Woodies have finally done it, they’ve approved Scarborough (big LNG growth project) and signed the merger agreement with BHP (to acquire the BHP Petroleum assets through a merger paid for by scrip).

The project economics are looking a little bit better, now that WPL have brought in a partner (Global Infrastructure Partners) to help with the capex.

It’s a good amount of news flow for WPL.

Firstly, it was taking a while, and the market hates uncertainty.

Second, the high oil prices made the market worry that BHP might get a little itchy about exiting oil at all, or at least seeking to renegotiate the terms.

Third, finding the equity partner (GIP) was taking a bit long, making the market worry about balance sheet risk.

Fourth, all of those things were sort of percolating around together, making for an overhang that was greater than the sum of its parts.

Whilst not strictly new news, the C02 reservoir is at the low end of other projects, which is a slight win for ESG, but highly unlikely to alter the opinion of those already opposed to the project.

It may however sway a marginal investor.

Woodies will have a strong balance sheet post the merger, and ideally can implement a buyback should a share overhang (from the sale of shares to BHP, who might wish to immediately sell the stock) persist.

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