UPDATE 2.15pm: Investors have hit the sell button on Woodside despite analysts generally agreeing a big sell-down by shareholder Royal Dutch Shell announced yesterday was a positive for the stock.
Woodside announced yesterday it would spend $2.86 billion buying back a 9.5 per cent slab of shares from Shell, while Shell would offload another 9.5 per cent stake to institutional shareholders, leaving it with just 4.5 per cent of Woodside.
The buyback, if approved by shareholders, would go ahead at a discounted $36.49 a share comprising a capital component of $US7.95 a share and balance paid in the form of a fully franked dividend.
The separate sell-down to institutions was completed at $41.35.
Woodside shares sank at the open after emerging from a trading halt this morning and eventually closed down $1.95, or 4.55 per cent, at $40.90.
Woodside's buyback of 9.5 per cent of its share represents a consolidation of its shares on issue, which typically acts as a positive for a company's share price.
Analysts also noted the improved chances of a takeover offer for the company, with Shell's effective blocking stake being removed.
Woodside chief executive Peter Coleman also insisted the deal would not prevent the company from seeking growth opportunities.
"The message is clear: We are generating a lot of free cash and we are committed to growing our business and committed to pursuing all of those opportunities," he told a media, analysts and investors' teleconference yesterday.
"This does not in any way affect our capacity to pursue any of those opportunities or complete a transaction if it's attractive."
Mr Coleman said the combined transaction would deliver value to Woodside shareholders through increased earnings and dividends per share.
The company said it would continue with its practice of an 80 per cent dividend payout ratio for the foreseeable future.
However some shareholders have expressed dismay that the selective buyback was not open to all shareholders.
The extraordinary general meeting to vote on the buyback is expected to be held in August.