BHP MULLING SALE OF WOODSIDE 40% INTEREST

Jan. 22, 1990
BHP Petroleum Pty. Ltd. is considering plans to sell its 40% interest in Woodside Petroleum Ltd., operator of the giant Northwest Shelf gas development project off western Australia. At current prices, a sale would raise about $800 million (Australian). Meantime, a group led by Woodside plans to test an oil discovery near its 1989 Wanaea oil strike as well as conduct further appraisal of the Wanaea find in the Northwest Shelf area.

BHP Petroleum Pty. Ltd. is considering plans to sell its 40% interest in Woodside Petroleum Ltd., operator of the giant Northwest Shelf gas development project off western Australia.

At current prices, a sale would raise about $800 million (Australian).

Meantime, a group led by Woodside plans to test an oil discovery near its 1989 Wanaea oil strike as well as conduct further appraisal of the Wanaea find in the Northwest Shelf area.

Elsewhere off Australia, BP Petroleum Development Ltd. plans to spend about $30.2 million the next 6 years to explore its two new permits in the Bonaparte basin. The recent award of the permits to BP wraps up Australia's 1989 offering of offshore tracts.

Australia also plans its first 1990 major release of offshore acreage in May. Under consideration are:

  • Two areas in the Otway basin off Victoria.

  • Two areas in the southern Canning basin off Western Australia.

  • Four or five areas in the Timor Sea, immediately west of the zone of cooperation and in Area B of the zone (OGJ, Nov. 6, 1989, p. 17),

  • A number of areas in the Great Australian bight off South Australia.

BHP STANCE

BHP Chief Executive Officer P.J. Willcox said his company is not in a hurry to clinch a deal, intending to sell only at the right price and to the right buyer.

Royal Dutch/Shell Group, which also owns a 40% interest in Woodside, has first right of refusal for BHP's Woodside shares under an agreement negotiated in 1976 when the two companies first bought into Woodside.

In 1985, BHP and Shell boosted their interests in Woodside from 20% in an effort to guarantee Woodside's financial standing in the Northwest Shelf development project and underpin sale and purchase agreements under way with the project's eight LNG buyers in Japan.

BHP does not want to destabilize Woodside or the $11 billion LNG project, the company said, because it still will have substantial holdings involved-8.33% of the project's domestic gas sales and one-sixth interest each in LNG sales and current exploration permits.

However, since Woodside had put in place a refinancing package late last year, it no longer needs BHP's backing, Willcox said. Thus, BHP could treat its Woodside interest as a stand-alone asset.

Further, it is a good time to test the market and see if BHP shareholders would be better off with an early return on the Woodside investment, Willcox said.

BHP MOTIVATION

BHP's motivation in seeking a buyer for its Woodside interests relates to its quest to become a major international company.

Its participation in the Northwest Shelf project forms an unnecessarily large slice of BHP's portfolio of interests, Willcox said.

He says the current market is attractive for a sale, citing buoyant oil prices, success of the Northwest Shelf project, strength in Woodside share prices, and further exploratory successes in the Northwest Shelf area.

Industry officials speculated that the high price and prospect of a long wait for returns could drive off any single Australian buyer, although an investment group is possible.

Other speculation on potential buyers centers on Japanese interests or major multinational companies.

BHP appointed investment banker J. P. Morgan to handle inquiries.

EXPLORATORY SUCCESS

Woodside drilled an oil discovery earlier this month near its 1 Wanaea find, which logged a 335 ft gross oil column and was the first significant oil show in the gas prone Carnarvon basin (OGJ, Mar. 13, 1989, p. 29).

Its 1 Cossack, 7 km from 1 Wanaea, has not been production tested, but logs indicate a 165 ft gross oil column of 48 gravity oil.

After testing Cossack, Woodside plans to drill two appraisal wells at Wanaea (OGJ, Aug. 28, 1989, p. 15).

Some industry officials have estimated Wanaea and Cossack combined could hold 300 million bbl of reserves. Both discoveries have little associated gas.

Development could involve a floating production facility similar to the Jabiru and Challis field developments in the Timor Sea to the north.

BP EXPLORATION

Australia awarded Permits NT89-1 and NT89-2 to BP in completing its 1989 offering of 12 offshore blocks (OGJ, Apr. 10, 1989, p. 16).

Seven of the areas were awarded in 1989. No bids were received for the remainder.

BP, sole applicant for the two permits, plans for each block a minimum dry hole program in the first 3 years involving 1,200 line km of seismic surveys and geological and geophysical studies for about $2.6 million.

In the following 3 years, BP plans for each permit a minimum program of 200 line km of seismic surveys, one well, and geological/geophysical studies for about $12.5 million.

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