THE WALL STREET JOURNAL: Woodside Petroleum May Be Takeover Target: Speculation Is That Shell Will Sell Its 34.3% Stake, Possibly to China's Cnooc: “Shell Australia Chairman Tim Warren has chosen not to comment on the speculation, allowing analysts' theories to flourish.” (ShellNews.net) 2 Dec 04
By STEPHEN BELL
DOW JONES NEWSWIRES
December 2, 2004; Page C5
PERTH, Australia -- Driven by rumors that Royal Dutch/Shell Group may divest itself of its more than one-third stake in Woodside Petroleum Ltd., analysts speculated that a 16 billion Australian dollar (US$12.36 billion) bid for Australia's biggest energy company could be looming.
Chinese energy group Cnooc Ltd. has been named as a potential buyer of Shell's stake, a move that would give it more leverage over Woodside's vast natural-gas reserves, as China prepares to begin liquefied-natural-gas imports.
"The market seems to expect that [Shell ] will sell down its 34.3% stake, raising around US$4 billion to invest in other exploration and production assets," Citigroup Smith Barney said. Such a sale might "prompt a predator to make a full bid," it added.
Takeover talk helped push Woodside's shares to a record of A$21.48 on Monday, up nearly 16% in two weeks. Speculation cooled slightly yesterday as the shares closed down 3.2% at A$20.19 amid a broadly weaker market.
Australian analysts are divided on whether the rumors have any basis. "It is speculation, and there is an absence of facts or logic," Morgan Stanley energy analyst Stuart Baker said this week.
Shell Australia Chairman Tim Warren has chosen not to comment on the speculation, allowing analysts' theories to flourish. Privately, however, local Shell officials point to the company's strategy-review statement in September. Under pressure to resolve problems with its reserve base, Shell said that it would sell about US$5 billion of "limited growth potential" assets during the next two years. The assets are in Angola, Thailand, Bangladesh and Egypt, it said.
Shell didn't indicate any plans to sell Australian assets and some analysts say that Woodside -- which plans to double its annual production to about 140 million barrels of oil equivalent by 2010 -- fits into Shell's strategy of boosting oil and gas reserves and production.
Woodside recently discovered oil fields in Mauritania. It also operates the core North West Shelf gas venture off the coast of Western Australia. This venture mainly exports liquefied natural gas to Japan and Korea, although shipments to China are due to begin in 2006.
The other side of the coin is that Shell has a direct one-sixth stake in the shelf. And, following its failed A$10 billion bid for Woodside in 2000-01, Shell has little influence over the management of the increasingly independent company.
"We don't comment on market speculation," a Woodside spokesman said when asked whether the company was aware of Shell's intentions.
But Citigroup said Woodside has "emerged from the shadow of Shell," in reference to the Australian company's diversification into oil projects in Australia and offshore.
Woodside is a "major oil and gas company in its own right, not just the local branch of a major," Citigroup said. Cnooc is the "market favorite" to buy the Shell stake, if a deal eventuates, it added.
Recently, Cnooc unveiled an US$850 million convertible-bond sale, further fueling talk that it may use a growing war chest to buy into Woodside.
Under Australian takeover laws, Cnooc normally would need to make a full takeover bid for Woodside, if it buys Shell's stake. However, analysts say that a full takeover likely would be blocked by Australia's government on national-interest grounds similar to those it cited in its rejection of Shell's bid for Woodside.
Write to Stephen Bell at stephen.bell@dowjones.com