Why is the Woodside share price having such a strong start to the week?

Analysts are bullish on Woodside’s upcoming merger with BHP’s petroleum assets.

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The Woodside Petroleum Ltd (ASX: WPL) share price is off to a good start this week.

The S&P/ASX 200 Index (ASX: XJO) energy giant closed on Friday at $28.77 per share and is currently trading for $29.30, up 1.84%.

That compares to a slim 0.09% gain for the ASX 200 at this same time.

So, why is the Woodside share price outperforming?

Oil edges higher and BHP merger in the spotlight

ASX energy shares, as you’d expect, tend to rise in fall in line with energy costs.

With Brent crude oil prices notching up 1% to just over US$113 per barrel, the Woodside share price is a likely beneficiary.

Then there’s the pending merger with BHP Group Ltd‘s (ASX: BHP) petroleum assets. Shareholders approved the merger last week.

Leading broker Morgans sees a lot of upside from that merger.

According to Morgans:

We believe WPL has benefited from being in the right place, at the right time. With: 1) BHP/WPL having an existing relationship, 2) BHP eager to boost its ESG profile, and 3) WPL being a quality operator (safe hands which is important for BHP).

From an economic standpoint we think WPL is getting the better of the deal, with synergies not baked into deal metrics and BHP willing to accept a discount. The deal is transformative, lifting WPL into being a top 10 global E&P with +2 billion barrels of 2P reserves, with [earnings before interest, tax, depreciation and amortisation] EBITDA of US$4.7bn pa and growth options.

Morgans has a $33.60 target for the Woodside share price. That is some 15% higher than the current share price.

Woodside share price snap shot

The Woodside share price has gained 33% so far in 2022. That compares to a year-to-date loss of around 4% posted by the ASX 200.

Woodside pays a 6.5% trailing dividend yield, fully franked.

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 Scott Phillips.

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