What is weighing down the Woodside share price?
Shares in the oil and gas giant climbed 8.5% in the last 12 months.
Shares in Australia’s largest oil and gas company Woodside (ASX: WPL) are among the top traded shares on the ASX boards. The stock was down 2.6% to $21.62 at the time of writing.
Why is the Woodside stock price lower?
Woodside shares have come under pressure after the company confirmed talks with resources giant BHP (ASX: BHP) for the takeover of the latter’s petroleum assets.
The assets, worth a potential $20 billion, cover BHP’s entire petroleum portfolio spanning Australia, the Gulf of Mexico and Trinidad and Tobago assets, and could turn Woodside into a major global company.
“A number of options are being evaluated. One option is a potential merger of the Petroleum business with Woodside Petroleum and a distribution of Woodside shares to BHP shareholders,” BHP said in a statement to the ASX on Monday.
Woodside also confirmed the talks with BHP.
The discussions follow growing investor pressure on BHP to exit its fossil fuel businesses. The company has already put its thermal coal assets on the market.
Share dilution
A deal for BHP’s petroleum division would likely see Woodside paying for the assets with its own shares to be partially distributed to BHP shareholders. The mining company is also expected to gain a 15-20% stake in Woodside as a result.
Investors are worried this would result in the dilution of Woodside shares given that an all-share deal would potentially double the number of Woodside shares on issue.
The interest from the oil and gas producer comes amid consolidation in the industry after smaller rivals Santos (ASX: STO) and Oil Search (ASX: OSH) agreed to a merger in recent weeks.
The sector has been under increasing pressure with falling oil and gas prices during the pandemic and the threat of climate change that is threatening longer term demand.
Woodside shares have gained 8.5% over the past 12 months.
Considering buying Woodside shares?
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