Woodside Petroleum Ltd. rose in Sydney amid speculation Australia’s second-biggest oil and gas producer is close to resolving how Royal Dutch Shell Plc will dispose of its remaining stake in the company.
Woodside climbed 2.6 percent to A$46.72 at the 4:10 p.m. close, compared with a gain of 0.9 percent for the benchmark S&P/ASX 200 Index. The shares earlier increased as much as 5.6 percent to A$48.11, the most since Aug. 20, 2009.
The potential for an asset swap with Shell “is getting people excited,” said Tim Schroeders, a Melbourne-based money manager at Pengana Capital Ltd., which manages about $1 billion.
Woodside could exchange stakes in liquefied natural gas projects for Shell’s remaining shares in the company, worth more than A$8 billion ($8 billion), analysts led by Sydney-based David Heard at Bank of America Merrill Lynch wrote March 18. Under such a deal, Woodside may swap a 30 percent stake in the Pluto LNG project, an 18.5 percent stake in the Browse venture and 20.7 percent of the Sunrise development, the report said.
Michelle Grady, a spokeswoman for Woodside, and Vera Surzhenko, a spokeswoman for Shell in London, both declined to comment.
The assets-for-stock swap with Shell would help Woodside by lowering its spending requirements for the LNG projects, Heard wrote. Shell is also a “very powerful ally in LNG” with expertise in supplying fuel and in technology, the analyst said. Investors have been concerned Shell would sell further Woodside shares at a discount to institutional investors, according to the report.
“We give substantial weight to the likelihood of a more attractive outcome achieved by Shell and Woodside working together,” Heard wrote in an earlier March 14 report.
The most likely outcome is a sale of Shell’s remaining 24 percent stake to a “strategic investor,” said John Hirjee, a Melbourne-based analyst at Deutsche Bank. Some investors today speculated BHP Billiton Ltd., Australia’s largest oil and gas producer, was interested in Woodside shares, Hirjee said.
“It would make sense if it went to a strategic investor, but whether that’s BHP or another entity, we’ll have to wait and see,” he said. A Japanese buyer is possible, he said, “because Japan could have a link to a major supplier of Australian LNG.”
Woodside is being “proactive” with Shell about its remaining shares in the Australian company, after Europe’s largest oil company sold a 10 percent stake last year, Chief Executive Officer Don Voelte said last month. Shell sold that holding in Woodside for about $3.3 billion in November.
Voelte said Feb. 21 he hoped there would be “no surprises” regarding Shell’s remaining stake.
Selling shares to a national oil company or LNG buyer is an option, Merrill Lynch’s Heard said. “Woodside, with its significant resource base and pipeline of LNG projects could be seen as an attractive investment proposition and/or alliance partner,” he wrote.