What a potential $1 billion payday means for Woodside shares

Woodside's merger with BHP's oil and gas assets last year greatly expanded its portfolio.

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Oil miner holding a laptop and mobile phone looks at his phone and sees the falling oil price and falling Woodside share price

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Woodside Energy Group Ltd (ASX: WDS) shares are outpacing the benchmark index on Monday.

In early afternoon trade, the S&P/ASX 200 Index (ASX: XJO) oil and gas stock is trading for $37.96 a share, up 0.77%.

The ASX 200 is up 0.51% at this same time.

That's today's price action for you.

Now, what's all this about a $1 billion payday?

What assets is the ASX 200 energy company looking to divest?

Woodside shares grew significantly in scope last June when the company completed its $40 billion merger with the oil and gas assets of BHP Group Ltd (ASX: BHP).

Now Woodside is looking to trim back some of its expanded portfolio, potentially pocketing $1 billion.

The ASX 200 oil and gas stock has put its Pyrenees and Macedon projects, both in Western Australia, on the marketplace.

Morgan Stanley is acting as Woodside's financial adviser on the sales.

According to the marketing flyer (courtesy of The Australian):

Macedon and Pyrenees are well understood, mature and cash generative assets with proved and probable reserves of 75 million barrels of oil equivalent net to Woodside's share.

Woodside added, "Australia's political stability, transparent regulatory system and sound governance frameworks provide a low-risk jurisdiction for investment."

The Australian cited unnamed sources who said the deal could be worth some $1 billion.

Woodside is the operator of both projects. It's looking to sell its 62% interest in Pyrenees, which produces crude oil. Woodside also owns 71.4% of Macedon, a pipeline gas project.

Both assets are expected to continue producing through to the mid-2030s.

However, on releasing its half-year results last Tuesday, Woodside reported "a pre-tax impairment of $68 million for the Pyrenees cash-generating unit, primarily due to a reduction in future production volumes reflecting a lower-than-expected outcome of drilling activities".

Woodside shares closed down 1% on the day.

As for potential buyers of the Western Australian projects, Santos Ltd (ASX: STO) could be making an offer. Santos already owns 28.6% of both projects.

Japan's Inpex Corporation, Woodside's junior joint venture partner, might also be looking to up its interest.

And unnamed sources also said that Beach Energy Ltd (ASX: BPT) could be making an offer.

What could the $1 billion sale mean for Woodside shares?

Woodside shares come into the potential asset sales with a strong liquidity position of US$7.5 billion, along with low gearing of 8.2% (as at 30 June).

But an extra $1 billion certainly would be welcome to help fund Woodside's growth plans and other expenditure commitments.

Commenting on Woodside's strong balance sheet last week, CEO Meg O'Neill said:

This is important in the context of the investment program we have in the coming years as we complete Sangomar, progress Scarborough and Trion.

Woodside's Sangomar oil development in Senegal is now 88% complete.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

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