Australia's mining giant BHP Billiton is seen targeting oil and gas producer Woodside Petroleum Ltd. to make up for its failed bid for Canada's Potash Corp., a report by Morgan Stanley said.

Still on its bullish acquisition mode, Morgan Stanley analysts Craig Campbell and Stuart Baker said in their recent report that it is possible for BHP to target Woodside, which is now considered as Australia's second largest oil and gas producer.

They noted that it is also in time for Royal Dutch Shell Plc's unloading of 34.27 percent stake in Woodside. Early this week, Shell sold 10 percent of its Woodside stake for $3.3 billion.

Analysts predict that Shell will also dispose of its other shareholdings in Woodside as it shifts its focus on liquefied natural gas projects.

Macquarie Disagrees

Bloomberg News said Macquarie Bank disagrees with Morgan Stanley's analysis on Woodside and BHP. The investment bank said in a report and quoted by Bloomberg: BHP is "acquisitive and cashed up" and would be unlikely to confront opposition from Australia's Foreign Investment Review Board."

Woodside rose 52 cents to A$42.74 at 11:57 a.m. in Sydney trading, valuing the Perth-based company at almost A$32 billion.