By Dhirendra Tripathi

Investing.com – BHP Billiton (NYSE:BBL) ADR traded 1.8% lower in Monday’s premarket on concerns that the company may not make the clean break with fossil fuels that many investors had hoped for.

BHP said overnight it's in talks with Woodside Petroleum (OTC:WOPEY) over a potential sale. One of the possibilities under consideration would include an all-share transaction in which BHP would distribute Woodside shares to its investors – an alternative that few BHP investors would prefer.

Reports peg the value of the deal at $15 billion. Under the likely terms, Woodside will issue its own equity to BHP shareholders as consideration for buying the mining giant’s petroleum business.

Such a deal would leave BHP shareholders with shares of a pure fossil fuel player, shares that they would be forced to sell immediately due to their investment mandates. Shareholders are usually happier with a cash-deal that would help the company pay them dividends or fund a buyback program.

BHP has got rid of many of its polluting assets and the sale of the petroleum business would bring it close to an exit from all such sectors.

A report last week by a UN panel warned of dire consequences as it said the climate is getting warmer at a pace faster than estimated earlier.

For Woodside, an acquisition of BHP's oil and gas assets would roughly double its annual underlying earnings to around $8 billion. For BHP, a petroleum exit would strip out just 5% of underlying earnings, according to Reuters

Woodside share closed 4.5% lower in today’s trading.

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