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Date : 17/08/2021

BHP Stock Drops Following FY21 Results

BHP Group is arguably the most well diversified mining and exploration company there is, and it is a part of every investor’s portfolio for different reasons – maybe for the stable dividends, or to decrease the overall volatility of the portfolio. BHP shares are also one of the best blue chip stocks that trade on the ASX. BHP derives revenues from 4 main commodities – Iron Ore, Copper, Coal, and Petroleum. These commodities are very sensitive to the global economic outlook and activity. With economic activity increasing across the developed world, increased demand and inflation fears have resulted in high commodity prices. BHP shares are trading close to its highs posted earlier this year on the back of soaring iron ore prices.

Why is BHP Stock down on the ASX?

Earlier last month, BHP was known to be looking into divesting from the Oil and Gas business in a multi-billion dollar exit. As reported extensively during US market hours yesterday, BHP is looking to accelerate its retreat from fossil fuels. Bloomberg first broke the story and mentioned that BHP is looking for a trade sale to dispose of its petroleum assets in a bid to not be stuck with assets that may become difficult to sell later on, as the world moves away from fossil fuels and towards green energy.

With a lot of market speculation and whispers saying that Woodside Petroleum (ASX: WPL) is working to strike a deal to buy BHP’s petroleum assets, BHP responded to the speculation yesterday that they had initiated a strategic review of our Petroleum business to re-assess its position and long-term strategic fit in the BHP portfolio, and the chief candidate was Woodside for a potential merger of the Petroleum business and a distribution of Woodside shares to BHP shareholders.

In a joint statement this morning, Woodside Petroleum and BHP announced that they have indeed entered into a merger commitment to combine their respective oil and gas portfolios by an all-stock merger to create a global top 10 independent energy company by production.

Following BHP’s exit from petroleum, the giant miner will be entering the Potash business with a US$500 million investment and also delisting its secondary LSE listing and unifying the shareholders under the ASX entity. BHP shares closed at $51.33 a share following a 1.42% decline in trading today.

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