August 19, 2022

DealBook: BHP Billiton to Buy Petrohawk for $12.1 Billion

Marius Kloppers, chief executive of BHP Billiton.Tim Wimborne/ReutersMarius Kloppers, chief executive of BHP Billiton.

9:16 p.m. | Updated

BHP Billiton said Thursday that it would buy Petrohawk Energy for about $12.1 billion in cash, as the mining giant continues its quest for shale natural gas assets.

Under the terms of the deal, the Anglo-Australian mining company will pay $38.75 a share in cash through a tender offer that will begin by July 25. The price tag is 65 percent higher than Petrohawk’s Thursday closing price of $23.49.

The deal is the latest example of a major company seeking an entrance into the red-hot shale natural gas space. Petrohawk has positions in three of the most popular shale formations in the United States: the Eagle Ford, Haynesville and Permian Basin areas in Texas and Louisiana.

“Our offer and the associated substantial premium represent a unique opportunity for Petrohawk shareholders and recognize the growth opportunities embedded in its portfolio immediately,” Marius Kloppers, BHP’s chief executive, said in a statement.

Shale operators have become hot commodities over the last year, with Marathon Oil and Royal Dutch Shell among the big oil companies that have paid billions of dollars for deals in the sector. Such deals are aimed at tapping into rising demand for natural gas and its byproducts by energy and chemical companies.

In Petrohawk, which is based in Houston, BHP will acquire about one million net acres of shale, with an estimated net production of about 158,000 barrels of oil equivalent per day and proven reserves of 3.4 trillion cubic feet of natural gas equivalent. The company has sold multiple assets and piled on debt to raise money for its operations.

Earlier this year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy.

Other companies associated with shale natural gas have become the object of deal-makers’ attentions as well. The Williams Companies and Energy Transfer Equity are waging a bidding war for the Southern Union Company, a major gas pipeline company.

Should the tender offer succeed, it may also help BHP move past its spotty history of deal-making. Last year, the Canadian government effectively blocked the company’s $38.6 billion bid for the Potash Corporation, the world’s biggest producer of the major fertilizer ingredient. BHP has also failed to both buy its main rival, Rio Tinto, and form a joint venture with that mining company.

BHP plans to finance the offer with cash on hand and bank loans. The company currently has $16.6 billion in cash and short-term investments.

BHP was advised by Barclays Capital, Scotia Waterous and the law firms Sullivan Cromwell and Morgan, Lewis Bockius. Petrohawk was advised by Goldman Sachs and the law firm Simpson Thacher Bartlett.

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