Why is the BHP share price sliding lower?

Posted: 18 August 2021 1:34 pm
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Shares in mining giant BHP have climbed 28% in the last 12 months.

Shares in the world’s biggest miner BHP (ASX: BHP) are among the biggest losers on the ASX boards on Wednesday. Shares in the company were down 5.5% at $48.52 at the time of writing.

What is weighing down the BHP stock price?

BHP shares have dropped after the mining giant late on Tuesday announced a historic deal under which it would divest its entire petroleum business to Woodside Petroleum (ASX: WPL) in return for the latter’s shares.

The deal will catapult the expanded Woodside into the top 10 producers in the world and consolidate Australia's energy sector.

BHP shareholders will own 48% of Woodside as part of the deal which values BHP Petroleum at US$13.9 billion.

BHP CEO Mike Henry also announced a major shift in BHP’s structure, with the company to abandon its dual-listed structure that had been in place since its merger with Billiton in 2001. It will retain its ASX listing.

Analysts had been expecting the decisions to put pressure on the BHP stock to account for the divestment of the petroleum business and the loss of arbitrage in the dual-listed shares.

Strong results

Meanwhile, news of BHP’s best profit in nearly a decade has understandably been relegated to second spot.

The world’s biggest miner posted an underlying profit of $17.08 billion for the 12 months to 30 June, an 88% surge over the previous year, on the back of booming commodities prices.

BHP’s iron ore division again dominated its results, with underlying earnings before interest and tax of US$24.29 billion, or about 80% of its total underlying earnings of US$30.29 billion.

The miner will pay $2 per share as a final dividend, totalling $10.1 billion, and bringing the total payout for the year to $3.01 a share.

But the strong run could be coming to an end, as iron ore prices have slid nearly a third in the last few weeks over concerns of a resurgence of COVID-19 cases in China and its decision to lower emissions by curbing steel output.

Considering buying BHP shares?

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