Credit Suisse oil and gas analyst Saul Kavonic has long-considered Woodside to be the most likely contender to buy BHP’s petroleum assets.

“BHP Petroleum simply no longer fits within BHP’s portfolio or future-facing strategy,” Mr Kavonic said on Monday.

“After having waited too long to divest thermal coal, and now having to resort to selling for cents on the dollar, BHP should know it’s better to exit petroleum sooner rather than later.”

BHP and Woodside are already joint-venture partners in two WA projects: the North West Shelf and the $16 billion Scarborough liquefied natural gas (LNG) project they are hoping to sanction this year.

BHP also owns a 50 per cent interest in the ExxonMobil-operated Bass Strait oil and gas fields off Victoria, and oil and gas interests in the Gulf of Mexico, Trinidad and Tobago and Algeria.

For Woodside, acquiring BHP’s petroleum assets would retain the company’s position as Australia’s largest independent oil and gas producer after two of its ASX-listed rivals – Santos and Oil Search – agreed to a $22 billion merger earlier this month.

United Nations secretary-general Antonio Guterres said last week the latest Intergovernmental Panel on Climate Change (IPCC) report on the dramatic effect of human-induced climate change “must sound a death knell for coal and fossil fuels, before they destroy our planet”.

Mr Kavonic said the primary question for the investment community was the price Woodside would pay.

“A cash deal could leave Woodside still dependent on sell-downs or an equity raise,” he said. “A scrip deal would leave Woodside with a very strong balance sheet to fund growth without sell-downs, but could leave a stock overhang as some BHP investors may not have a long-term mandate to hold Woodside shares.”

Investors and analysts have been predicting a wave of merger-and-acquisition activity to sweep the oil and gas industry in coming years, as elevated concerns about global warming cause lenders to flee the sector and push the cost of capital higher.

While near-term demand is forecast to remain strong for many years, the International Energy Agency released a landmark report in May warning investors must avoid funding any new oil and gas fields if the world is to achieve the international Paris Agreement’s aspirational goal of limiting global temperature rises to 1.5 degrees.

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United Nations secretary-general Antonio Guterres said last week the latest Intergovernmental Panel on Climate Change (IPCC) report on the dramatic effect of human-induced climate change “must sound a death knell for coal and fossil fuels, before they destroy our planet”.

The Climate Action 100+ coalition backed by 575 institutional investors last month described the latest forecasts around the speed of emissions cuts required to slow global warming as a “game-changer”, and warned its members would apply greater scrutiny to oil and gas producers.