One of the biggest pieces of news in the August reporting season has been BHP Group Ltd (ASX: BHP) earnings. The iron ore giant reported its full-year results last Tuesday ahead of a potential merger with Woodside Petroleum Ltd (ASX: WPL).
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How does the BHP earnings result compare to Woodside's?
It's worth noting the key differences between BHP and Woodside at the outset. BHP is an Aussie miner with diversified interests across the energy sector. Woodside is largely an oil and gas producer — Australia's largest independent dedicated oil and gas company at that.
The BHP earnings result included the highlights below:
- Underlying earnings before, interest, tax, depreciation and amortisation (EBITDA) up 69% to US$37.4 billion
- Free cash flow up 140% to US$19.4 billion
- Full-year dividend up 151% to 301 US cents per share
However, iron ore and copper remain the primary revenue drivers for BHP. Of the total US$60.8 billion of revenue, just 6.5% or US$3.9 billion comes from petroleum.
When comparing BHP and Woodside, it's worth looking at how the petroleum segment performed rather than the overall result. BHP's Petroleum EBITDA totalled US$2.3 billion with the segment's EBITDA margin up 3% to 58%.
For its part, Woodside reported a half-year EBITDA of $1,496 million. That included liquids production of 8.7 million barrels of oil equivalent (mmboe). Woodside generated $311 million in free cash flow
Off the back of the BHP earnings, the two energy giants have entered into a merger agreement. The transaction will combine each entity's significant oil and gas portfolios via an all-stock merger.
The consolidated entity will create a global top 10 independent energy company by production. It is hoped that combining expertise across the two businesses will create synergies and a high margin oil portfolio. Woodside and BHP are also targeting long life LNG assets as part of the new entity's strategy.
BHP shareholders would own 48% of the newly combined business with the merger expected to complete in Q2 of calendar year 2022.
Foolish takeaway
BHP's earnings clearly disappointed investors with shares in the iron ore giant sliding more than 14% in the last 5 days. Investors will be hoping the combined power of BHP and Woodside can deliver large synergies and boost future results in the right direction.
