A huge new company has arrived on the London Stock Exchange overnight.
Shares of Woodside Energy, based in the Western Australian city of Perth, were added to the main list and enjoyed a healthy first day premium, rising from the opening price of 1800p and as high as 1992.8p by midday.
The company is valued at just under £36 billion at current prices.
Woodside might not be a household name in the UK, but it certainly is in Australia.
Founded in 1954 as an oil company, taking its name from the town of Victoria near its leases, the company pioneered offshore oil exploration, setting world records for drilling depths beneath the South Australian seabed.
The company remained a specialist offshore oil and liquefied natural gas producer in the decades that followed, with its partners Shell and BHP – the Australian mining giant – each becoming 40% shareholders.
In fact, Shell attempted to buy out other shareholders in a $10 billion takeover bid blocked by the Australian government in 2001. Both she and BHP subsequently sold their holdings.
Fast forward to last year when BHP had that before divested its US shale assetsannounced that it would abandon its dual listing structure and move its main share listing to Australia – giving up its status as the largest company on the FTSE 100 in the process.
The announcement was accompanied by news that BHP, which itself had attempted to buy Woodside in the past, would sell its remaining oil and gas assets to Woodside.
That deal closed last Wednesday, creating one of the 10 largest independent energy companies in the world by hydrocarbon production.
Meg O’Neill, Woodside Chief Executive, said, “Woodside begins today its journey as a global company, becoming a larger supplier of the energy the world needs now and will demand in the future.”
“The merger delivers a diverse portfolio of high quality assets and a range of growth opportunities in the oil, gas and new energy sectors that promise continued value for our shareholders.”
“We believe the completion of Fusion will position Woodside to play a more significant role in the energy transition that is imperative as we respond to climate change while ensuring reliable and affordable energy supplies for a growing and burgeoning world population. “
With BHP shareholders emerging with 48% of the expanded business, it means many UK investors will now hold a stake in Woodside.
So what do you get?
As you’d expect, Woodside’s assets are heavily skewed towards Australia, including Pluto, which takes gas from the offshore Pluto and Xena gas fields in Western Australia and turns it into liquefied natural gas (LNG), much of which is shipped to customers in Japan.
It also owns just over a third of North West Shelf, just off the country’s north-west coast, the massive natural gas project that ranks as Australia’s largest resource project of all time and where Woodside first partnered with Shell – a fellow shareholder – in 1971.
The company’s current largest growth project is the Scarborough gas field off the coast of Western Australia.
Further afield, Woodside also owns interests in the Angostura oil and gas field off the coast of Trinidad, the Shenzi oil and gas field off the coast of Louisiana in the Gulf of Mexico, where it is also a minority shareholder in Mad Dog and Atlantis. Oil and gas fields, both operated by BP.
There is also interest in the Sangomar oil field in Senegal, which Ms O’Neill says is a grade ideally suited to replacing Russian crude, which will soon no longer reach European refineries.
Woodside is also building non-oil and gas projects as it joins forces with companies like BP and Shell in its attempt to steer away from hydrocarbons.
It has invested in three separate hydrogen and ammonia projects in Perth, Tasmania and Oklahoma, and solar projects in California and Western Australia.
The rationale for the merger was that the expanded Woodside group would be more geographically diversified, with 15% of its operations in the US Gulf of Mexico and 5% in Trinidad and Tobago, and more diverse in terms of its products, with 29% of production coming from oil and condensate.
At its core, however, it is an investment in the LNG sector. LNG still accounts for 46% of combined production in the new group.
And that makes it a more interesting investing game than it was at the beginning of the year.
Russia’s invasion of Ukraine has spurred a determination in many countries to wean themselves off Russian gas – and for many of them that means buying LNG, a commodity of which Australia is the world’s largest producer by volume, just ahead of Qatar and the U.S .
Even before the war in Ukraine, global LNG demand was forecast to more than double between 2021 and 2050, driven by declining gas production in Europe and parts of Asia.
It was already thought that Australia would be the most likely to benefit from this increase in demand thanks to its existing long-term supply contracts with many Asian customers.
The question for investors is whether much of this is already priced in.
Woodside’s Australian shares are already up 45% since the start of the year, but much of the share price strength has come in recent weeks and may reflect the fact that a number of Sydney-based investors who were previously “short”. , Woodside shares, which were sold ahead of the company’s major oil offering by BHP, recently bought to close those positions.
So much of the value could already be in Woodside’s stock price. However, this will be a deal worth keeping an eye on.
The London stock market has a new giant. It’s an oil and gas company. | business news
Source link The London stock market has a new giant. It’s an oil and gas company. | business news