MARUY Marubeni Corp (PK)

   By Rhiannon Hoyle 
 

Australia's Woodside Petroleum Ltd. this month agreed an all-stock deal to buy the oil-and-gas business of BHP Group Ltd., the world's largest mining company, which the companies said would create one of the world's top-10 independent energy companies by production.

Combining the businesses into what would also become the largest energy company on Australia's stock exchange would give Woodside a stronger cash flow and fiscal strength to fund both planned developments and investment in new energy markets, according to newly appointed Woodside CEO Meg O'Neill.

Ms. O'Neill spoke with The Wall Street Journal about what the deal means for Woodside's exposure to liquefied natural gas, potential ESG risks and future rehabilitation obligations. Here are edited excerpts:

Q: What feedback have you received from shareholders on the proposed deal?

A: Our investors and shareholders are very excited. They recognize the strategic rationale for the deal. They recognize that the merger gives us a geographically diverse and very well balanced portfolio of options and creates significant growth optionality. Investors are particularly excited about what it does for us financially. The balance sheet will be in very strong shape with the BHP petroleum business coming across with no debt. Cash flow will be bolstered--doubled versus what Woodside's forecasts alone would have been, which gives us the financial strength to not just fund our planned development in both the hydrocarbon and low-carbon opportunities, but also to return value to our shareholders throughout the cycle.

Q: What about concerns from some shareholders that it will dilute Woodside's LNG exposure?

A: Investors are very keen to understand our product mix. I think what's interesting to note is that when the merger proceeds we will still be 70% gas: we will be about 50% LNG, the rest will be a pipeline gas position. So, in terms of the way that we support our customers in decarbonizing, we will remain a very gas-oriented business which I think is quite exciting for our investors.

Q: Does this deal raise the ESG risks Woodside might face by increasing its exposure to fossil fuels?

A: One thing I think Woodside's investors should be quite pleased with is all of Woodside's commitments as it pertains to climate change and decarbonization will be applied to the entire portfolio. So we are firmly committed to transparently reporting our equity emissions, operated and not operated. We've made commitments to reduce our net emissions: reducing net emissions 15% by 2025, 30% by 2030, with an aspiration of net zero by 2050. Those commitments will be applied to the entire portfolio. So I think the strength of our commitments to decarbonization is something that investors should take great heart in.

Q: Do you expect the oil and gas sector to face increasing pressure from activists to address climate change?

A: We recognize that climate change is one of the most significant issues facing our planet today. We also fully appreciate that as an energy company we have a particularly important role to play, which is why we do have strong decarbonization commitments for our own business. One of the things that I think will be a great opportunity for us going forward, that will help demonstrate our commitments to a lower carbon future, is the work that we're doing looking at investment in lower-carbon energy, such as hydrogen and ammonia. And we're working today, in a number of consortia and partnerships with prospective customers of those products, to progress a pathway where we will be able to make those investments.

Q: If the deal with BHP goes ahead, there will likely be some BHP shareholders that want to sell their allocated stock in Woodside. Are you concerned about the prospect of an exodus?

A: We have carefully reviewed the BHP shareholder register. When we look at the aggregate shareholdings in BHP and compare it to Woodside shareholders, we think there will be demand for Woodside shares that outpace the supply that's available from those BHP shareholders that don't want to stay with us. So, at the end of the day, we think the balance will work out favorably. But we do recognize there will be a bit of uncertainty, particularly as BHP progresses with their unification ahead of this merger being concluded.

Q: What is your response to concerns from environmental groups over how Woodside will handle the rehabilitation of BHP assets?

A: We fully accept that as part of a responsible development of offshore resources one key step is remediation. I think we have very strong credentials. We routinely plug in abandoned wells that are no longer flowing, and so we understand the obligations. The obligations have been accounted for in the valuation that we've applied to the merger. We look forward to closely working with the operator, particularly in Bass Strait on detailing those plans and getting after the work.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

August 27, 2021 02:05 ET (06:05 GMT)

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