Woodside rejects Shell bid

Woodside Petroleum Ltd. directors have rejected as too low a bid by Royal/Duth Shell Group for a majority interest in the Perth, Australia, firm. The proposal, made through Shell Australia Ltd., would have given Woodside all of Shell's upstream operations in Australia and most of its upstream operations in New Zealand, plus minority interests in two Iranian projects.


Woodside Petroleum Ltd. directors have rejected as too low a bid by Royal/Duth Shell Group for a majority interest in the Perth, Australia, firm.

The proposal, made through Shell Australia Ltd., would have given Woodside all of Shell's upstream operations in Australia and most of its upstream operations in New Zealand, plus minority interests in two Iranian projects. In exchange, Shell wanted some 428.9 million new Woodside shares, which would have boosted its interest in that company to 60% from the current 34.27% stake.

The Shell Group would then make Perth one of its three global centers, along with The Hague and Houston.

The value of the Shell offer was calculated at about $5.8 billion (Aus.) or $13.50/share.

However, following a meeting June 29-30, the nonShell directors of Woodside said the proposal would not add to the company's per-share earnings "to any significant degree." They also said the offered assets would not increase Woodside's strategic diversity or increase the oil-to-gas proportions of its reserves-an important component of the company's overall strategy, officials said.

"The proposal is not near to the nonShell appointed directors' view of an adequate premium for control of Woodside; nor, in any event, is the premium accessible to shareholders," they said in a statement.

They indicated that a more detailed explanation of that decision would be sent to shareholders after the board's next meeting July 18-19.

The Shell-nominated directors withdrew from last week's meeting after presenting their views in favor of the deal.

Assets offered to Woodside

One of the main elements of that offer was 20% equity in Shell's $800 million Nowrooz-Soroush redevelopment project in Iran. That project involves rebuilding war-damaged production facilities in that field, for which Shell is to be paid in crude oil from the restored production.

Woodside officials earlier calculated the value of that Iranian equity at about 25% of Woodside's Enfield oil field off western Australia, where reserves are estimated at around 60 million bbl (OGJ Online, June 18, 2000).

Australian assets offered by Shell in the proposal included equity in North West Shelf fields ranging from 8.33% to 16.67%; a 22.46% equity in the Laminaria oil field; 25.5% of nearby Corallina oilfield; 28.57% of the yet-to-be-developed Gorgon gas condensate fields; and 12.5% of the Gorgon deepwater extension.

The New Zealand assets included 18.75% of the Maui gas-condensate field; 50% of the onshore Kapuni field; 49% of the recently discovered Maari oil field, which is expected to come on stream in 2003; and 18.33% of the Pohokura gas-condensate discovery.

Joint project ongoing

Meanwhile, the commonwealth government moved last week to grant major project facilitation status to the joint Sunrise gas project by Woodside Energy Ltd. and Shell Development (Australia) Pty Ltd. in the Timor Sea.

"That project will provide Australia with its fourth major gas production hub, with initial gas production similar in scale to the Bass Strait and Cooper basin fields, but with significantly greater growth potential," said Jeff Schneider, Woodside's director of Australian gas.

The two companies previously announced plans to use Timor Sea gas to supply a methanol plant near Darwin and other gas consumers in the Northern Territory and Queensland. That proposed project is valued at $2.5 billion (Aus.).

Up to 20% of the greater Sunrise gas resources are thought to be within the Zone of Cooperation jointly administered by Australia and East Timor, officials said.

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