2021), the Merged Group has:

⁷ Source: Wood Mackenzie estimates based on 2022 production of peers with market capitalisation >$10 billion, excluding NOCs and companies with free float below 65%. Woodside analysis. Chart approximates positions of various companies based on this data. Dataset: APA, BP, Chevron, ConocoPhillips, Coterra, Continental, Devon, Diamondback, ENI, EOG, ExxonMobil, Hess, Inpex, Marathon, Occidental, Ovinitiv, Pioneer, Repsol, Santos, Shell, Total and Woodside. Santos is shown on a pro forma basis after the merger with Oil Search. For comparative purposes, Woodside on a standalone basis consists of 100% OECD and 100% conventional production, based on this data set.

⁸ Source: S&P, 28 October 2021; Moody’s, 15 December 2021.

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⁹ Figure 5 is indicative only, and is intended to provide an overall future production profile for the Merged Group. It is based on the assumptions that current sanctioned projects are delivered within their target schedules, and that the Merged Group holds an 82% participating interest in Sangomar and 100% in Scarborough. It also assumes no sell-down of participating interests in Sangomar or Scarborough. To avoid doubt, production from Algeria and Neptune is excluded. Figure 5 is given in advance of completion of the Merger and based, in some respects, on external views of the BHP Petroleum asset base. Accordingly, Figure 5 is provided for illustrative purposes only and should not be relied on as guidance of future production of the Merged Group. Please refer to the “Disclaimer and important notices” section (including under the heading “Forward-looking statements”) for important cautionary information relating to forward-looking statements.

¹⁰ Figure 6 is indicative only, and is intended to provide an overall future profile for operating cash flow and free cash flow. Figure 6 assumes a Brent oil price forward curve (as at 24 March 2022) of $107/bbl in 2022, $93/bbl in 2023, $84/bbl in 2024, $79/bbl in 2025, $76/bbl in 2026 followed by a long term $65/bbl (real terms 2022) from 2027. Includes unsanctioned U.S. GOM and Western Australia subsea tiebacks. Assumes 82% Sangomar and 100% Scarborough, noting the equity selldown processes for Sangomar and Scarborough are ongoing. To avoid doubt, production from Algeria and Neptune is excluded. Excludes financing costs. Assumes long-term foreign exchange rate of 0.75 USD per 1.00 AUD. Assumes currently sanctioned projects being delivered in accordance with their current project schedules. Assumes transaction costs of $410 million. Excludes integration costs, cost of attainment of synergies and synergies. Please refer to the “Disclaimer and important notices” section (including under the heading “Forward-looking statements”) for important cautionary information relating to forward-looking statements.

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1.2.3 The Merger supports shareholder returns through continued capital discipline

Significant operating cash flow is expected to support returns to Woodside Shareholders over time, while Woodside maintains its focus on disciplined growth investment, in line with its capital allocation framework described at Figure 7 below. It is intended that this capital allocation framework will also apply to the Merged Group.

In line with Woodside’s current dividend policy, the Merged Group’s dividend policy will be based on net profit after tax (NPAT) excluding non-recurring items, with a minimum 50% payout ratio and a targeted payout ratio between 50% and 80%. The NPAT basis is expected to help preserve cash and protect the Merged Group’s balance sheet in periods of low commodity pricing.

In periods of excess cash generation, additional opportunities to provide returns to Woodside Shareholders through special dividends and share buy-backs will be considered.

It is expected that Australian shareholders of the Merged Group will benefit from the continued distribution of Woodside’s significant franking credit balance under the Merged Group’s dividend policy.

Importantly, the enlarged portfolio is expected to deliver the cash flow and financial resilience to fund the Merged Group’s evolution through the energy transition. Woodside’s climate strategy comprises of reducing net equity Scope 1 and 2 greenhouse gas emissions, and investing in the products and services to help Woodside’s customers reduce their emissions. In December 2021, Woodside announced a target of $5 billion (subject to the Merger being Implemented) of new energy products and lower-carbon services investments by 2030, with those investments to be made in line with the capital allocation framework illustrated above.

1.2.4     The Merger delivers a strong growth profile and a wide range of growth opportunities

In addition to the recently sanctioned Scarborough and Pluto Train 2 projects, the Merged Group has a wide range of near-term and longer-term potential growth opportunities that will be progressed in line with Woodside’s disciplined growth strategy.

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These growth opportunities include:

All growth opportunities are screened against portfolio metrics using price, scenario and climate analysis and tested through Woodside’s capital allocation framework.

1.2.5     The Merger creates an opportunity for energy transition leadership and increased capacity to navigate the energy transition

The Merged Group is expected to be a larger, more financially resilient company, with increased scale and technical depth, enabling the Merged Group to better navigate the energy transition than either Woodside or BHP Petroleum could on a standalone basis.

Woodside has previously announced in the Woodside Annual Report 2021 and its Climate Report 2021 that it has set near- and medium-term targets to reduce net equity Scope 1 and 2 greenhouse gas emissions, 15% by 2025 and 30% by 2030, towards an aspiration of net zero by 2050 or sooner.¹² Woodside expects these targets to be maintained for the Merged Group, although the possible pathways to achieve those ambitions will need to be determined following the integration of the BHP Petroleum assets.

As announced on 8 December 2021, Woodside is progressing several new energy opportunities across hydrogen and ammonia for power generation with potential 2030 capacity of approximately 3,000 megawatts.

Woodside is also assessing carbon capture and storage opportunities, including the development of a large-scale, multi-user project near Karratha, Western Australia.

¹¹ Illustrative of the considerations. Not an exhaustive list.

¹² Target is for net equity Scope 1 and 2 greenhouse gas emissions, relative to a starting base of the gross annual average equity Scope 1 and 2 greenhouse gas emissions over 2016-2020 and may be adjusted (up or down) for potential equity changes in producing or sanctioned assets with an FID prior to 2021. Following Implementation (which remains subject to Conditions including regulatory approvals), the starting base will be adjusted for the then combined Woodside and BHP Petroleum portfolio.

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The chart above shows indicative design out, operate out and offset emissions reductions to achieve the Merged Group’s net equity Scope 1 and 2 greenhouse gas emissions targets in 2030. The values do not represent cumulative abatement over the period leading up to those years.

1.2.6     The Merger is expected to unlock pre-tax synergies of more than $400 million per annum

The combination of highly complementary asset portfolios through the Merger is expected to unlock synergies.

Woodside has undertaken comprehensive integration planning work and has identified pre-tax synergies that are expected to be in excess of $400 million per annum (100% basis, pre-tax).

Woodside expects to realise the annual synergies through a combination of corporate, operations, exploration and growth activities.

Further information regarding the potential synergies expected to result from the Merger can be found in Section 6.5.

1.2.7     The Merger has the unanimous support of the Woodside Board

After carefully considering the advantages and disadvantages of the Merger for Woodside Shareholders, for the reasons set out in this Merger Explanatory Memorandum, the Woodside Board believes that the Merger is in the best interests of Woodside Shareholders. The Woodside Board unanimously recommends that Woodside Shareholders vote in favour of the Merger Resolution at the Meeting, in the absence of a Superior Proposal and subject to the Independent Expert maintaining its conclusion that the Merger is in the best interests of Woodside Shareholders.

1.2.8     The Independent Expert has concluded that the Merger is in the best interests of Woodside Shareholders

To assist Woodside Shareholders to assess the Merger and consider how to vote on the Merger Resolution, Woodside appointed KPMG as the Independent Expert to prepare the Independent Expert Report.

¹³ Target is for net equity Scope 1 and 2 greenhouse gas emissions, relative to a starting base of the gross annual average equity Scope 1 and 2 greenhouse gas emissions over 2016-2020 and may be adjusted (up or down) for potential equity changes in producing or sanctioned assets with an FID prior to 2021. Following Implementation (which remains subject to Conditions including regulatory approvals), the starting base will be adjusted for the then combined Woodside and BHP Petroleum portfolio.

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The Independent Expert has concluded that the Merger is in the best interests of Woodside Shareholders, in the absence of a superior offer. This conclusion is on the basis that the Independent Expert has assessed the underlying value of Woodside as a standalone entity to be in the range of A$23.09 to A$26.42 per Woodside share and the value of the Merged Group to be in the range of A$26.25 and A$29.81 per Merged Group share. As the range of assessed values for a Woodside share prior to the Merger lies predominately below the range of assessed values for a share in the Merged Group on an equivalent basis, the Independent Expert has concluded that the Merger is fair to Woodside Shareholders.

The Independent Expert also concluded that, based on its assessment of the full underlying value of Woodside and BHP Petroleum as stand-alone entities, the aggregate 52% interest that Woodside Shareholders will hold in the Merged Group is broadly consistent with Woodside’s contribution to the Merged Group.

The Independent Expert Report is included in full in this Merger Explanatory Memorandum at Annexure 3. See Section 3.4 for further information.

1.3 Why you may consider voting against the Merger

1.3.1     You may not agree with the recommendation of the Woodside Board and/or the conclusion of the Independent Expert

Notwithstanding the unanimous recommendation of the Woodside Board and the conclusion of the Independent Expert (refer to Annexure 3), you may believe the Merger is not in your interests.

1.3.2     The risk profile of the Merged Group will change, which you may consider to be disadvantageous to you relative to the risk profile of the current Woodside business

Woodside Shareholders are currently exposed to certain risks by virtue of having an equity interest in Woodside.

While Woodside and BHP Petroleum both have international operations, with common areas of interest across a number of regions, products and end markets (including common ownership of a number of assets), the profile, capital structure and size of the Merged Group will be significantly different from that of Woodside prior to the Merger.

If the Merger is implemented, Woodside Shareholders will maintain a level of exposure to these risks and will become exposed to additional risks associated with having an indirect equity interest in BHP Petroleum (which will be owned by Woodside following Implementation) and with Implementation more generally. These risks include, but are not limited to, the Merged Group not realising the expected growth opportunities and synergies. In addition, the Merged Group’s increased scale of operations as a result of the Merger will increase the exposure to the risks that Woodside currently faces (as described in Section 8.3), including the exposure to challenges associated with climate change and the energy transition.

However, following Implementation, the Merged Group’s diversified portfolio of assets will mean that Woodside Shareholders have a reduced risk exposure to any one asset.

1.3.3     Your percentage shareholding and voting power in Woodside will be diluted by the issue of the Share Consideration

Your equity interest in Woodside will be diluted if the Merger is implemented. In this regard, Implementation will reduce Woodside Shareholders’ aggregate interest in Woodside’s assets from 100% to approximately 52% as a result of the issue of New Woodside Shares, though Woodside Shareholders will gain exposure to BHP Petroleum’s assets.

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1.3.4     Woodside Shares may trade below the current price

The price at which Woodside Shares trade on ASX after the Merger is implemented may be influenced by a range of factors and Woodside Shares may trade below the price of Woodside Shares on the Last Practicable Date (being A$33.20), the date of the Meeting or the Implementation Date.

The levels of liquidity and volatility at which Woodside Shares may trade after the Merger is implemented could differ from those at which Woodside Shares currently trade, including as a result of the sale facility to be conducted by the Sale Agent (refer to Section 10.4).

There is no guarantee that Woodside Shares post-Merger will trade in or above the Independent Expert’s assessed value per Merged Group share of A$26.25 to A$29.81 or that they will trade at or above the price of Woodside Shares on the Last Practicable Date of A$33.20.

1.4 Other considerations

In considering how to vote in relation to the Merger Resolution, Woodside Shareholders should be aware that there are a number of risks, both general in nature and specific to the Merger and the Merged Group. These include:

These risks are described in detail in Section 8.

Certain risks associated with the Merger are also considered in the Independent Expert Report which is included in full in this Merger Explanatory Memorandum at Annexure 3. In particular, the Independent Expert points out that the Merger is being undertaken at a time of significant geopolitical unrest, during a period of significant global uncertainty arising from the impact of COVID-19 variants and against a background of increasing focus by the global community on environmental, social and governance issues, and that evaluation of the Merger requires Woodside Shareholders to consider both matters of value and also the broader commercial and qualitative aspects of the proposal in order to determine how to vote. Woodside Shareholders are encouraged to read the Independent Expert Report in detail for these reasons.

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This section answers some frequently asked questions about the Merger. It is not intended to address all relevant issues for Woodside Shareholders. This section should be read together with all other parts of this Merger Explanatory Memorandum.

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3.1 Outline of the Merger

On 17 August 2021, Woodside and BHP announced that they had entered into a Merger Commitment Deed, with an effective date of 1 July 2021, to combine BHP Petroleum assets and Woodside through an all-stock merger. The Merger will be on a cash-free and debt-free basis, where BHP Petroleum will settle all intercompany loan balances prior to Implementation.

With the combination of two high quality asset portfolios, the Merger is expected to create a top 10 global independent energy company by production and the largest energy company listed on ASX.¹⁷ Woodside believes that the Merger will help it supply the energy needed for global growth, and support its financial resilience, through the energy transition.

On 22 November 2021, Woodside and BHP entered into a binding Share Sale Agreement to implement the Merger (together with an Integration and Transition Services Agreement, which sets out the parties’ obligations in relation to the separation, transition and integration of BHP’s oil and gas portfolio with Woodside’s oil and gas portfolio).

If the Merger is implemented, Woodside will acquire all of the issued share capital in BHP Petroleum International Pty Ltd, which holds BHP’s oil and gas business, and Woodside will issue 914,768,948 New Woodside Shares to BHP as part of the Merger Consideration,¹⁸ with those New Woodside Shares to be immediately distributed by BHP to Eligible BHP Shareholders (and transferred to the Sale Agent, in the case of New Woodside Shares attributable to Ineligible Foreign BHP Shareholders and Relevant Small Parcel BHP Shareholders).

The Merged Group will be owned by Existing Woodside Shareholders (as to approximately 52%) and BHP Shareholders (as to approximately 48%) (based on the issue of 914,768,948 New Woodside Shares and the number of Woodside Shares outstanding on the Last Practicable Date) subject to any BHP Shareholders being Ineligible Foreign BHP Shareholders or Relevant Small Parcel BHP Shareholders.

Eligible BHP Shareholders will be entitled to a specific number of New Woodside Shares in respect of each BHP Share that the BHP Shareholder holds at the Distribution Record Date, which date will be set by BHP. Based on the number of New Woodside Shares to be issued and the number of BHP Shares outstanding on the Last Practicable Date, each BHP Shareholder is expected to be entitled to approximately 0.1807 New Woodside Shares in respect of each BHP Share.

The Merger is subject to satisfaction (or waiver, if permitted) of various Conditions including Woodside Shareholder Approval and regulatory and other approvals as detailed in Section 10.2.

If all of the Conditions are satisfied (or waived, if permitted), including Woodside Shareholder Approval, then:

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Following Implementation, the Merged Group will comprise Woodside and its subsidiaries, including each member of the BHP Petroleum group.

From the date of issue, New Woodside Shares issued as the Share Consideration will be fully paid and rank equally with Woodside Shares currently on issue. Following Implementation, Woodside Shares will continue to be listed on ASX, and Woodside will make applications for secondary listings on the NYSE in the United States (in the form of Woodside ADSs) and on the LSE in the United Kingdom.

Section 10.3.1 provides details about the timing for the payment of the cash proceeds from the sale of New Woodside Shares by the Sale Agent that Ineligible Foreign BHP Shareholders and Relevant Small Parcel BHP Shareholders will receive in lieu of the receipt of New Woodside Shares under the Merger.

Implementation will not result in any change to any BHP Shareholder’s ownership of BHP Shares.

3.2 Board / Director recommendations

After carefully considering all aspects, benefits and risks of the Merger and the Independent Expert Report (including the Independent Technical Specialist Report), the Woodside Directors unanimously:

in the absence of a Superior Proposal and subject to the Independent Expert maintaining its conclusion that the Merger is in the best interests of Woodside Shareholders.

Each Woodside Director intends to vote in favour of the Merger Resolution in respect of any Woodside Shares they hold or control, in the absence of a Superior Proposal and subject to the Independent Expert maintaining its conclusion that the Merger is in the best interests of Woodside Shareholders. In reaching their recommendation, the Woodside Directors have considered a range of factors, including the potential for Existing Woodside Shareholders to share in the potential value creation from the expected diversification, growth and scale of the Merged Group. Refer to Sections 1.2 and 1.3 for a discussion of some of the matters that the Woodside Board has taken into account in making its recommendation to Woodside Shareholders.

3.3 Merger consideration

Under the Share Sale Agreement, the Merger will take economic effect from 1 July 2021.

As a result, subject to Implementation, Woodside will become entitled to the economic benefit and risks of the BHP Petroleum assets and liabilities that are the subject of the Merger with effect from 1 July 2021, and BHP Shareholders will become entitled to the agreed number of Woodside Shares with adjustment for dividends and certain other events from that same date. Movements in the value of either BHP Petroleum’s assets or Woodside Shares after 1 July 2021 will not affect the “merger ratio” and would be to the benefit or detriment of each party.

Nevertheless, for accounting purposes, the Merger will be treated as if it is effective as of the Implementation Date. The accounting treatment of the consideration paid by Woodside will be determined by the price of the Woodside Shares at the Implementation Date. The price of Woodside Shares has increased by approximately 50% from 1 July 2021 to the Last Practicable Date for a variety of potential reasons including increases in commodity prices. Accounting standards require the value of Woodside Shares (including the increase in the value of Woodside Shares from July 2021 to the Implementation Date) to be allocated to the BHP Petroleum assets and liabilities acquired at their fair value and any amount above that allocated to goodwill. Following Implementation, Woodside will need to determine the fair value of the BHP Petroleum assets and liabilities as at the Implementation Date and calculate the value of goodwill on acquisition to be recognised. Subsequently, on an ongoing basis, Woodside will need to assess the extent to which the goodwill may be impaired.

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The Pro Forma Financial Information includes an estimate of goodwill arising on acquisition, based on assumptions as to the price of Woodside Shares and other factors. See Section 7 for further information.

If the Merger is implemented, Woodside will acquire 100% of the issued share capital of BHP Petroleum International Pty Ltd in exchange for:

Separately, if required, BHP will pay to Woodside, or Woodside will pay to BHP, the Locked Box Payment on Implementation. The Locked Box Payment refers to:

Further information regarding the Share Sale Agreement, the Woodside Dividend Payment and the Locked Box Payment is set out in Section 10.3.1.

3.3.1       Share Consideration

With respect to the Share Consideration, BHP has provided Woodside with written notice stating that BHP directs Woodside to issue the Share Consideration to BHP, following which BHP will procure that the New Woodside Shares are immediately distributed to Eligible BHP Shareholders (or transferred to the Sale Agent, in the case of New Woodside Shares attributable to Ineligible Foreign BHP Shareholders and Relevant Small Parcel BHP Shareholders).

Upon Implementation, Woodside will issue New Woodside Shares and:

Eligible BHP Shareholders will be entitled to a specific number of New Woodside Shares in respect of each BHP Share that the BHP Shareholder holds at the Distribution Record Date (which date will be set by BHP), with their aggregate entitlement to New Woodside Shares rounded down to the nearest whole number of New Woodside Shares. Based on the issue of 914,768,948 New Woodside Shares and the number of BHP Shares outstanding on the Last Practicable Date, Eligible BHP Shareholders are expected to be entitled to approximately 0.1807 New Woodside Shares in respect of each BHP Share.

Based on the closing price of Woodside Shares on each of the relevant dates specified in the table below, the Share Consideration implies the total consideration as set out in the table below.

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The 914,768,948 New Woodside Shares to be issued as Share Consideration will represent approximately 48% of the shares on issue in the Merged Group upon Implementation, with Existing Woodside Shareholders owning approximately 52% of the Merged Group.²¹

From the Implementation Date, the New Woodside Shares received as part of the Merger Consideration will be fully paid and rank equally with existing Woodside Shares.

Following Implementation, Woodside Shares will continue to be listed on ASX.

BHP ADS Holders will be issued New Woodside Shares in the form of Woodside ADSs, each representing a Woodside Share. Woodside will file with the SEC the U.S. Registration Statements for the issue of the Woodside ADSs and the distribution of the New Woodside Shares under U.S. securities laws prior to the Meeting. In addition, Woodside has applied to list the Woodside ADSs on the NYSE, under the symbol “WDS”.

Woodside will also apply for admission of the Woodside Shares in the United Kingdom on the LSE under a standard listing, under the symbol “WDS”.

See Section 10.6 for further information. Further information can also be found in the U.S. Registration Statements and the UK prospectus which are expected to be filed by Woodside and released to ASX shortly following the date of this Merger Explanatory Memorandum.

3.3.2       Woodside Dividend Payment and Locked Box Payment

Separate to the Share Consideration, on Implementation:

The Woodside Dividend Payment is, in effect, the payment to BHP of a cash amount at Implementation representing the cash dividend that would have been received (between the Effective Time and Implementation) by BHP Shareholders if they had been issued the Share Consideration at the Effective Time. The Woodside Dividend Payment amounts to $830 million.

The Locked Box Payment is a payment from BHP to Woodside at Implementation representing the positive net cash flow generated by BHP Petroleum (adjusted for permitted adjustments) following the Effective Time (or, if that amount were negative, Woodside will be required to make a cash payment to BHP at Implementation). As at the date of this Merger Explanatory Memorandum, Woodside estimates the Locked Box Payment (based on an Implementation Date of 1 June 2022) to be approximately $1.6 billion (such amount to be reduced by any cash held in bank accounts beneficially controlled by BHP Petroleum as at the Implementation Date), payable by BHP to Woodside.²²

Further information regarding the Share Sale Agreement, the Woodside Dividend Payment and the Locked Box Payment is set out in Section 10.3.1.

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3.3.3       Ineligible Foreign BHP Shareholders

A BHP Shareholder who is not an “Eligible BHP Shareholder” will be an “Ineligible Foreign BHP Shareholder” for the purposes of the Merger (except certain South African BHP Shareholders who validly elect to receive New Woodside Shares in accordance with arrangements to be outlined by BHP). Ineligible Foreign BHP Shareholders will not receive New Woodside Shares in connection with the Merger.

Refer to Section 10.4 for further information in relation to the treatment of Ineligible Foreign BHP Shareholders.

3.3.4       Small Parcel BHP Shareholders

A Small Parcel BHP Shareholder who validly elects (in accordance with the instructions to be issued by BHP) to have the New Woodside Shares to which they will be entitled (pursuant to the Merger and the subsequent BHP distribution of New Woodside Shares) sold by the Sale Agent under the sale facility will be a “Relevant Small Parcel BHP Shareholder”. Relevant Small Parcel BHP Shareholders will not receive New Woodside Shares in connection with the Merger.

Refer to Section  10.5 for information in relation to the treatment of Relevant Small Parcel BHP Shareholders.

3.4 Independent Expert conclusion

To assist Woodside Shareholders to assess the Merger and consider whether to vote in favour of the Merger Resolution Woodside appointed KPMG as the Independent Expert, to prepare the Independent Expert Report.

The Independent Expert has concluded that the Merger is in the best interests of Woodside Shareholders. This conclusion is on the basis that the Independent Expert has assessed the underlying value of Woodside as a standalone entity to be in the range of A$23.09 to A$26.42 per Woodside share and the value of the Merged Group to be in the range of A$26.25 and A$29.81 per Merged Group share. As the range of assessed values for a Woodside share prior to the Merger lies predominately below the range of assessed values for a share in the Merged Group on an equivalent basis, the Merger is fair to Woodside Shareholders.

The Independent Expert also concludes that the aggregate 52% interest that Woodside Shareholders will hold in the Merged Group is broadly consistent with Woodside’s contribution to the Merged Group.

As part of its assessment, the Independent Expert points out that the Merger is being undertaken at a time of significant geopolitical unrest, during a period of significant global uncertainty arising from the impact of COVID-19 variants and against a background of increasing focus by the global community on environmental, social and governance issues, and that evaluation of the Merger requires Woodside Shareholders to consider both matters of value and also the broader commercial and qualitative aspects of the proposal in order to determine how to vote.

The Independent Expert outlines certain matters that it believes Woodside Shareholders should also consider in deciding how to vote on the Merger Resolution, including that:

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Based on its assessed values and these factors, the Independent Expert concludes that on balance Woodside Shareholders will be better off approving the Merger Resolution.

The Independent Expert Report is included in full in this Merger Explanatory Memorandum at Annexure 3. Woodside Shareholders are encouraged to read the Independent Expert Report in detail to understand these commercial and qualitative considerations.

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4.1 Overview

Woodside overview

Woodside operates as an explorer for and producer of energy products.

Woodside’s Australian operations are primarily in Western Australia. Domestic gas is sold to customers in Western Australia. LNG, LPG, condensate and oil are sold to customers primarily in Asia. Woodside’s operations outside of Australia are not in production.

BHP Petroleum overview

BHP Petroleum also operates as an explorer for and producer of energy products.

BHP Petroleum’s Australian operations are on the east and west coasts of Australia. Domestic gas is sold to customers in Australia. Crude oil and gas is sold to customers in Japan, South Korea and China. BHP Petroleum’s global operations are in the United States Gulf of Mexico (“U.S. GOM”) and the Republic of Trinidad and Tobago (“T&T”). Crude oil products from BHP Petroleum’s U.S. GOM operations are sold into the U.S. domestic and global oil market with gas volumes sold into the U.S. domestic gas market. Similarly, crude oil produced from BHP Petroleum’s T&T operation is sold into the global oil market and gas volumes are sold domestically.

4.2 Australia oil and gas overview

Australia is home to substantial onshore and offshore oil and gas reserves, the development of which has underpinned the nation’s position as a leading global LNG exporter.

There are two distinct regional gas markets which service domestic gas consumption, one on each coast of Australia.

4.3 West coast of Australia domestic gas market

4.3.1       Market overview

The Western Australian domestic gas market primarily services several large industrial consumers and mining firms, the majority of which are supplied directly through the transmission network (such as the Dampier to Bunbury Natural Gas Pipeline and the Goldfields Gas Pipeline). The remaining large customers are supplied by domestic LNG facilities, which convert natural gas to LNG which is then transported by road. Customers supplied through the retail distribution network account for 6% of Western Australia’s total domestic gas consumption. Despite its relatively small population, Western Australia has the highest natural gas consumption of all Australian states. Western Australia consumed 669 PJ of gas in 2018-2019, approximately 42% of Australia’s total gas consumption.

The large majority of gas reserves in Western Australia are from conventional reservoirs located in the Carnarvon and Perth basins. While most of Western Australia’s gas reserves are developed as LNG export projects, domestic supply in Western Australia is underpinned by a domestic gas reservation policy (“WA Domestic Gas Policy”). Under the policy, introduced in 2006, gas equivalent to 15% of LNG production from LNG export projects is required to be reserved for domestic use as a condition of LNG project approval. The WA Domestic Gas Policy contains flexibility, allowing negotiations to occur on a case-by-case basis regarding the method by which the LNG project proponents fulfil their domestic gas commitments, including from alternative sources.

4.3.2       Key recent trends

In 2021, a number of producers made progress on developing and commercialising domestic gas fields and LNG projects which are likely to contribute to supply in the coming years. Demand for Western Australia’s key commodities, particularly gold and iron ore, has remained strong throughout the COVID-19 pandemic which has flowed through to increased domestic gas demand for mining operations.

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The Western Australian Government clarified the WA Domestic Gas Policy to state that it would not agree to exports of gas through the Western Australian pipeline network, and that supply of gas to the east coast would be treated as an export for the purposes of the policy.

In the past 18 months there has been an increase in proposed hydrogen projects, with a number of producers, including Woodside, entering into hydrogen development opportunities. As at January 2022, the Western Australian Government was funding seven renewable hydrogen feasibility studies as part of the Renewable Hydrogen Strategy. The studies include examining solar hydrogen for waste collection and light vehicle fleets in Cockburn, a hydrogen refuelling hub in Mandurah, and the potential for an electrolysis hydrogen production plant in the Great Southern or Wheatbelt regions of Western Australia.

4.3.3       Market dynamics

The Western Australian domestic gas market is characterised by:

4.3.4       Demand outlook

According to the Australian Energy Market Operator (“AEMO”), gas consumption in Western Australia is expected to be supported by strong demand for the State’s commodities through the development of new resources projects. Long-term west coast gas demand is expected to grow moderately at an average annual rate of 0.8% until 2031, growing from 1,071 TJ/day in 2022 to 1,150 TJ/day in 2031. In 2021, large customers accounted for approximately 85% of gas consumed in Western Australia with a majority of gas consumed in the minerals processing, mining and electricity generation sectors.

4.3.5       Supply outlook

Gas supply to the Western Australian domestic market is largely dependent on the sustained development of gas reserves. Overall, potential gas supply is projected to decline at an average annual rate of 1.40% between 2022 and 2031. AEMO notes that there is a large volume of undeveloped gas from fields such as Clio-Acme and Equus that could supply the Western Australian domestic market over the next 10 years but are currently too speculative to include in its potential supply forecasts.

4.3.6       Supply and demand balance

The supply of gas in the Western Australian domestic gas market is expected to be sufficient to meet demand until 2024. Between 2025 and 2027 gas demand may exceed supply by 51 PJ in total across these years, at rates of up to 85 TJ/day in 2026 (up to 7% of daily demand). From 2027 the Scarborough project is forecast to supply up to 210 TJ/d into the domestic market. The development of Perdaman Chemical and Fertiliser’s proposed urea project would add a large new consumer to the Karratha region; it is expected to start production in 2025 (subject to FID). After 2030, declining reserves at domestic gas only facilities is expected to cause forecast gas demand to again exceed forecasted supply.

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4.4 East coast of Australia domestic gas market

4.4.1       Market overview

Australia’s east coast gas market includes New South Wales, Australian Capital Territory, Queensland, South Australia, Victoria and Tasmania, is connected by gas transmission pipelines, and also sources gas supply from the Northern Territory via the Northern Gas Pipeline. This market is characterised by:

4.4.2       Key recent trends

Gas sales in the east coast market are heavily contract-based, with only a small share of production traded on the wholesale (spot) market. This is because long-term contracts provide producers the confidence to invest in new gas supply, and gas consumers security of supply at agreed price indices and levels. Bilateral contracts are negotiated between buyers and sellers, with a shift towards more shorter-term contracts in recent years. Negotiated price outcomes are generally not disclosed to the market.

Several spot hubs exist for short-term trading, however these volumes account for a relatively small share of the market (approximately 10-20%) and are used for market balancing by gas players.

Higher marginal costs of supply for new supply sources available in the east coast market may put upward pressure on prices, compared to pre-2015 levels. There is a forecasted risk of gas shortfalls in the east coast gas market as soon as winter 2023, prompting several developers to propose LNG import terminals to be built on the east coast.

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4.4.3       Demand outlook

The outlook for gas demand in the long-term is uncertain, with forecasted scenarios ranging from relatively flat demand to steadily declining demand over time. This uncertainty arises from potential policy changes (e.g. Victoria’s proposed Gas Substitution Roadmap), the availability of gas supply that is affordable for more price-sensitive consumers, and the outlook for gas-fired power generation, which is subject to the growth of renewable energy and electricity storage, coal power plants, and electricity transmission connectivity between regions. Gas-fired power generation is increasingly playing a critical balancing role in the power sector, for periods of lower renewable energy and/or coal-fired power generation, making gas-fired power demand subject to short-term events.

4.4.4       Supply outlook

The east coast market’s supply outlook is forecast to be challenged, as reserves located near domestic demand centres in offshore Victorian basins, particularly the Gippsland Basin, are in decline.

The proposed introduction of LNG import terminals on the east coast of Australia at various locations (e.g. Victoria, New South Wales, and South Australia), could address these supply shortfall risks and provide incremental supply.

In April 2021, BHP announced the successful commissioning of the Gippsland Basin Joint Venture’s West Barracouta natural gas field in the Bass Strait offshore Victoria, which will provide new domestic gas supply to Australia’s east coast. The West Barracouta field is the largest domestic gas project in Australia in recent years and will help to increase the supply of gas to the east coast of Australia. In March 2022, ExxonMobil announced it was making incremental investments to deliver an additional 200 PJ of gas over the next five years, through the Gippsland Basin Kipper offshore field and the Turrum field.

Santos’ proposed Narrabri gas project in New South Wales has targeted FID for 2023 and would add a large new supply source if progressed.

4.4.5       Supply and demand balance

The east coast gas market is likely to have future supply shortfalls without the development of further gas resources and/or LNG import terminals. While the northern region of the east coast of Australia will be self-sufficient in gas until 2030, the southern region (which includes New South Wales, Australian Capital Territory, Victoria, Tasmania and South Australia) is contending with the decline of legacy basins. Gas supply to meet this shortfall may come from Queensland, Northern Territory, and/or LNG import terminals. However, pipeline capacity limitations and costs may constrain the available gas supply to the most southern states in particular: Victoria and Tasmania.

4.5 LNG market

4.5.1       Market overview

The LNG market is a global export-driven market dominated by larger players. Australia was the largest LNG exporter by volume in 2021, producing 79.2 Mt compared to Qatar at 78.0 Mt and the U.S. at 67.5 Mt.

4.5.2       Key recent trends

The global LNG price recovery has accelerated since the lows experienced at the start of the COVID-19 pandemic, supported by a recovery in Chinese LNG demand (which was up 20% in the second half of 2021 compared to 2020), European carbon prices and other factors.

Global production in 2021 grew by 20 Mt on 2020 volumes. However, much of the “growth” is a result of LNG plants in marginal supply markets such as Egypt and the U.S. which are returning to regular production profiles after operating at reduced levels in 2020 due to depressed LNG prices. Supply has not been quick to rebound following the COVID-19 pandemic as a result of lower investment over 2015-2017 and also because of delays to several projects under construction. Organic supply growth is expected to return in 2022, as new projects in the U.S. and Indonesia come online. Overall capacity additions from under-construction projects during 2023-2025 are expected to be small, with Tortue FLNG Phase 1 (on the border of Senegal and Mauritania) expected in 2023 and Costa Azul Phase 1 (Mexico) in 2025. Woodside’s Scarborough development is targeted to commence production in 2026. The current conflict between Russia and Ukraine is likely to affect Russian projects, such as Arctic LNG-2 which had been expected to become operational in late 2023, and delays are possible.

4.5.3       Market dynamics

The majority of Australian LNG is sold into the Asia Pacific market under long-term bilateral contract arrangements, with pricing indexed to the price of crude oil. Historically these contracts have had durations of up to 25 years. This provided producers, particularly for greenfield projects, with a level of certainty on the recovery of significant upfront investment and provided purchasers long-term security of energy supply. In recent years, primarily due to the increased liquidity in the global LNG market, producers and purchasers in the Asian region have concluded bilateral contracts over shorter durations of between 5 and 15 years.

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Historically the exact terms of the oil price linkage in Asian LNG contracts is negotiated confidentially between buyers and sellers, with contracted LNG prices traditionally linked to the price of JCC. JCC reflects the average price of crude oil imported into Japan and closely correlates to the lagged price of Brent oil. In recent years, Brent oil has been commonly used as a contract price marker for LNG in the Asian region, particularly in China, Korea, Taiwan, India and south-east Asia. This contrasts with the spot market pricing of domestic natural gas in North America, and to a lesser extent Europe, where competing sources of gas (pipeline and LNG) are priced in hubs. LNG exports from the United States are commonly indexed to the U.S. natural gas hub, Henry Hub.

In addition, as global markets become increasingly interdependent and physical liquidity rises, there has been an increase in term and spot sales arrangements in the Asia-Pacific region priced off the Platts JKM benchmark price assessment, which is reflective of gas-on-LNG competition and prevailing LNG market supply-demand balances.

Long-term LNG contracts are often subject to periodic price review which may occur through bilateral agreement or be triggered contractually as a result of significant movements in oil price. This is particularly the case with contracts greater than ten years in duration. While most of Australia’s LNG production continues to be traded via long-term contracts, there has been an increase in spot sales and short-term contract sales. A key contributing factor is the greater flexibility that short-term contracts can provide in terms of responding to changes in sources of supply and demand for LNG.

4.5.4      Demand outlook²⁵

According to Wood Mackenzie, global LNG demand is expected to more than double in volume between 2021 and 2050. With indigenous production decline in Europe and parts of Asia, LNG imports are expected to become the preferred supply type for many economies. Europe, for example, could see LNG demand increase by 51 Bcm despite overall gas demand declines of 184 Bcm in 2021-2050. Asia represents almost 90% of all the gas demand growth for 2021-2050, and Australian LNG producers benefit from the close proximity to and long-term relationships with customers in Asian markets.

While there are challenges posed for natural gas demand due to the energy transition, Wood Mackenzie is forecasting global gas demand to grow between 2021 and 2035. Natural gas’ share in global total primary energy demand is expected to peak by the early 2040s, highlighting the role gas is expected to play in supporting the energy transition in the medium to longer-term. However, gas demand could see a substantial decline under Wood Mackenzie’s AET-1.5 scenario (Accelerated Transition 1.5-degree scenario). Wood Mackenzie’s AET-1.5 scenario outlines a view of the world that limits the average rise in global temperatures to 1.5 degrees Celsius compared with pre-industrial times.

4.5.5      Supply outlook

The 2020 COVID-19 pandemic and low oil and gas prices in 2020 resulted in a number of delays to the start dates for new LNG supply projects that are under-construction and to the timelines for projects that were proposed to take FID. In 2020, only one project took FID, the Energia Costa Azul LNG project in Mexico. In 2021, a few projects took FID, including Qatar’s North Field East project, the Darwin LNG backfill (Barossa) in Australia, Russia’s Baltic LNG (Ust-Luga) and the Scarborough-Pluto Train 2 project in Australia.

More than 96 Mtpa of under-construction LNG capacity is likely to become operational between 2026 and 2030. In addition, Wood Mackenzie estimates that up to 80 Mtpa of supply capacity will take FID within the next 36 months.

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In the longer-term, Qatar, Russia and the U.S. were forecast to dominate LNG supply additions into the next decade, based on the large number of current project proposals and substantial and relatively low-cost gas resources. Russia’s role in energy markets after the invasion of Ukraine is uncertain.

4.6 Oil market

4.6.1      Market overview and dynamics

The COVID-19 pandemic reduced oil demand in 2020 to well below 2019 levels. After an increase of 5.6 MMbbl/d in 2021, the IEA estimates that oil demand will grow by 2.1MMbbl/d in 2022 to reach 99.7 MMbbl/d, slightly above pre-COVID-19 levels. The forecast reflects new estimates of reduced demand as a result of the Russia and Ukraine conflict.

In the second quarter of 2020, the oil market saw oil supply heavily outpacing world oil demand, leading to an increase in global oil inventories within a short span of a couple of months. In response to this situation, in April 2020, OPEC and non-OPEC oil producing countries participating in the ‘Declaration of Cooperation’, known as OPEC+, announced voluntary production adjustments commensurate with the material oil stock surplus, to achieve the rebalancing and stabilisation of the oil market.

Since early 2020, OPEC+ has been playing a significant role in balancing the market through production curbs. OPEC+ member countries have the ability to produce over 40% of the world’s crude oil. Equally important to global prices, OPEC+ oil exports can represent more than 60% of the total petroleum traded internationally. Due to this market share, OPEC+ actions can, and do, influence international oil prices.

The extent to which OPEC+ utilises available production capacity is often used as an indicator of the tightness of global oil markets, as well as an indicator of the extent to which OPEC+ is exerting upward influence on prices. The U.S. Energy Information Administration defines spare capacity as the volume of production that can be brought on within 30 days and sustained for at least 90 days. Saudi Arabia, the largest oil producer within OPEC+ and the world’s largest oil exporter, historically has had the greatest spare capacity. Saudi Arabia generally keeps more than 1.5 – 2 MMbbl/d of spare capacity on hand for market management. OPEC+ spare capacity provides an indicator of the world oil market’s ability to respond to potential crises that reduce oil supplies. As a result, oil prices tend to incorporate a rising risk premium when OPEC spare capacity reaches low levels.

Australia holds just 0.3% of the world’s oil reserves as of September 2021. Most of Australia’s known remaining oil resources are LPG and condensate, associated with offshore gas fields in the Browse, Carnarvon and Bonaparte basins. Australian oil production has been in decline since 2009 as new reserve developments have failed to match the rate of depletion in existing fields. Oil production in 2019 showed a reversal to this long-term trend following the start-up of the Greater Enfield (Woodside operated), Ichthys and Prelude projects.

The U.S. GOM area, both onshore and offshore, is one of the most important regions for energy resources and infrastructure. In 2021, production from U.S. GOM was affected by hurricane activity which resulted in prolonged outages.

4.6.2      Key recent trends

As at March 2022, oil prices were at decade highs. This was reflective of markets pricing in a geopolitical risk premium as a result of the conflict between Russia and Ukraine (Dated Brent was $127/bbl and WTI was $115/bbl) as a shortage of natural gas, LNG and coal boosted demand for oil while economic growth continues and global mobility improves. Despite increasing global COVID-19 cases in Q4 2021, measures taken by governments to contain the virus were less severe than during earlier waves and the resulting impact on economic activity and oil demand was relatively subdued. Oil demand exceeded IEA expectations in Q4 2021 increasing by 1.1 MMbbl/d to 99 MMbbl/d.

Prior to Russia’s invasion of Ukraine, world oil supply was projected to rise sharply in 2022 towards the year end as U.S. output bounced back from Hurricane Ida and responded to the higher price environment and as OPEC+ continued to unwind cuts. Canada and Brazil are also expected to achieve record production levels. Additionally in January 2022, Ecuador, Libya and Nigeria were already ramping up production.

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Notwithstanding the above supply increases, the current conflict between Russia and Ukraine is expected to create a supply shock, with the IEA estimating that from April 2022 as much as 3 MMbbl/d of Russian oil production could be shut in as a result of sanctions and self sanctions.

4.6.3      Long term demand and supply outlook

Demand for crude oil and petroleum products is influenced by many factors and is impossible to predict with certainty. Specifically, factors such as the rate of global economic growth, evolving energy policies, and technological trends will have material impacts on the path for long-term oil demand. The policies undertaken by governments to reduce carbon emissions will play a significant role in determining this path.

Wood Mackenzie²⁶ , a provider of market data and analysis, estimated in November 2021 that global total liquids demand would continue to grow until peaking in 2034 at 108 MMbbl/d and then gradually decline thereafter. Under this outlook, by 2050 total demand will have retreated to 96 MMbbl/d, approximately 4 MMbbl/d lower than 2019 levels.

Other forecasters may make different assumptions about the drivers of oil demand and thus may have alternate outlooks. In addition, many forecasters consider the potential impact of global policies that could limit the average rise in global temperatures to 2 degrees Celsius or 1.5 degrees Celsius compared with pre-industrial times. Wood Mackenzie has developed such scenarios. For example, in their AET-1.5 scenario, which assumes that the average rise in global temperatures is limited to 1.5 degrees Celsius compared with pre-industrial times, oil demand peaks earlier and declines more rapidly than in the outlook described above. Under this scenario, oil demand declines by nearly two thirds from current levels by 2050.

Potential sources of supply to meet future oil demand include currently producing fields in the OPEC+ countries, the US and elsewhere, and new oil developments. With Russia being one of the world’s largest oil producers, the ongoing conflict between Russia and Ukraine and associated sanctions has created uncertainty over the long-term supply outlook from that region.

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5.1 Overview

5.1.1      BHP Group overview

Incorporated in 1885, BHP is a leading global resources company with a market capitalisation of approximately A$250 billion.²⁷ BHP’s operations revolve around the discovery, development, production and marketing of iron ore, metallurgical coal, copper, nickel and uranium. BHP also has substantial interests in potash, and, through BHP Petroleum, oil and gas. BHP is headquartered in Melbourne, Australia, with more than 80,000 employees and contractors, operating in over 90 locations worldwide. BHP Group Limited is registered in Australia with its registered office at 171 Collins Street, Melbourne, Victoria 3000, Australia.

5.1.2      BHP Petroleum overview

BHP pioneered the development of an oil and gas industry in Australia with the Bass Strait discovery in 1965. BHP Petroleum International Pty Ltd is a wholly owned subsidiary of BHP. The BHP Petroleum business now has conventional oil and gas assets located in the United States Gulf of Mexico (“U.S. GOM”), Australia, the Republic of Trinidad and Tobago (“T&T”), Algeria and Mexico, and appraisal and exploration options in T&T, central and western U.S. GOM, Eastern Canada, Barbados and Egypt. The crude oil and condensate, gas and natural gas liquids (“NGLs”) produced by the assets of BHP Petroleum are sold on the international spot and domestic markets. BHP Petroleum also includes BHP Petroleum’s effective interest in the Rhourde Ouled Integrated Development (“Algerian Assets”), which BHP is in the process of divesting.

During FY2021, BHP Petroleum achieved first production at two major development projects, both of which were delivered on or ahead of schedule. The Ruby oil and gas project in T&T achieved first production in May 2021. The Atlantis Phase 3 project achieved first production in the first half of the 2021 financial year. Total BHP Petroleum production and unit costs for FY2021 was 103 MMboe and $10.83/boe respectively.²⁸

5.2 Overview of assets

5.2.1      Overview of BHP Petroleum assets

BHP Petroleum has an international portfolio of assets which includes oil and gas production in the U.S. GOM, Australian LNG, oil and domestic gas assets and T&T oil and domestic gas assets. Key growth in the portfolio is driven by sanctioned and unsanctioned developments to currently producing assets in the U.S. GOM, as well as the development of the Scarborough field in Australia.

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5.2.2     Shenzi

Shenzi overview and history

The Shenzi conventional oil and gas field is located approximately 195km off the coast of Louisiana in the Green Canyon protraction area, GOM. The field has produced approximately 350 MMboe (100% basis) since production commenced in 2009. Crude oil produced from the field is transported to connecting pipelines for onward sale to Gulf coast customers. Natural gas production is transported via a lateral pipeline that is tied into the Cleopatra natural gas pipeline for ultimate transmission onshore to the Neptune processing plant in St. Mary’s Parish, Louisiana.

The Shenzi Joint Venture has recently sanctioned two brownfield developments. First, a subsea multiphase pumping project to increase production rates from existing wells, which is targeted to be completed in 2022. The other sanctioned project involves sidetracks of existing M9U production wells to access unswept oil in the M9U reservoir and achieved first oil in the fourth quarter of 2021. There are also additional unsanctioned infill opportunities at Shenzi to increase production with 3 producing and 2 water injection wells tied back to the Shenzi tension leg platform.

In addition to the currently producing Shenzi field, the project also includes the future tie-back developments of Shenzi North and Wildling which will take advantage of existing infrastructure and production capacity in the nearby Shenzi production facility. Shenzi North, the first development phase of the Greater Wildling mini-basin, was discovered in 2017. On 5 August 2021, BHP approved the funding of $544 million in capital expenditure (100% basis) to execute the Shenzi North oil project in the U.S. GOM. The project is expected to add two wells and subsea equipment to establish a new drill centre north of Shenzi. Production is expected to begin in FY2024.

The Wildling project adds an additional two wells and subsea equipment. The Wildling field, which is also located in the Wildling mini basin was discovered in 2017 and is expected to be developed as a subsea tie-back to the Shenzi tension leg platform. Potential FID is expected in 2022-2023, which would lead to first production in 2024-2025.

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Ownership structure and joint ventures

The Shenzi field covers lease blocks GC609, GC610, GC652, GC653 and GC654. On 6 November 2020, BHP finalised a membership interest purchase and sale agreement with Hess to acquire an additional 28% working interest in Shenzi, taking its working interest from 44% to 72%. Repsol is the only other participant in the Shenzi Joint Venture, with a 28% working interest.

Shenzi North lies in lease blocks GC608 and GC609. The ownership is 72% BHP Petroleum and 28% Repsol.

Greater Wildling lies in lease blocks GC520 and GC564. Greater Wildling is 100% BHP Petroleum owned and operated.

BHP Petroleum owns a 25% and 22% interest respectively in the companies that own and operate the Caesar oil pipeline and the Cleopatra natural gas pipeline which connect the Green Canyon area to connecting pipelines that transport the product onshore.    

Offshore infrastructure

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Atlantis overview and history

The Atlantis conventional oil and gas field is one of the largest producing fields in U.S. GOM, located off the coast of Louisiana in the south-eastern Green Canyon protraction area. Oil and gas from the field is transported to existing shelf and onshore interconnections via the Caesar and Cleopatra pipelines.

Atlantis was discovered in 1998 and has produced approximately 460 MMboe (100% basis) since first production was achieved in 2007. The development of Atlantis occurred over several phases:

Phase 1: sanctioned in 2003

Phase 2: Operator (BP) submitted Development Operations Coordination Document in 2009, targeting Atlantis North flank. Production commenced in 2009

Phase 3: sanctioned in 2019 with first production achieved in 2020, including eight subsea wells and associated manifolds and flow lines.

Atlantis possesses multiple unsanctioned projects currently in the planning phase, leveraging existing infrastructure and technology. Future development phases for Atlantis include multiple infill campaigns with a total of twelve additional producing wells and six additional water injection wells utilising existing infrastructure. In addition, a major facilities expansion is planned to include topsides modification, subsea multiphase pumping, and upgrades to water injection and water handling facilities.

Ownership structure and joint ventures

Atlantis field lies within lease blocks GC699, GC742, GC743, and GC744. It is owned by BP (56.0%, Operator) and BHP Petroleum (44.0%).

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Offshore infrastructure

³⁵ Atlantis Project map in relation to BHP Petroleum’s U.S. GOM projects. Fields, blocks and pipelines shown in maps are stylised and not to scale. Map only shows the BHP Petroleum fields, leases and pipelines which are referenced in the BHP Petroleum Overview part of this Merger Explanatory Memorandum.

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5.2.4     Mad Dog

Mad Dog overview and history

The Mad Dog conventional oil and gas field is located off the coast of Louisiana in the Green Canyon protraction area, U.S. GOM. Mad Dog was discovered in 1998 and has produced approximately 260 MMboe (100% basis) since first production, which was achieved in 2005.

Phase 1 of the project is processed through a subsea truss spar, Spar A. Oil from the project is transported to Ship Shoal 332B through the Caesar pipeline where it is then transported via the Cameron Highway Oil Pipeline System internally in the U.S. Gas from the project is exported to Ship Shoal 332A through the Cleopatra pipeline, where it is then transported to the Manta Ray Gathering System and then to the Nautilus Gas Transportation System into Louisiana.

Mad Dog Phase 2, which was sanctioned in 2017 for $2.2 billion in capital expenditure (BHP Petroleum share), focuses development on the southern flank of the field and is targeting first production in 2022. Mad Dog Phase 2 includes a new semi-submersible floating production unit (“FPU”) named Argos. The development plan includes 14 production wells and eight water injectors (nine producers and four water injectors have been drilled to date). The new platform will be moored approximately 10km southwest of the existing Mad Dog platform.

Beyond the sanctioned projects, there are further brownfield growth opportunities at Mad Dog. There are additional opportunities to increase the Mad Dog Phase 2 production beyond the initial investment scope with 9 new wells tied back to existing facility. Additionally, there is potential for a water injection expansion at the project with two water injector wells providing water from Mad Dog Phase 2 facility to increase production at the existing Spar A facility.

Ownership structure and joint ventures

Mad Dog field lies in lease blocks GC738, GC781, GC782, GC824, GC825, GC826, GC868, GC869, and GC870. It is owned by BP (60.5%, Operator), BHP Petroleum (23.9%), and Chevron (15.6%).

³⁶ Mad Dog Project map in relation to BHP Petroleum’s U.S. GOM projects. Fields, blocks and pipelines shown in maps are stylised and not to scale. Map only shows the BHP Petroleum fields, leases and pipelines which are referenced in the BHP Petroleum Overview part of this Merger Explanatory Memorandum.

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Offshore infrastructure

5.2.5     North West Shelf

The North West Shelf fields lie within permits WA-1-L. WA-23-L, WA-24-L, WA-3-L, WA-30-L, WA-5-L, WA-6-L, WA-7-R, WA-57-L. WA-58-L, WA-56-L, WA-2-L and WA-28-P, WA-4-L, WA-9-L, WA-16-L, WA-52-L, WA-53-L and WA-11-L. Ownership of the various North West Shelf joint ventures operated by Woodside (“NWS Project”) and the associated production is split between several joint ventures with different participating interests.

BHP Petroleum owns an equity interest of between 12.5% and 16.67%³⁷ in the various North West Shelf joint ventures operated by Woodside. Woodside’s equity interests are similar in percentage terms (generally one-sixth of the project with some variations) with the notable exception of its interest in the Okha FPSO as described below.

Dedicated LNG facilities, such as the gas treatment, liquefaction trains and LNG storage tanks, are owned on an equal one-sixth basis by six of the seven NWS Project participants (excluding CNOOC). All other assets, which are used in both the domestic gas and LNG processing activities, are owned in varying percentages (excluding CNOOC) based on their interests in the above joint ventures. Six of the seven NWS Project participants (excluding CNOOC) also separately own an equal share in ships utilised for the NWS Project.

Though also located on the North West Shelf, the Okha FPSO is reported as its own entity by Woodside. That joint venture is owned by Woodside (33.33%), with BHP Petroleum, BP, Chevron, and MIMI each having a one sixth participating interest.

³⁷ This range does not include BHP Petroleum’s interest in the historic “Domestic Gas Joint Venture”, which is 8.33%.

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5.2.6     Bass Strait

Bass Strait overview and history

The Bass Strait Project consists of numerous conventional oil and gas fields, in the well-established Gippsland Basin off the south-east coast of Victoria, Australia. The project consists of an integrated network of offshore platforms and subsea tie-backs connected via extensive pipeline infrastructure to onshore processing facilities at Longford and Long Island Point. Bass Strait was Australia’s first major offshore oil and gas development and has sold over 8 Tcf of pipeline gas and over 4 billion bbl of oil since first production in 1969.

Natural gas production from Bass Strait currently supplies approximately 40% of Australian east coast domestic gas demand and is the largest supplier into the Eastern Australian domestic gas market, which spans Queensland, New South Wales, Victoria, Tasmania, Australian Capital Territory, Northern Territory, and South Australia. The asset also produces crude oil and condensate, LPG and ethane which is sold to both domestic and international customers.

The Longford facilities process both crude oil and natural gas to achieve requisite sales specifications. Natural gas is exported directly into the east coast gas network while crude and natural gas liquids are transferred to the Long Island Point facility by pipeline. Crude is stored at Long Island Point prior to transfer to domestic refineries via pipeline or export customers via ship loading. Natural gas liquids are processed to produce butane, propane and ethane products. Butane and propane are stored prior to onward sale via truck loading, pipeline, or export shipping. Ethane is sold via pipeline to a customer in the Altona petrochemical area.

In April 2021, the Gippsland Basin Joint Venture successfully commissioned the West Barracouta natural gas field with a capital investment of approximately A$400 million (100% share). Bass Strait retains a portfolio of contingent and prospective opportunities, primarily from deeper, acid gas resources with commercialisation enabled by the Longford Gas Conditioning Plant, commissioned in 2017, which provides acid gas processing capability. Further investment to deliver additional gas between 2023 and 2027 including additional development from the Kipper field and advancing funding decision for the Turrum field were announced in March 2022.

Several of the Bass Strait offshore facilities have ceased production following field depletion and an active program of restoration is underway. Near term activities are dominated by well plug and abandonment with planning in progress for longer term facility decommissioning and removal.

³⁸ Bass Strait Project map. Fields, blocks and pipelines shown in maps are stylised and not to scale. Map only shows the key BHP Petroleum fields, leases and pipelines which are referenced in the BHP Petroleum Overview part of this Merger Explanatory Memorandum.

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Ownership structure and joint ventures

Bass Strait production is primarily from the Gippsland Basin Joint Venture, owned by ExxonMobil (50%, operator) and BHP Petroleum (50%), and the Kipper Unit Joint Venture, owned by ExxonMobil (32.5%, operator), BHP Petroleum (32.5%) and Mitsui (35%). Kipper unit production is processed by the Gippsland Basin Joint Venture under a processing agreement. The Gippsland Basin Joint Venture fields lie in permits Vic/L1-L11 and Vic/L13-19 and the Kipper field lies in permits Vic/L9 and Vic/L25.

Bass Strait key production hubs

5.2.7     Pyrenees

Pyrenees overview and history

The Pyrenees project consists of 6 conventional oil fields located approximately 45km northwest of Exmouth, Western Australia, in the Carnarvon Basin. Crude oil is offloaded from the FPSO directly to tankers for sale to international markets and attracts a premium to Brent given its low sulphur content. Produced formation water is treated on the facility and reinjected for disposal in four subsea water injection wells. A single well into the Macedon gas field allows for injection or production of natural gas depending on facility requirements.

The Pyrenees Phase 4 project has been sanctioned with infill drilling and well intervention for water shut-off.

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Ownership structure and joint ventures

The Pyrenees development covers two separate production licences: WA-42-L is owned by BHP Petroleum (71.4%, Operator) and Santos (28.6%). WA-43-L is owned by BHP Petroleum (40%, Operator), Santos (31.5%) and Inpex (28.5%).

Note: ^† includes one gas well drilled into the Macedon field. ^‡ Pyrenees Phase 4 is sanctioned on the basis of well re-entry for infill drilling and water shutoff and so therefore will not add to well count.

³⁹ Pyrenees Project map in relation to BHP Petroleum’s and Woodside’s Western Australia projects. Fields, blocks and pipelines shown in maps are stylised and not to scale with the intent to show the general location and proximity of BHP Petroleum and Woodside’s Carnarvon Basin fields assets. Maps only show the key Woodside and BHP Petroleum fields, leases and pipelines.

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5.2.8     Macedon

Macedon overview and history

Macedon is an offshore gas field located in the Exmouth sub-basin around 40km north of Exmouth, Western Australia. Gas is produced from subsea wells and flows through a pipeline to a gas treatment plant located near Onslow. Sales quality gas is then transported via a dedicated 67km pipeline into the Dampier to Bunbury Natural Gas Pipeline and thereon for onward sale into the Western Australian domestic gas market.

Ownership structure and joint ventures

Macedon lies within WA-42-L, the same production licence as Pyrenees. It is owned by BHP Petroleum (71.4%, Operator) and Santos (28.6%).

Offshore infrastructure

⁴⁰ Macedon Project map in relation to BHP Petroleum’s and Woodside’s Western Australia projects. Fields, blocks and pipelines shown in maps are stylised and not to scale with the intent to show the general location and proximity of BHP Petroleum and Woodside’s Carnarvon Basin assets. Map only shows the key Woodside and BHP Petroleum fields, leases and pipelines.

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Note: ^† excludes one Macedon gas well drilled as part of the Pyrenees development

5.2.9 Trinidad and Tobago

Angostura and Ruby overview and history

The Greater Angostura field is an offshore conventional oil and gas field located 38km northeast of Trinidad. The Angostura field was discovered in 1999, with first oil achieved in January 2005 (Phase 1). Phase 2 established gas sales in 2011. First gas for Angostura Phase 3 was established in September 2016. Ruby is a conventional offshore oil and gas field located within the Greater Angostura Fields. First oil was achieved in May 2021.

The current development comprises a main central processing platform (“CPP”), gas export platform (“GEP”), four wellhead protector platforms (“WPP”) and onshore terminal. Flowlines connect the Ruby wellhead platform back to the CPP and GEP for processing.

Crude oil from CPP is transported to the Terminal Facility located in the south eastern end of Trinidad. Calypso crude from the Angostura and Ruby fields is sold on a spot basis to international markets via the Terminal Facility while the gas is sold domestically under term contracts via separate pipelines to T&T from the GEP.

Ownership structure and joint ventures

The Angostura field lies in Block 2c. It is owned by BHP Petroleum (45.0%, Operator), National Gas Company (30.0%) and Chaoyang (25.0%).

The Ruby field lies in Block 3a. It is owned by BHP Petroleum (68.46%, Operator) and National Gas Company (31.54%).

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Offshore infrastructure

⁴¹ Angostura and Ruby Project map. Fields, blocks and pipelines shown in maps are stylised and not to scale. Map only shows the key BHP Petroleum fields, leases and pipelines.

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5.2.10     Scarborough

The Scarborough field is located approximately 375km west-northwest offshore the Burrup Peninsula. Scarborough is part of the Greater Scarborough resource, including the Jupiter and Thebe fields.

Scarborough is owned by Woodside (73.5%, Operator) and BHP Petroleum (26.5%).

BHP Petroleum also owns an equal 50% participating interest with Woodside in the Thebe (WA-63-R) and Jupiter (WA-61-R) fields, which are part of the Greater Scarborough fields and options for potential future subsea tie-backs to the Scarborough FPU.

Woodside, as operator of the Scarborough Joint Venture, is developing the Scarborough gas resource through new offshore facilities connected by an approximately 430km pipeline to the second LNG train (“Pluto Train 2”) at the existing Pluto LNG onshore facility.

On 22 November 2021, Woodside announced that final investment decisions had been made to approve the Scarborough and Pluto Train 2 developments, including new domestic gas facilities and modification to Pluto Train 1. On 18 January 2022, Woodside announced the completion of the sale of a 49% non-operating participating interest in the Pluto Train 2 Joint Venture to Global Infrastructure Partners (“GIP”). Woodside has retained a 51% participating interest in Pluto Train 2 Joint Venture. Woodside remains the operator of Pluto LNG and the Pluto Train 2 Joint Venture.

In Q2 2020, the Scarborough Offshore Project Proposal was accepted by NOPSEMA and in Q4 2020, Production Licences were granted for the WA-61-L (Scarborough) and WA-62-L (North Scarborough) titles. Following approval by the Western Australia Minister for Environment of the Scarborough Nearshore Ministerial Statement 1172 in Q3 2021, all key primary environmental approvals are in place to support the final investment decisions.

In April 2022, further key primary approvals were received from the Commonwealth-Western Australian Joint Authority to support execution of the Scarborough Project. The Scarborough Joint Venture has received an offer for the pipeline licence to construct and operate the Scarborough pipeline in Commonwealth waters. Approval has also been granted for the Scarborough Field Development Plan (“FDP”), enabling Woodside to commence petroleum recovery operations from Petroleum Production Licences WA-61-L and WA-62-L. Following approval of the FDP, the Scarborough and Pluto Train 2 processing and services agreement executed in November 2021 is now unconditional.

5.2.11     Other Australia infrastructure – no longer in production

BHP Petroleum is operator of several Australian fields that are no longer in production including the Griffin (45-71.43% equity) and Stybarrow (50%) offshore oil fields located off North West Cape and the Minerva offshore gas field (90% equity and operator) in the Otway basin. A program of restoration activities is underway and is being carried out in close cooperation with environment and safety regulators and other key stakeholders.

5.2.12     Algerian Assets sale

While BHP Petroleum’s reserves and resources as of 30 June 2021 and the combined financial statements of BHP Petroleum are inclusive of BHP Petroleum’s 28.85% interest in the Algerian Assets, these assets are currently classified as non-core and are expected to be divested prior to the Implementation of the Merger.

As part of the Merger, Woodside and BHP have agreed that BHP will retain the economic benefits of the Algerian Assets from the Merger effective date (1 July 2021), including the net proceeds from the divestment. If the divestment of the Algerian Assets has not completed prior to the Implementation of the Merger, Woodside will operate the Algerian Assets on behalf of BHP under an arrangement whereby BHP will retain all economic exposure and indemnify Woodside for any costs and liabilities associated with the Algerian Assets until such time as both parties agree alternative arrangements or the Algerian Assets lapse or terminate (whichever is earlier). As at 30 June 2021, the 1P reserves of the Algerian Assets were approximately 8.9 MMboe and the Algerian Assets contributed revenue of $164m, $159m and $258m for the financial years ended 30 June 2021, 2020 and 2019, respectively.

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5.2.13     Description of Property

The following table sets out the location, capacity and BHP Petroleum’s ownership interest in the assets described below.

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In addition to the assets described above, BHP Petroleum leases office space in several locations globally, the two largest being Houston, Texas and Port of Spain, Trinidad.

5.3 Growth projects

5.3.1     Trion

Trion overview and history

The Trion project (“Trion”) is a BHP Petroleum-operated oil and gas opportunity in Mexico, which was discovered by PEMEX (Mexico’s state-owned petroleum company) in 2012, with BHP acquiring operatorship in 2017.

Trion is a greenfield development that would represent the first oil production from Mexico’s deepwater, with potential for future discoveries to be tied back to Trion facilities. The Trion field is in the Perdido Foldbelt, Gulf of Mexico, at a water depth of 2,500m approximately 180km off the Mexican coastline and 30km south of the US/Mexico maritime border.

Ownership structure and joint ventures

BHP Petroleum holds a 60% participating interest in and operatorship of Blocks AE-0092 and AE-0093 containing the Trion discovery. PEMEX Exploration & Production Mexico holds a 40% interest in the blocks.

5.3.2     Calypso

Calypso overview and history

Calypso is a BHP Petroleum-operated deepwater gas discovery in T&T. The Calypso opportunity is located 217km off the coast of T&T and comprises several discoveries in deepwater Blocks 23(a) and TTDAA 14. Calypso is proximate to existing LNG infrastructure and downstream petrochemical facilities.

The Calypso appraisal drilling program (consisting of the Bongos-3, Bongos-3X and Bongos-4 wells) concluded on 20 December 2021. All wells encountered hydrocarbons. Bongos-3 confirmed volumes downdip of prior penetrations and Bongos-4 established volumes in a new segment. The well results are currently under evaluation and will be incorporated into the development plan. Ownership structure and joint ventures

Calypso sits within the Deepwater Blocks 23(a) and TTDAA 14 lease blocks. It is owned by BHP Petroleum (70.0%, operator) and BP (30%).

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5.3.3        Magellan

Magellan overview and history

The Magellan discoveries in the Trinidad South Deepwater license Block TTDAA 5 includes the LeClerc and Victoria gas fields discovered in 2016 and 2018, respectively. Both fields are approximately 200km east of the island of Trinidad in water depths of approximately 1,800 m.

Ownership structure and joint ventures

BHP Petroleum signed a Production Sharing Contract in 2013 for exploration in the TTDAA 5 Block, BHP Petroleum is operator and has a 65% working interest with Shell as partner.

5.4 Recent performance

During FY2021, BHP Petroleum acquired an additional 28% working interest in Shenzi for $0.5 billion, increasing its share from 44% to 72% of the project. In FY2019, BHP Petroleum completed the divestment of its U.S. Onshore Shale business, realising net proceeds on sale of $10.4 billion.

⁴²  These are non-IFRS measures that are unaudited but derived from audited Financial Statements. These measures are presented to provide further insight into BHP Petroleum’s performance. Refer to definitions in Glossary.

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5.5 Reserves and resources

Notes:

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Notes:

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5.6 Corporate structure of BHP Petroleum

Set out below is BHP Petroleum’s list of subsidiaries. The list of subsidiaries contains all group members with the exception of certain entities in which BHP Petroleum holds an insignificant minority shareholding.

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