What: Shareholders in blue chip oil and gas major Woodside Petroleum Limited (ASX: WPL) watched as their shares fell 4.5% today after the company came out of a trading halt.
On Tuesday morning, shareholders finally received some clarity regarding Shell's 23% stake in Woodside with news that Shell would sell back to Woodside 78.3 million shares with a further 78.3 million shares being sold via an underwritten institutional sell-down. The insto sell-down was priced at $41.35 per share which was a 3.5% discount to the last traded price pre-trading halt.
So what: Despite today's falls, the stock is still up 17% over the past year, providing shareholders with a return which exceeds the 12% return from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). More importantly, with Shell's strategic holding set to disappear, the "stock overhang" should now disappear.
Now what: The effect of the buy-back and cancellation of 78.3 million shares from Shell is expected to be immediately 6% earnings per share accretive. This is good news for shareholders, however of greater interest is the potential this could create for Woodside to grow its oil and gas reserves by pursing a merger or via a takeover. Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) are two companies which have been singled out by commentators as potential M&A targets for Woodside.
