Woodside shares rise on $2.1 billion sale and partnership

Woodside has struck a deal with JERA. Here's what you need to know.

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Woodside Energy Group Ltd (ASX: WDS) shares have recovered from a morning decline and are edging higher on Friday afternoon.

At the time of writing, the energy giant's shares are up 0.5% to $30.63.

Why are Woodside shares rising?

Investors have been buying the company's shares this afternoon after the company released an announcement relating to its Scarborough project.

According to the release, Woodside has broadened its strategic relationship with Japan's JERA through a transaction that involves three core elements:

  • Equity in the Scarborough joint venture.
  • LNG offtake agreement.
  • Collaboration on opportunities in new energy and lower carbon services.

In respect to the equity, Woodside advised that it has executed a binding sale and purchase agreement with JERA for the sale of a 15.1% non-operating participating interest in the Scarborough joint venture for an estimated total consideration of US$1,400 million (A$2,130 million).

This comprises a purchase price of approximately US$740 million, and reimbursement to Woodside for JERA's share of expenditure incurred from the transaction effective date of 1 January 2022. Completion of the transaction is expected in the second half of 2024.

What else?

The LNG offtake agreement is non-binding but if it goes ahead, it will see JERA purchase six LNG cargoes on a delivered ex-ship basis per year for 10 years commencing in 2026 from Woodside's global portfolio.

Another non-binding agreement will see the two parties form a new energy collaboration including potential opportunities in ammonia, hydrogen, carbon management technology and carbon capture and storage. Management notes that this will support common decarbonisation ambitions.

Woodside CEO, Meg O'Neill, commented:

Woodside welcomes Japan's largest utility, JERA, into the Scarborough Joint Venture. This builds on a long history of collaboration, starting in 1989 with LNG sales from the North West Shelf to JERA's parent companies Tokyo Electric and Chubu Electric. JERA's participation in the Scarborough Joint Venture, which will also include LNG Japan, is a further demonstration of the importance of the project to Japanese customers and confidence in long-term demand.

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. 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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