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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind -  Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles...

  • Member since 2021
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  • Aug 23, 2021
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It’s likely that this deal signals that the era of paying premiums to acquire oil and gas assets is over. From now on, companies seeking to offload these type of assets will be forced to accept ever-diminishing prices.

'The Signals to The market – Is Writing On The Wall?

  • The market hasn’t exactly cheered BHP Group’s proposed exit from its oil and gas business, with shares of both the mining giant and the acquirer, Woodside Petroleum, tumbling in the wake of deal.
  • A point of concern for investors is that BHP may have sold the assets too cheaply, and that getting only Woodside shares as payment is less than desirable.

 Oil to Follow Coal?

Can oil company stocks go down the same route as Peabody resources, a pure play coal producer? In last 3 years coal producer has lost nearly 70% of its value.

  • While it's not a fait accompli that oil and gas assets will travel down the same path as coal, the risks are increasing that they will.
  • A renewed focus on mitigating climate change and rising concern about the environment among investors will make it difficult for oil and gas companies to attract shareholders and capital, even if the prices and demand for crude oil, natural gas and LNG remain strong.
  • BHP may have exited oil and gas at just the right time. Its investment in the Jansen potash project in Canada shows that the company is more focused on commodities that will be needed in the future.

BOTTOMLINE

The key challenge remains; the offloading of toxic assets by high-profile fossil fuel companies in apparent bid to reduce emissions (Greenwashing) to under the radar companies with less ESG credentials and commitment to reduce emissions (Carbon Leakages) may continue to exploit the asset to maximize profits and production may continue without any reduction in real emissions. 

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