Woodside (ASX:WPL) share price dips amid corporate watchdog’s mega-merger verdict

What does the regulator’s decision mean for Australia’s largest listed energy company?

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The Woodside Petroleum Ltd (ASX: WPL) share price is failing to grab the market’s enthusiasm today after clearing a major regulatory hurdle.

This morning, the Australian Competition and Consumer Commission (ACCC) revealed its decision on Woodside’s proposed acquisition of BHP Group Ltd‘s (ASX: BHP) petroleum arm. The outcome was what Australia’s largest listed energy company had hoped for — a thumbs up.

At the time of writing, shares in the oil and gas giant are exchanging hands at $21.84, down 1%.

What does the ACCC’s decision mean for shareholders?

The ACCC’s announcement today marks an important milestone in Woodside’s efforts to acquire BHP’s petroleum business. Yet, the Woodside share price has failed to move meaningfully on the update.

After reviewing the proposal, the corporate watchdog has come to the conclusion that a merger of the two energy companies would not significantly lessen competition. This is despite Woodside and BHP Petroleum being two of the four largest domestic natural gas suppliers in Western Australia.

On this point, ACCC chair Rod Sims noted the merged entity would likely still face competition post-acquisition. The regulator highlighted that major gas producers such as Chevron and Santos Ltd (ASX: STO) should keep the oil and gas market competitive. Other existing oil and gas players that will be helping keep the market tight include Shell and ExxonMobil.

Furthermore, the corporate watchdog concluded that Woodside was unlikely to be incentivised to reduce the supply of natural gas from BHP’s domestic-only site at Macedon. This gas from this project can only be supplied to the WA domestic market.

Commenting on the regulation Woodside will remain held to, Sims said:

In Western Australia, gas exporters are required to reserve the equivalent of 15% of their export production for the domestic market, ensuring that domestic gas will continue to be available from Woodside and BHP Petroleum’s export assets, and from a range of other competitors.

Previously, Woodside has indicated the second quarter of the 2022 calendar year is its target for completing the merger.

What’s going on with the Woodside share price?

While the news would normally be considered a positive, the Woodside Petroleum share price is shedding some of its value today.

On such days as today, we might turn to the oil price as a potential anchor on the company’s share price. However, the energy-giving commodity rose in value last night, suggesting something else might be at play.

One contributing factor could be that Woodside has found itself in the headlines today for scrutiny over emissions. The prospect of the company’s Scarborough project adding an additional 2.5 million tonnes of carbon emissions a year from 2026 has found itself in The Sydney Morning Herald.

The Woodside Petroleum share price is down 5.5% since the beginning of the year. Based on the current share price, the company offers a dividend yield of 2.53%.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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