BHP WTF - The Sequel, page-104

I agree with your consensus on the underinvestment in O&G thanks to COVID and woke ESG. Leading to an eventual price spike in POO, as we are seeing now. I invested heavily in ORG and WPL to play this.

However the merger or BHP and WPL oil assets is not a WPL only benefit. By my calculations you get circa 179 WPL per 1000 BHP based on the valuations. Regardless if WPL spiked to $100 or $1000 we still get the same intrinsic value via the agreed upon inspecie of WPL, as a BHP holder. That won’t change. It’s not 1 July 2021, it’s a date not yet set. So I’ll gat even more as I’ve been buying heavily into more BHP on what I see as oversold.

Equally, the US$400m pa in synergies is an incredible value deal for both BHP and WPL holders. I fully endorse this simply due to this fact. It also gets the woke ESG rubbish off the Board. It might even add BHP into the new and trendy ESG related benchmarks and subsequent fund mandates/ETFs. This could soak up a lot more stock.

The arbitrage hedge fund play still going on, evident of the shorts in BHP vs RIO or FMG which in theory should be higher due simply to higher IO exposure. Albeit BHP is priced at an iron ore price below $70 given the other mix if it’s commodities.

My view is this will spike post the unification deal is done and the shorts close out with the ASX issue to PLC holders. Rebalancing will need to occur for new index weighting, ESG on boarding and probably a change in sentiment. My view on long term copper price is much more bullish than analysts, so this could also play out. Iron ore should also begin its restocking and this volition period should be over. It’s oversold based on its forward looking earnings.