In mid-August, the Anglo-Australian mining giant BHP Group announced their intent to divest from oil and gas. The organisation then suggested they would merge their hydrocarbon enterprise with Woodside Petroleum, another Australian company.
If this deal goes ahead as proposed, then it is expected that substantial amounts of Woodside stock will go towards BHP shareholders.
Falling Share Value
In the weeks since, BHP shares have been declining, with an overall 10% dive in market capitalisation across this period, and its Australian shares have gone down roughly 23% in value.
It would be difficult to separate this from a recent rise in Eurozone inflation. This is currently at the highest level it has been in nearly ten years – which places a lot of pressure on shares of European origin.
BHP boss Mike Henry has described this decline as just a ‘short-term volatility’, and their Chief Financial Officer David Lamont has attributed at least part of the drop to a reduction in iron ore prices across this timeframe.
It does warrant mentioning that their competitor Rio Tinto, which does more iron ore mining than BHP, has had a 19% drop in the past month. Lamont’s claims may have some merit, even if they are not the full picture.
BHP has had less of a decline on the London Stock Exchange, where stock prices have only reduced by 6%.
On the topic of the LSE, the company is also wanting to consolidate by removing BHP Group from the LSE, giving all holders of this stock an equivalent on the organisation’s Australian listing.
Analysts have had a mixed response to BHP Group’s decision, particularly its longevity. S&P Global threatened to downgrade the credit rating of BHP in response, a move that they are currently contesting.
In contrast, Moody’s Investor Services regarded this as a positive decision due to its implications for BHP’s environmental credentials.
Time will tell if this decline continues – though it seems like it will for now.
Speculators and analysts are struggling to see a clear path, and the predictions being made appear contradictory. Either way, BHP stock is definitely worth watching at the moment.