17 Aug - 14 min read

Woodside and BHP to create a global energy company

Woodside and BHP to create a global energy company

BHP Group Plc
Registration number 3196209
Registered in England and Wales
Share code: BHP
ISIN: GB00BH0P3Z91

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.


THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.




JOINT ANNOUNCEMENT
Release Time        IMMEDIATE
Date                17 August 2021
Release Number      16/21


Woodside and BHP to create a global energy company

Woodside Petroleum Ltd (“Woodside”) and BHP Group (“BHP”) have entered into a merger
commitment deed to combine their respective oil and gas portfolios by an all-stock merger (the
“Transaction”) to create a global top 10 independent energy company by production.

On completion of the Transaction, BHP’s oil and gas business would merge with Woodside,
and Woodside would issue new shares to be distributed to BHP shareholders. The expanded
Woodside would be owned 52 per cent by existing Woodside shareholders and 48 per cent by
existing BHP shareholders. The Transaction is subject to confirmatory due diligence,
negotiation and execution of full form transaction documents, and satisfaction of conditions
precedent including shareholder, regulatory and other approvals.

With the combination of two high quality asset portfolios, the proposed merger would create
the largest energy company listed on the ASX, with a global top 10 position in the LNG industry
by production. The combined company will have a high margin oil portfolio, long life LNG
assets and the financial resilience to help supply the energy needed for global growth and
development over the energy transition.

Attractive strategic and financial rationale

The combination of Woodside and BHP’s oil and gas business is expected to deliver
substantial value creation for both sets of shareholders from across a range of areas, including:
   -   Greater scale and diversity of geographies, products and end markets through an
       attractive and long-life conventional portfolio
   -   Resilient, high margin operating cash flows to fund shareholder returns and business
       evolution to support the energy transition
   -   Strong growth profile with a plan to achieve targeted Scarborough FID in the 2021
       calendar year and capacity to phase the most competitive, high-return options within
       the portfolio
   -   Proven management and technical capability from both companies
   -   Shared values and focus on sustainable operations, carbon management and ESG
       leadership
   -   Estimated synergies of more than US$400 million (100 per cent basis, pre-tax) per
       annum from optimising corporate processes and systems, leveraging combined
       capabilities and improving capital efficiency on future growth projects and exploration
   -   Greater financial resilience, relative to Woodside’s and BHP’s standalone petroleum
       businesses.

Woodside CEO and Managing Director Meg O’Neill said, “Merging Woodside with BHP’s oil
and gas business delivers a stronger balance sheet, increased cash flow and enduring
financial strength to fund planned developments in the near term and new energy sources into
the future.

“The proven capabilities of both Woodside and BHP will deliver long-term value for
shareholders through our geographically diverse and balanced portfolio of tier 1 operating
assets and low-cost and low-carbon growth opportunities.

“The proposed transaction de-risks and supports Scarborough FID later this year and enables
more flexible capital allocation. We will continue reducing carbon emissions from the combined
portfolio towards Woodside’s ambition to be net zero by 2050.”

BHP CEO Mike Henry said, “The merger of our petroleum assets with Woodside will create an
organisation with the scale, capability and expertise to meet global demand for key oil and gas
resources the world will need over the energy transition.

“Bringing the BHP and Woodside assets together will provide choice for BHP shareholders,
unlock synergies in how these assets are managed and allow capital to be deployed to the
highest quality opportunities. The merger will also enable the skills, talent and technology of
both organisations to build a resilient future as the world’s needs evolve.”

Greater scale and diversity of geographies, products and end markets to create a long-
life conventional portfolio

This Transaction delivers significant benefits for both Woodside and BHP shareholders by
creating a long-life conventional portfolio of scale and diversity of geography, product and end
markets.

On a proforma basis, the combined business will consist of:
   -   High quality conventional asset base producing around 200 MMboe (FY21 net
       production)
   -   Diversified production mix of 46% LNG, 29% oil and condensate and 25% domestic
       gas and liquids (FY21 net production)
   -   Wide geographic reach with production from Western Australia, east coast Australia,
       US Gulf of Mexico, and Trinidad and Tobago with approximately 94% of production
       (FY21 net production) from OECD nations
   -   2P reserves of over 2 billion boe comprising 59% gas, and 41% liquids.

Resilient operating cash flows to fund shareholder returns and business evolution to
support the energy transition

Significant operating cash flow will support continued strong returns to shareholders over time.
Woodside will maintain its focus on disciplined growth investment and continued dividends. It

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is expected that Australian shareholders will benefit from the distribution of Woodside’s
significant franking credit balance.

Strong growth profile with a plan to achieve targeted Scarborough FID in 2021 and
capacity to phase high-return options

The Transaction will deliver expanded growth optionality for shareholders with the flexibility to
phase and selectively progress near and longer term high-return options.

Woodside and BHP have developed a plan to targeted final investment decision (FID) for
Scarborough (Australia) by the end of the 2021 calendar year, prior to the proposed completion
date for the merger.

As part of this plan, Woodside and BHP have agreed an option for BHP to sell its 26.5 per cent
interest in the Scarborough Joint Venture to Woodside and its 50 per cent interest in the Thebe
and Jupiter joint ventures to Woodside if the Scarborough Joint Venture takes a FID by 15
December 2021. The option is exercisable by BHP in the second half of the 2022 calendar
year and if exercised, consideration of US$1 billion is payable to BHP with adjustment from an
effective date of 1 July 2021. An additional US$100 million is payable contingent upon a future
FID for a Thebe development.

The Atlantis Phase 3 (US), Mad Dog Phase 2 (US), Shenzi North (US) and Sangomar Field
Development Phase 1 (Senegal) projects remain on budget and on track, and along with
significant brownfield expansion options, provide opportunity for near- and medium-term
growth.

Longer term embedded options include the Wildling (US), Trion (Mexico), Calypso (Trinidad
and Tobago) and Browse (Australia) projects. These options offer significant potential growth
coupled with multiple exploration opportunities and partnerships.

Proven management and technical capability from both companies

The combined business will benefit from the joint management and technical petroleum
expertise of both companies, led by Meg O’Neill as the CEO and Managing Director. Leading
HSE performance, LNG production and marketing, deepwater oil development and production,
exploration success, and international experience will come together to create a differentiated
set of capabilities. These capabilities are further supplemented through investments in
technology and low carbon solutions, and strong governance systems. In addition, it is
intended that the Woodside Board will appoint a current BHP director as a Woodside director
on completion.

Shared values and focus on sustainable operations, carbon management and ESG
leadership

The combined business will continue to have an unrelenting focus on safe, sustainable and
reliable operations, building on Woodside’s and BHP’s strong track records.

It will build on Woodside’s existing targets to reduce net emissions by 15 per cent and 30 per
cent by 2025 and 2030 respectively, on the pathway to its ambition of net zero by 2050,
applying these to the combined portfolio. Progress will be reported on both an operated and
non-operated equity emissions basis.

In support of the goals of the Paris Climate Agreement, and to contribute to the energy
transition, the combined business will focus on building and maintaining a high return and
carbon-resilient portfolio which includes natural gas and new energy technologies.
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The combined business is expected to generate significant cash flow this decade to support
the development of new energy products and low carbon solutions including hydrogen,
ammonia and carbon capture and storage (CCS).

Synergies and benefits

This merger of highly complementary asset portfolios is expected to unlock material synergies.
Woodside and BHP have estimated annual synergies to be in excess of US$400 million per
annum (100 per cent basis, pre-tax).

These synergies are anticipated to come from:
   -   Optimising corporate processes and operating costs across the entire portfolio
   -   Leveraging the leading petroleum capabilities of both organisations including
       technology, operating, sales and marketing, infrastructure and resource development
       expertise
   -   Optimising spend on exploration and future growth projects through the development
       of combined and more capital efficient opportunities.

Greater financial resilience, relative to Woodside and BHP’s standalone petroleum
business

On completion of the Transaction, the combined business’ balance sheet will be strengthened
by the resilience the merged portfolio delivers through the cycle. On a proforma basis (12
months to 30 June 2021), the combined business will have:
   -   A large earnings base with revenue of more than US$8 billion and EBITDA of US$4.7
       billion
   -   Operating cash flows of more than US$3 billion supported by resilient foundation assets
   -   A strong balance sheet reflected with low gearing of 12%.

Merger mechanics

Under the proposed transaction, Woodside, or a wholly owned subsidiary of Woodside, will
acquire 100 per cent of the issued share capital of BHP Petroleum International Pty Ltd in
exchange for shares in Woodside which will deliver 48 per cent to BHP shareholders on
completion. Woodside shares will be immediately distributed to BHP shareholders. Woodside
will remain listed on the ASX with listings on additional exchanges being considered.

Both the Woodside and BHP boards of directors confirm their support for the Transaction. The
merger is expected to be completed in the second quarter of the 2022 calendar year with an
effective date of 1 July 2021.

The Transaction is subject to confirmatory due diligence, negotiation and execution of full form
transaction documents which is targeted for October 2021, and satisfaction of conditions
precedent including shareholder, regulatory and other approvals. Under the merger
commitment deed, each party has agreed to pursue a merger transaction and agreed to certain
exclusivity arrangements and to each pay a reimbursement fee of approximately US$160
million in certain circumstances.

Woodside’s financial advisers are Gresham Advisory Partners Limited and Morgan Stanley
Australia Limited, and its legal advisers are King & Wood Mallesons and Vinson & Elkins LLP.

BHP’s financial advisers are J.P. Morgan, Barclays and Goldman Sachs and its lead legal
adviser is Herbert Smith Freehills.
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About BHP

BHP is the world’s largest diversified natural resources company by market capitalisation with
over 80,000 employees and contractors, primarily in Australia and the Americas. BHP’s
products are sold worldwide and it is among the world’s top producers of major commodities,
including iron ore, copper, nickel and metallurgical coal.

BHP pioneered the development of an oil and gas industry in Australia with the Bass Strait
discovery in 1965. The BHP petroleum business now has conventional oil and gas assets in
the US Gulf of Mexico, Australia, Trinidad and Tobago, and Algeria, and appraisal and
exploration options in Mexico, Trinidad and Tobago, western US Gulf of Mexico, Eastern
Canada, and Barbados.

The crude oil and condensate, gas and natural gas liquids (NGLs) produced by BHP’s
petroleum assets are sold on the international spot market or domestic market. The total gross
asset value of the BHP petroleum business as at 30 June 2021 was US$15.4 billion, it
contributed US$3.9 billion to BHP group revenue and it generated EBITDA of US$2.3 billion
for the year ended 30 June 2021.

About Woodside

Woodside led the development of the LNG industry in Australia and is applying this same
pioneering spirit to solving future energy challenges. With a focused portfolio, Woodside is
recognised for its world-class capabilities as an integrated upstream supplier of energy. As
Australia’s leading LNG operator, Woodside operated 6% of global LNG supply in 2020.
Woodside’s proven track record and distinctive capabilities are underpinned by more than 65
years of experience, making Woodside a partner of choice.

Disclaimer and important notice

This announcement is subject to:
   -    the same “Disclaimer, important notice and assumptions” contained in pages 2 to 3 of
        Woodside’s investor presentation titled “Woodside and BHP petroleum merger” dated
        17 August 2021; and
   -    the same “Disclaimer” contained in page 2 of BHP’s investor presentation titled
        “Growing value and positioning for the future” dated 17 August 2021, each with any
        necessary contextual changes.




 BHP contacts                                        Woodside contacts

 Investor Relations                                  Investor Relations
 Email: investor.relations@bhp.com                   Email: investor@woodside.com.au

 Australia and Asia                                  Damien Gare
 Tara Dines                                          Mobile: +61 417 111 697
 Tel: +61 3 9609 2222 Mobile: + 61 499 249 005
                                                     Matthew Turnbull
 Europe, Middle East and Africa

                                                 5
 James Bell                                                       Mobile: +61 410 471 079
 Tel: +44 20 7802 7144 Mobile: +44 7961 636 432

 Americas
 Brian Massey
 Tel: +1 713 296 7919 Mobile: +1 832 870 7677

 Media Relations                                                  Media
 Email: media.relations@bhp.com                                   Email: christine.forster@woodside.com.au

 Australia and Asia                                               Christine Forster
 Gabrielle Notley                                                 Mobile: +61 484 112 469
 Tel: +61 3 9609 3830 Mobile: +61 411 071 715

 Europe, Middle East and Africa
 Neil Burrows
 Tel: +44 20 7802 7484 Mobile: +44 7786 661 683

 Americas
 Judy Dane
 Tel: +1 713 961 8283 Mobile: +1 713 299 5342



 Woodside Petroleum Ltd.
                                             Further information on Woodside can be found at woodside.com.au
 ACN 004 898 962

 Mia Yellagonga, 11 Mount Street
 Perth WA 6000, Australia
                                             This ASX announcement was approved and authorised for release by
                                             Woodside’s Disclosure Committee.
 Tel +61 8 9348 4000



Further information on BHP can be found at: bhp.com

Sponsor: UBS South Africa (Pty) Limited

The person responsible for arranging the release of this announcement on behalf of BHP is Stefanie
Wilkinson, Group Company Secretary.

Authorised for lodgement by:
Stefanie Wilkinson
Group Company Secretary

BHP Group Limited ABN 49 004 028 077                               BHP Group plc Registration number 3196209
LEI WZE1WSENV6JSZFK0JC28                                           LEI 549300C116EOWV835768
Registered in Australia                                            Registered in England and Wales
Registered Office: Level 18, 171 Collins Street                    Registered Office: Nova South, 160 Victoria Street
Melbourne Victoria 3000 Australia                                  London SW1E 5LB United Kingdom
Tel +61 1300 55 4757 Fax +61 3 9609 3015                           Tel +44 20 7802 4000 Fax +44 20 7802 4111



Members of the BHP Group which is
headquartered in Australia
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Forward-looking statements
This announcement contains forward-looking statements. The words ‘anticipate’, ‘believe’, ‘aim’, ‘estimate’, ‘expect’,
‘intend’, ‘may’, ‘target’, ‘plan’, ‘forecast’, ‘project’, ‘schedule’, ‘will’, ‘should’, ‘seek’ and other similar words or
expressions are intended to identify forward-looking statements. These forward-looking statements are based on
assumptions and contingencies that are subject to change without notice and involve known and unknown risks,
uncertainties and other factors, many of which are beyond the control of Woodside, BHP and their respective related
                                                              6
bodies corporate and affiliates, and each of their respective directors, officers, employees, partners, consultants,
contractors, agents, advisers and representatives, and could cause results, performance or achievements to be
materially different from the results, performance or achievements that are or may be expressed or implied by those
forward-looking statements or any projections or assumptions on which those statements are based.
The forward-looking statements are subject to risk factors, including those associated with the oil and gas industry
as well as those in connection with the Transaction. It is believed that the expectations reflected in these statements
are reasonable, but they may be affected by a range of variables which could cause actual results or trends to differ
materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, geotechnical factors,
drilling and production results, gas commercialisation, development progress, operating results, engineering
estimates, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative,
fiscal and regulatory developments, economic and financial markets, conditions in various countries, approvals and
cost estimates.
Investors are strongly cautioned not to place undue reliance on forward-looking statements, particularly in light of
the current economic climate and the significant uncertainty and disruption caused by the COVID-19 pandemic.
Forward-looking statements are provided as a general guide only and should not be relied on as an indication or
guarantee of future performance. These statements may assume the success of the Transaction, BHP’s oil and
gas portfolio or Woodside’s business strategies, the success of which may not be realised within the period for
which the forward-looking statements may have been prepared, or at all. No guarantee, representation or warranty,
express or implied, is made as to the accuracy, likelihood of achievement or reasonableness of any forecasts,
prospects, returns, statements or tax treatment in relation to future matters contained in this presentation.
Past performance and pro forma historical information is given for illustrative purposes only. Pro forma information
is presented on a combined basis, without giving effect to any pro forma adjustments. It should not be relied on and
is not indicative of future performance, including future security prices.

Disclosure of reserve information and cautionary note to US investors
Unless expressly stated otherwise, all estimates of oil and gas reserves and contingent resources disclosed in this
presentation have been prepared using definitions and guidelines consistent with the 2018 Society of Petroleum
Engineers (SPE)/World Petroleum Council (WPC)/American Association of Petroleum Geologists (AAPG)/Society
of Petroleum Evaluation Engineers (SPEE) Petroleum Resources Management System (PRMS). Estimates of
reserves and contingent resource in this presentation will differ from corresponding estimates prepared in
accordance with the rules of the US Securities and Exchange Commission (the “SEC”) and disclosure requirements
of the US Financial Accounting Standards Board (“FASB”), and those differences may be material. For additional
information regarding the availability of Woodside’s reserves disclosures in accordance with SEC requirements,
please see Woodside’s investor presentation dated 17 August 2021 and released to the ASX. For additional
information regarding BHP’s reserves, please see BHP’s annual report on Form 20-F filed with the SEC.

No offer or solicitation
This communication relates to the proposed Transaction between Woodside and BHP. This communication is not
intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any securities
or a solicitation of any vote or approval with respect to the Transaction or otherwise, nor shall there be any offer,
solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such jurisdiction. No offer of securities in the United
States shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933.

Important additional information and where to find it
In connection with the proposed Transaction, Woodside intends to file with the US Securities and Exchange
Commission (the “SEC”) a registration statement on Form F-4 (the “Registration Statement”) to register the
Woodside securities to be issued in connection with the proposed Transaction (including a prospectus therefor).
Woodside and BHP also plan to file other documents with the SEC regarding the proposed Transaction. This
communication is not a substitute for the Registration Statement or the prospectus or for any other document that
Woodside or BHP may file with the SEC in connection with the Transaction. US INVESTORS AND US HOLDERS
OF WOODSIDE AND BHP SECURITIES ARE URGED TO READ THE REGISTRATION STATEMENT,
PROSPECTUS AND OTHER DOCUMENTS RELATING TO THE PROPOSED TRANSACTION (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS TO THOSE DOCUMENTS) THAT WILL BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT WOODSIDE, BHP AND THE PROPOSED TRANSACTION. Shareholders
will be able to obtain free copies of the Registration Statement, prospectus and other documents containing
important information about Woodside and BHP once such documents are filed with the SEC, through the website

                                                            7
maintained by the SEC at http://www.sec.gov. Copies of such documents may also be obtained from Woodside
and BHP without charge.




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Date: 17-08-2021 08:53:00
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