Shell puts Woodside in play with $3 billion stake sale

By Michael Smith and Tom Bergin

SYDNEY/LONDON (BestGrowthStock) – Royal Dutch Shell said it planned to sell almost a third of its 34 percent stake in Woodside Petroleum for $3.3 billion, prompting predictions Australia’s largest oil and gas firm could become a bid target.

The Anglo-Dutch oil major said in a statement on Monday it would retain a 24.27 percent stake in Woodside for at least a year, except in the case of a takeover bid for Woodside, or that Shell decided to sell a large chunk to a strategic buyer.

A source familiar with the matter said the 10 percent stake being sold on Monday was being marketed to institutions in Australia and internationally.

Shell said investment bank UBS had underwritten the sale at A$42.23 a share.

Shell, which tried to take over Woodside in 2000 but which was blocked by the Australian government, said its development of a large portfolio of interests in Australia showed it no longer needed to use Woodside as a vehicle for investment there.

“We will increasingly focus our investment in Australia through direct interests in assets and joint ventures, rather than indirect stakes,” Chief Executive Peter Voser said in a statement.

The deal takes Shell closer to its goal of raising $7-8 billion by the end of 2011, as it seeks to reduce debt incurred to pay for heavy investments in recent years.

“This disposal program is seen as a way of upgrading the portfolio and repairing the balance sheet,” Peter Hitchens, analyst at Panmure Gordon said in a note to clients.

Shell’s London-listed “A” shares fell 0.4 percent at 2,075.5 pence at 0948 GMT, against a 0.2 percent fall in the STOXX Europe 600 Oil and Gas index

Woodside closed flat ahead of the news at A$45.86.

POTENTIAL SUITORS

Investment banks said last week Woodside was being eyed as a potential takeover target with its long-serving chief executive, Don Voelte, due to step down in the second half of 2011, potentially leaving the company exposed to predators.

Woodside shares rose last week on speculation Australia and London-listed miner BHP Billiton may take a look if its $39 billion bid for Canada’s Potash Corp collapsed.

BHP, which looked at merging with Woodside in 2001, declined comment on a possible bid on Monday.

Speculated also flared that Shell could sell the remaining 24 percent to Chinese state-owned PetroChina, with which Shell made a joint $3 billion takeover of Australian Arrow Energy earlier this year.

However, while China is seen as a keen buyer for such assets, a takeover is seen as unlikely for political reasons.

“Given the strategic nature of the assets, however, it would seem likely that only another Australian company would be allowed to purchase,” analysts at Bernstein said in a research note.

While that could limit the field, the attractiveness of Woodside’s assets means a fat premium is still likely.

“Any potential bidder is going to have to at least stump up A$50-plus to bid for Woodside,” said David Lennox, resources analyst at Fat Prophet.

Woodside, which had a market value of A$35.9 billion at Monday’s close, operates the massive North West Shelf project in Western Australia which accounts for about 40 percent of the nation’s entire oil and gas production.

The six equal partners in the North West Shelf joint-venture are Woodside, BHP Billiton, Chevron, BP Plc, Shell and Japan Australia LNG (MiMi) Pty Ltd, which is a venture of Mitsubishi Corp and Mitsui and Co.

Woodside was not immediately available to comment, while Shell declined to provide additional comment.

Shell is also a partner in the rival Gorgon LNG project operated by Chevron Corp.

(Editing by Mark Bendeich and Louise Heavens)

(Additional reporting by Miranda Maxwell)

($1=.9885 Australian Dollar)

Shell puts Woodside in play with $3 billion stake sale