Woodside explains rejection of Shell�s offer


In the detailed explanation previously promised, Woodside Petroleum Ltd.�s independent directors reiterated Wednesday that a sweetened $2.5 billion offer by the Royal Dutch/Shell Group for 56% controlling interest of the Australian firm is inadequate.

In late November, the directors rejected Shell�s cash offer of $14.80/share (Aus.), plus a call option for one share of Woodside stock, exercisable at the same price if shareholders approved Shell�s separate merger proposal. At that time, they promised to provide their shareholders �with detailed recommendations shortly.� (OGJ Online, Nov. 28, 2000)

The Woodside independent directors subsequently hired an outside expert, Deloitte Corporate Finance Pty Ltd., which used three different valuation methods to assess Shell�s offer.

Based on that evaluation, Shell�s offer �is neither fair nor reasonable;� does not provide �an adequate premium;� and does not �fully reflect the growth initiatives of Woodside,� they said in a written statement.

�The independent expert has assessed the fair market value of Woodside to be $16-$18/share,� said John Akehurst, the company�s managing director.

�This range compares with Shell�s offer of $14.80/share and a conditional call option which the independent expert has valued at 20�-42�. The independent expert has concluded that the offer is neither fair nor reasonable,� he said.

Akehurst also cited three unspecified recent takeovers in Australia�s resource sector, in which the average premiums were reportedly in the range of 53-101%, �measured 1 day and 2 months, respectively, before the bids.�

He said, �Shell�s takeover premium for Woodside, when measured against the same criteria, ranges from just 4% to only 10%.�

Moreover, Deloitte officials estimated the average premium for takeover bids among global oil and gas companies to be 48% above the share price a month before the bid. The average premium offered in cash bids greater than $2 billion (US) for large companies was 43%, officials said.

In cases where the bidding company already owned more than 20% of the takeover target, officials figured the average premium at 19% over the share price a month before the bid and 26% above the share price 2 months before. Shell now has 34.3% interest in Woodside.

�The premium being offered to shareholders by Shell falls well short of these benchmarks,� said Akehurst.

When Shell sweetened its offer in November, Raoul Restucci, exploration and production director for the Asia-Pacific region, said the proposed price �is above the top end of the experts' valuation of $11.87-14.07/share (Aus.)" for Woodside stock.

Moreover, he said then, �The offer is being made at a time of volatile and high oil prices�not at a time of depressed market conditions. The offer is also made at a time when the Woodside share price has been buoyed by considerable speculation in relation to a revised merger proposal from us."

Shell�s revised proposal also included a swap of a substantial parcel of Shell properties, valued at $6.3-7.3 billion (Aus.), for 333.3 million new shares of Woodside stock. That portfolio of properties includes Shell's interests in the North West Shelf project, Laminaria-Corallina, Greater Gorgon and other selected Australian holdings, along with 20% interest in its Brutus deepwater development project in the Gulf of Mexico.

The revised offer would more than double to $2.5 billion the direct value transferred to Woodside through that deal, up from $1.2 billion under the previous offer, Shell officials said. It is their final offer for Woodside, they said at the time.

But that proposed transfer of properties was not included in Woodside�s assessment of the offer. The company lacks sufficient information about some of those assets to make a recommendation at this time, Akehurst said.

However, he promised that the offered properties �will be rigorously assessed to ensure that the value for all shareholders is properly understood before a recommendation is put to shareholders at a general meeting between March and June next year,� he said.

Meanwhile, the independent directors pointed out that Shell would reap the benefit of a proposed yearend dividend of 60�/share if other shareholders accepted its offer for their stock. They claimed the sale of stock could have adverse tax consequences for shareholders, too.

Woodside has the asset base, financial capability and the people �to deliver substantial growth over the next decade,� said Akehurst. The company has one of the lowest finding costs in the world, averaging 51�/bbl of oil equivalent since 1998.

Related Articles

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Forum extends study of subsea integrity

06/30/2015

Work by an industry forum called SURF IM Network, which studies oil and gas subsea integrity management, has been extended by 3 years.

Survey begins of collaboration on the UKCS

06/30/2015

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

Court rejects BP, Anadarko Macondo appeals

06/30/2015 BP PLC and Anadarko Petroleum Corp. have lost separate appeals to the US Supreme Court to overturn a lower-court decision expanding their financial...

Firms form Powder River basin logistics JV

06/29/2015 NGL Energy Partners LP, Tulsa, and Meritage Midstream Services II LLC, Denver, have formed a joint venture to develop crude oil gathering and water...

OGJ Newsletter

06/29/2015
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected