BHP in talks to sell Petroleum business to Woodside

BHP confirmed on Monday that it has initiated a strategic review of its petroleum business and is in talks about a potential merger of the unit with Australia's Woodside Petroleum.

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Responding to press speculation, the company noted that it regularly reviews its portfolio of assets to seek opportunities to maximise long-term shareholder value.

BHP said 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. We confirm that we have been in discussions with Woodside," it said.

While talks between the two are currently progressing, no agreement has been reached on any such transaction BHP added.

"A further announcement will be made as and when appropriate."

In a separate statement, Woodside said: "Woodside continuously reviews the composition of its asset portfolio and opportunities to create and deliver value for shareholders.

"Woodside is engaged in discussions with BHP regarding a potential merger involving BHP’s entire petroleum business through a distribution of Woodside shares to BHP shareholders."

Russ Mould, investment director at AJ Bell, said: "Is the oil and gas industry becoming toxic? News that resources firm BHP is closer to an exit from oil to focus purely on its mining operations is the latest sign of investment moving away from crude.

"There is a party potentially willing to take on the assets in Woodside Petroleum - so oil and gas can’t be entirely written off yet. However, it’s starting to feel like the direction of travel is clear as the impact of man-made emissions becomes more tangible.

"If BHP can make this deal happen it would help realise significant value in the business and put a big tick in the ESG box.

"While it is one of several options being looked into at BHP it looks like the writing is in the stars for its petroleum arm, with the business also scurrying away from its coal holdings.

"Rather than being victims of the transition away from fossil fuels, the miners can expect to play a pretty full part given the metals they dig out of the ground will be crucial to building the infrastructure and kit for large-scale renewables projects and electric vehicles.

"By exiting the oil business BHP could free up funds to increase its exposure in areas like battery metals and copper where demand from the ‘green’ economy is likely to be particularly robust."

At 1245 BST, the shares were down 2% at 2,276p.