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Woodside has stopped short of executing a major acquisition for the second
time in nine months, revealing yesterday that a proposed $US900 million ($1.6
billion) takeover of Westport Resources had fallen over because of pricing.
The Woodside board is understood to have unanimously rejected the proposal at
a meeting last week.
``At the price we would have to pay for the asset, the balance of risk and
reward for Woodside was considered to be unfavourable," a spokesman said.
It is the second time that Woodside has exercised caution on pricing, after
being outbid for the assets of BP's Veba Oil by Petro Canada in January.
At the time, Woodside said it was not prepared to bid beyond the $C3.2
billion ($3.7 billion) that Calgary's Petro-Canada had offered for Veba.
Although not publicly disclosing what company it was considering purchasing
this time around, it has become widely known that Woodside was looking at
Denver-based Westport.
Westport has proven reserves of more than 160 million barrels of oil
equivalent in the onshore and offshore Gulf Of Mexico and the Rocky Mountains,
and would be a strategic fit in Woodside's overseas strategy.
The proposed acquisition would also have helped plug a hole in Woodside's
earnings stream over the next two years, as production from the lucrative
Laminaria and Corallina oilfields continue to decline.
Woodside's share price closed 12c weaker at $11.78 on the news, but analysts
said it was a positive to see that the company was being conservative.
``[But] we'd like to know what the business case is [for Westport] because if
we know that, then we'll know what the criticism has been," Deutsche Asset
Management's director of Australian equities, Lawrence Grech, said.
There have also been concerns that Woodside risked paying too much for
Westport because it was buying when crude oil prices were at a peak.
And there were fears about the dilutionary effect on shareholders should
Woodside have proceeded with a planned $1billion equity raising to fund the
proposed transaction.
``The equity market is speculating that Woodside will soon announce a major
acquisition and equity raising," ABN Amro told clients on Monday.
``Some investors are expressing a general lack of confidence in Woodside
management's ability to add shareholder value through such an acquisition. Its
track record [Oil Search, Hardman and Pulse] is being held up as justification
for the nervousness."
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