HDR hardman resources limited

JB Were Research Report, page-2

  1. 145 Posts.
    Interesting the Were note mentions a possible move on HDR by WPL. The following article is in todays Syd Morn Herald...

    "Woodside, Shell are strained bedfellows
    By Stephen Bartholomeusz
    October 12 2002

    It would appear that the awkward relationship between Woodside Petroleum and its major shareholder, the Royal Dutch Shell group, is about to be tested once more.

    There has been persistent and apparently well-founded speculation in recent weeks that Woodside is close to finalising at least one major offshore acquisition and pursuing a number of others. Associated with that speculation are suggestions that it would fund its expansion with a $1 billion equity raising.

    Woodside last month confirmed that it was continuing to investigate acquisitions. It also felt it necessary to say that speculation that its actions were intended to have a negative impact on the "good relationship that exists between Shell and Woodside" was incorrect.

    Woodside's aspiration to expand away from its North-West Shelf gas operations have been a source of tension between the group and its 34 per cent shareholder in the past, particularly as that expansion into regions such as the Gulf of Mexico saw it venture onto traditional Shell turf.

    Indeed a desire to "rationalise" the conflict between Woodside's and its own ambitions was a factor in Shell's ill-fated attempt to bid for Woodside last year, a bid ultimately blocked by the Federal Treasurer, Peter Costello, on national interest grounds.

    Since that confrontation Woodside and Shell appear to have repaired their working relationship. Shell Australia's recently appointed chairman, Tim Warren, said his group supported Woodside's offshore ambitions and understood its aspirations for growth couldn't be met from its domestic operations.

    Indeed Shell supported Woodside's unsuccessful bid for BP's $US2 billion ($3.6 billion) Veba portfolio early this year, although that deal was said to suit Shell's own corporate strategies.

    The latest bout of Woodside tyre-kicking could be different.

    Woodside is said to be close to a $1.6 billion deal to acquire the Denver-based Westport Resources. It is also said to have expressed interest in, among other businesses, the oil and gas assets of the German conglomerate Tui AG, Prussag Energie. Prussag is said to have a price tag of about $US1 billion.Westport and its onshore gas reserves would, if Woodside were successful, give Woodside a presence in a region and sector of great interest to Shell. Last year Shell lost a fiercely contested bidding war for the Rocky Mountains' Barrett Resource Corp. Barrett was acquired by the now-struggling Williams Companies.

    Shell made no secret during that bid that it saw Rocky Mountain gas as strategically valuable to supply California, which has long-term structural problems in its electricity market.

    Shell might not be too keen to see Woodside developing an onshore gas presence in the US.

    It could be expected to be even less enthusiastic about being called on to support the funding for Woodside's incursions into its own territory with hundreds of millions of dollars of its own capital. The alternative of allowing itself to be diluted would be equally unpalatable.

    There isn't, at this stage, any confirmation that Shell does oppose Woodside's plans or would do anything other than support the funding for a deal that stacks up. If Woodside does acquire any of the targets it has assessed, particularly Westport, however, the relationship will be conclusively tested.

    Shell is in an uncomfortable position. It is restricted to its present shareholding and last year's events established that the stake isn't sufficient to effectively control Woodside.

    If it continues to support Woodside's expansion offshore it becomes a not-quite-passive funding vehicle for Woodside's ambitions. If it opposes the expansion, or particular deals, there is no guarantee that Woodside will take much notice.

    If Shell chose not to support the fund raising for a particular deal, its shareholding in Woodside would be heavily diluted, giving it less control and influence than it does today. It is an invidious and, in the long term, unsustainable position.

    The other player interested in the development of the relationship between Woodside and Shell is BHP Billiton, which looked last year at merging its BHP Petroleum unit with Woodside as part of a deal that would have seen Shell walk away with half Woodside's equity in the N-W Shelf project. Shell would have swapped an indirect interest in Woodside's 16.66 per cent interest in the LNG phase of the project for a direct 8.33 per cent to go with its own one-sixth interest.

    Talks failed, largely because Shell wasn't a seller of its Woodside shares, although BHP was also distracted by its own merger with Billiton.

    If BHP Billiton still harboured Woodside ambitions, however, any confrontation between Shell and Woodside, particularly resulting in Shell's stake being diluted, would open the door for a more conventional tilt at control.

    For both Shell and BHP Billiton, the kind of step-up in Woodside's investment in offshore operations that the group's chief executive, John Akehurst, appears to envisage is an increasing threat to their own ambitions.

    Woodside could grow its offshore assets to the point where it would make it more difficult and complicated for Shell to continue to justify its position as an influential portfolio investor and which altered the character of any BHP acquisition.

    Woodside today would fit perfectly into BHP's diversified cash flow model, reducing the cash flow at risk and giving it a better balance. Given sufficient time and sharemarket support, Woodside might not fit so perfectly in future.

    It may be that Woodside is unable to land one or more of its targets. It may also be the case that Shell is genuinely committed to supporting Woodside's independent expansion, even into provinces it considers its own. In either event, there would be no confrontation.

    The outcome of last year's bid, however, has left an inherently unsatisfactory legacy for both companies. Any divergence of views or strategies will expose that potential for conflict. "

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    Perhaps Mauritania will become prominent on both Shells & BHP's radar screens as a major new province sooner then later after yesterdays Ching 4 Announcement??

 
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