BHP may eye oil & gas if Potash bid dies

PERTH/SYDNEY Fri Nov 5, 2010 7:35am GMT

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PERTH/SYDNEY (Reuters) - BHP Billiton's blocked bid for Potash Corp has spurred talk that the miner will now focus on oil and gas targets such as Australia's Woodside Petroleum, but some analysts are sceptical.

Investors hope BHP will look at a share buyback or special dividend, but analysts said the miner could also use its huge war chest to boost its oil-and-gas assets. Woodside and Australia's Oil Search have been touted as possible targets, with both stocks rallying since Ottawa indicated this week it would block the $39 billion (24 billion pounds) Potash bid.

UBS analysts also pointed to U.S.-listed Anadarko Petroleum Corp as a potential target.

A potential $10 billion buyback would still leave BHP with $5 billion in cash to pursue other acquisition opportunities in petroleum or coal, according to UBS analyst Glyn Lawcock.

However, other analysts were more skeptical.

"They always had a soft spot for Woodside, but I don't think so," said Peter Kopetz, an analyst with State One Stockbroking in Perth who said that a switch from a potash company takeover to the oil and gas sector seemed unlikely.

"It's just one of those things that circulates since BHP has been rejected by another player. It's happened before."

Shell, a 34.7 percent shareholder in Woodside, is also an obstacle to any BHP takeover bid, though investment bankers said Shell could team up with the miner on a joint bid.

"It's a good time to have a crack at Woodside, when the CEO is leaving," one banker said.

Woodside chief executive Don Voelte is due to step down in the second half of 2011 as the company looks for a successor.

Analysts and investment bankers expect BHP to keep pursuing merger and acquisition opportunities rather than returning all its cash to shareholders.

"BHP are keen to do something, they are in aggressive mode and clearly looking to do something," said one analyst who declined to be named.

(Editing by Mark Bendeich)

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