(Adds analysis comment, share price moves)
MELBOURNE, July 31 (Reuters) - Woodside Petroleum Ltd's planned $2.68 billion share buyback from Royal DutchShell is on the brink of failing, based on a count ofvotes mailed in ahead of a shareholder meeting on Friday.
Woodside said on Thursday about 71.3 percent of votes castso far were in favour, with the rest against. It needs supportfrom 75 percent of votes cast to go ahead with the buyback,which would cut Shell's stake in the company to below 5 percent.
"If it gets knocked back, the question will have to be whathappens next, and in our view it's likely the board will move toimplement an equal access buy-back," said Nik Burns, executivedirector & lead energy analyst at UBS.
Shell is selling the bulk of its 23.1 percent stake inWoodside. As part of the deal Woodside aimed to buy back andcancel half the shares that Shell was selling to smooth theimpact of the sell-down. Shell has already sold the other halfto institutions.
Australia's top petroleum company will be hopingshareholders who attend Friday's meeting will tip the vote infavour of the buyback.
Shares in Woodside lost 1.4 percent to trade at A$42.28,recovering from a session low of A$41.96 by 0143 GMT, comparedwith a broader market rise of 0.3 percent.
Some Australian fund managers have opposed the move becauseit gives Shell access to tax credits that they believe allshareholders should have access to on an equal basis.
Woodside has tried to persuade investors they will allbenefit from the buyback as it will boost earnings per share anddividends per share for everyone, while removing an overhangthat has long weighed on its share price.
If the board moves to post an equal access buyback, Burnssaid he expects Shell to retain more than a 10 percent stake inWoodside, and the overhang Woodside was trying to remove throughthe process would still exist.
The reduction in Shell's stake marks a milestone in a longretreat from a company that it had tried to take over in 2001.That deal was ultimately blocked by the Australian governmentafter Woodside argued that Shell may focus on offshoredevelopments at the expense of Australian projects.
Like other oil majors, Shell is under pressure frominvestors to cut soaring costs and increase profit distributionvia dividends and share buy-backs. Under Chief Executive Ben vanBeurden, the company has sold or put on the block around $12billion of assets in Australia, Europe, Nigeria and NorthAmerica. ($1 = 1.0726 Australian Dollars) (Reporting by Sonali Paul, additional reporting by Thuy Ong inSYDNEY; Editing by Richard Pullin)
