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Woodside Petroleum to stand alone after Shell's $3.5b exit

15 Nov 2017 10:40 AM | Sonia Harvey (Administrator)

Source AFR

Woodside Petroleum chairman Michael Chaney has declared "the end of an era" as the oil and gas player emerged as a fully independent company for the first time in more than 30 years thanks to a $3.5 billion sellout by Royal Dutch Shell.

The outright sale of Shell's 13.28 per cent interest – which was upgraded in size only hours after an initial agreement after Monday's market close to sell 64 per cent of the holding – leaves Woodside without a stake that could block a full takeover.

The move was sudden but not unexpected, given the oil major – which had its own $10 billion bid for control of Woodside blocked under the Howard government in 2001 – had been gradually selling down since 2010. Shell had made it clear a full withdrawal was on the cards.

Mr Chaney described Shell's exit as "a natural evolution" given the development of Woodside's expertise since Shell first invested alongside its North West Shelf investment in the mid-1980s, and Shell's $US30 billion target for divestments of non-core assets in 2016-18.

But he acknowledged the path is more open now to potential takeover action.

"It's a possibility; whether it's a probability is another question," he said.

"Woodside stands on its own merits and I think for the board and management we just have to make sure that it's fairly valued in the market."

Investors said they didn't expect any impact on Woodside's strategy.

"Management has always steered Woodside as an independent company and we expect that to continue even after the sell-down," said Suhas Nayak at Allan Gray.

As reported in Street Talk, the shares were priced at $31.10 each, a 3.5 per cent discount to Monday's close in a block trade managed by UBS and Morgan Stanley. The timing took advantage of a circa 15 per cent surge in Woodside's stock price since early October on rising crude prices.

Chief executive Peter Coleman said the scaling up of the sale was positive on two fronts, showing strong support for the stock even at the "very tight discount", and eliminating uncertainty that would have lingered had Shell retained shares.

"There's been a perception of an overhang in the market since I joined Woodside," Mr Coleman said. "This takes the uncertainty and speculation away every time we report."

He said the share sale had been roughly evenly split across Australia, Asia and the UK investors, and was oversubscribed before the US market opened. The sale should spur further buying in coming weeks as Woodside's weighting in indices would increase.

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