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

India’s IOC to invest in processing-related upgrades, expansions

02/19/2015 Indian Oil Corp. Ltd. (IOC) has approved a series of expansions and upgrades designed to improve fuel quality and production at several of its refi...

PwC: Chemicals industry M&A activity in 2014 reached 10-year high

02/19/2015 Mergers and acquisitions (M&A) activity in the US chemicals business ramped up substantially in 2014, recording the highest volume in a decade ...

Talisman shareholders approve acquisition by Repsol

02/19/2015

Shareholders of Talisman Energy Inc., Calgary, have approved the acquisition of the company by Spain’s Repsol SA.

Marathon revises down budget by 20%

02/19/2015

Marathon Oil Corp., Houston, has reduced its capital, investment, and exploration budget for 2015 by another 20% to $3.5 billion.

Texas private equity firm to help fund Pennsylvania gas-fired power plant

02/19/2015 Panda Power Funds agreed to jointly develop a 1,000-Mw Pennsylvania power project that will use natural gas from the Marcellus shale, the Dallas pr...

Santos finalizes Papua New Guinea permit acquisition

02/19/2015 Santos Ltd. has finalized its acquisition of 50% interest in exploration permit PPL 269 in Papua New Guinea from New Guinea Energy for an initial p...

ExxonMobil investigating explosion at Torrance refinery

02/19/2015 An investigation is under way into the cause of an explosion and ensuing fire that took place at ExxonMobil Corp.’s 149,500-b/d Torrance, Calif., r...

Pemex cuts budget by $4 billion

02/18/2015 The board of Petroleos Mexicanos (Pemex) has approved a $4-billion budget reduction for 2015, an 11.5% decrease compared with the previous expendit...

Pemex lets contract for Salamanca refinery amid budget cuts

02/18/2015 Mexico’s Petroleos Mexicanos (Pemex), through a contractor, has let a contract to SENER Ingeniería y Sistemas SA, Mexico City, a division of SENER ...
White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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