Woodside Shares Drop Fuels BHP Takeover Speculation

As Woodside Petroleum's (ASX:WPL) shares crashed below $40 for the first time in 10 months, BHP Billiton (ASX:BHP) may be swooping in for a takeover with a possible $35 billion bid in the offing.

Woodside shares dropped 2.2 percent to $39.91 yesterday after announcement of cost blowouts at the Pluto LNG project. Woodside's chief executive Peter Coleman said that Pluto LNG had been delayed by another six months and that costs added $900 million to total $14.9 billion. This caused Friday shares to plummet 3.8 percent.

While Woodside's share price remained above $40, BHP is keeping it hands off, said sources close to the mining giant. Woodside shares skyrocketed to $48 after speculation about a deal in April.

Credit Suisse suggested that Woodside would fill the gap of petroleum growth projects in BHP's portfolio and provide a platform for the miner to be a power player in the Asian LNG market.

"We see the critical issue as being one of price," said Credit Suisse.

"On a risk-adjusted basis WPL (Woodside) may have been too expensive for BHP (once a takeover premium is included), but if WPL's share price stays in the low 40s BHP's interest in WPL may be renewed, particularly if Pluto 2 is de-risked."