Shares in mining firm BHP (BHP) leapt almost 10% to £25.05 in early trading after the company posted its best profit in almost a decade, alongside a record dividend, and announced it would merge its oil and gas assets with Australian firm Woodside Petroleum, a strategy it only floated a day ago.

For the year to June the group reported operating profits of $25.9 billion, an increase of 80% on the previous year, and underlying profits of $17.1 billion, up 88% on the previous year.

It also announced a $2 per share final dividend, taking the full year pay-out to $3.01 per share or a total capital return of $15.2 billion, despite committing $5.7 billion of cash to a new potash project at the same time.

ENERGY PIVOT

Just a day after it mentioned it was considering options for its oil and gas business, the company revealed it had signed a deal to merge the whole of its energy division with Woodside Petroleum.

The merger would create the largest energy company listed on Australia’s ASX exchange, with higher and more resilient profit margins and a global top 10 position in liquified natural gas by volume.

BHP would own 48% of the new company, with shareholders receiving new shares in Woodside which will remain listed on the ASX and which they can sell if they no longer want exposure to the energy business.

SINGLE STRUCTURE

BHP also surprised the market with the news that, due to big changes to the composition of its portfolio and a ‘significant reduction in earnings contribution from Plc assets’, it would give up its dual Anglo-Australian structure – which was created 20 years ago with the merger of BHP and Billiton – and unify its corporate structure under its existing Australian parent company.

As well as creating a simpler, more efficient corporate structure, the firm said the estimated cost of unification had come down 'materially' from an initial estimate of $1.2 billion to around a third of that figure.

UK holders of the Plc shares will receive Limited shares on a one-for-one basis, with the firm moving to a standard listing on the London stock exchange and keeping its primary listing in Sydney.

Under this structure, however, BHP shares would not qualify for inclusion in the FTSE UK Index series according to index compiler FTSE Russell, which means the index would need to be re-weighted.

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Issue Date: 17 Aug 2021