Woodside (ASX:WPL) confirms BHP oil and gas merger

Investors contemplate whether Woodside has bitten off more than it can chew…

| More on:
Two Santos oil workers with hard hats shake hands in the foreground of oil equipment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors don't seem too enthusiastic about the Woodside Petroleum Limited (ASX: WPL) share price on Wednesday. Shares in the Australian oil and gas giant are trading 1.3% lower to $20.46 following the release of its FY21 results and merger confirmation.

Weighing on the Woodside share price

There had been plenty of speculation, but yesterday Woodside confirmed the rumours of a merger with the petroleum division of BHP Group Ltd (ASX: BHP). Adding to the information for investors to process today, Woodside also reported its FY21 results.

Indeed, today likely marks one of the most significant days in Woodside's 67-year history. As such, the market is grappling with how the future might look for a ~$35 billion oil and gas, megalodon of a company.

The deal is an all-stock merger, creating a top 10 independent energy company by production in the process. According to Woodside, once complete the merged company will have a high margin oil portfolio. This is in addition to long-life LNG assets and the financial wherewithal to meet global energy needs. Despite this, the Woodside share price is in the negative today.

In a move that has been carefully orchestrated by Meg O'Neill, Woodside shareholders have a few things to be happy about. The previously appointed acting, now permanent, Chief Executive Officer O'Neill drove home a deal that is expected to deliver cost synergies north of US$400 million per annum. This will be through leveraging combined capabilities and capital efficiency.

Furthermore, in an industry that environmentalists have nominated for the chopping block, the merger might give Woodside a bit more longevity. A prime example is the company's Scarborough project, which contains almost no carbon dioxide. Post-merger, Woodside and BHP's joint venture in the project will fall under the one umbrella — unlocking further progress.

Results make for a difficult read

While the merger is one variable in the mix, Woodside's FY21 half-year results add another to the share price equation. The result itself seemed relatively positive, although the market might have expected more.

According to Commsec, consensus estimates were for US$489 million — or approximately AUD$673 million. However, the actual net profit after tax came in at US$354 million. In contrast, the company reported a $4 billion loss in the prior corresponding period.

There's certainly plenty for Woodside shareholders to consider, and perhaps the share price reflects that today. One final tidbit of information — the Woodside share price has gained 0.8% over the past 12 months.

Should you invest $1,000 in Woodside Petroleum Ltd right now?

Before you buy Woodside Petroleum Ltd shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Woodside Petroleum Ltd wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Energy Shares

Why is this ASX coal share crashing 13% on Thursday?

It's a poor day on the market for many ASX coal shares today.

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Energy Shares

How low can the oil price go? Here's Citi's 2025 forecast

Here’s what Citi says investors can expect from the oil price in the year ahead.

Read more »

Miner looking at a tablet.
Energy Shares

ASX 200 uranium share lights up on Queensland acquisition

The ASX 200 uranium producer is increasing its Queensland assets.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Energy Shares

Guess which ASX uranium stock is racing higher on huge news

Let's find out what this uranium developer has announced on Wednesday.

Read more »

A kid stretches up to reach the top of the ruler drawn on the wall behind.
Energy Shares

This ASX 200 share is down 40% in 2 months, an expert says it has significant potential

This fund manager has outlined why this stock has a positive future.

Read more »

oil and gas worker checks phone on site in front of oil and gas equipment
Energy Shares

Why ASX 200 energy shares are facing a plunging oil price in 2025

Just how low will the oil price go in 2025? Let’s find out.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Market News

Why did the ASX 200 hit a six-month low last week?

There was turmoil on the share market with ASX 200 energy stocks the worst affected.

Read more »

Woman refuelling the gas tank at fuel pump, symbolising the Ampol share price.
Energy Shares

This ASX 200 share just hit a 52-week low, one expert thinks it's a great buy

UBS believes this stock could significantly drive returns.

Read more »