BHP considers selling US shale assets

Fayetteville. Image: BHP

BHP Billiton is considering the divestment of its Fayetteville onshore gas field in the United States, the company reported in its latest operational review.

The review, which encompasses the nine months to March 31 2017, highlighted that the company’s total petroleum production dropped 15 per cent to 156.5Mmboe.

However, development activity within BHP’s onshore US petroleum assets increased, following the approval of two additional rigs in the Haynesville.

While BHP’s divestment of its non-core onshore US acreage at southern Hawkville is under way, the company is also thinking of divesting its Fayetteville asset.

“The Fayetteville field is currently under review and we are considering all options including divestment,” BHP said.

During the nine months, the company also invested $US2.2 billion ($2.9 billion) for the development of the Mad Dog Phase 2 project in the Gulf of Mexico and fully commissioned the Bass Strait Longford Conditioning Plant, enabling full production from the Turrum and Kipper fields in Victoria.

BHP’s total copper production during the nine months also decreased, falling 20 per cent to 939,000t. It’s guidance for the 2017 financial year has also reduced to between 1330-1360, contributed by industrial action at the troubled Escondida mine in Mexico, and the power outage in South Australia that affected production at Olympic Dam.

Iron ore production, however, increased three per cent to 171Mt. BHP’s Western Australia Iron Ore (WAIO) production rose following the commissioning of a new primary crusher and additional conveying capacity at Jimblebar, progress on the rail maintenance program and productivity improvements. This, was also offset by wet weather impacts.

Metallurgical coal production increased two per cent to 31Mt, with the company highlighting record coal production at five of its coal mines due to improved mining performance. However, guidance for the 2017 financial year dropped to between 39-41Mt due to infrastructure damage caused by Cyclone Debbie.

BHP also cited a rise in nickel production, which increased five per cent to 599,000kt.

BHP CEO Andrew Mackenzie highlighted the company’s restructure which mainly aimed to increase returns. He said the demerger of South32 and BHP’s $US7 billion ($9 billion) of divestments reduced the number of assets in its portfolio by more than a third and reduce costs.

“Our more focused portfolio has enabled us to lower unit costs by over 40 per cent,” Mackenzie said.

“A simpler portfolio allows us to improve safety and operational performance more quickly with maintenance, project and geoscience centres of excellence spreading petroleum and minerals expertise across the group.”

Mackenzie also indicated the company’s shifting attitude toward its shale assets.

“We have significantly reduced the capital intensity of our growth options and changed our approach in shale to improve returns and lower risks on new investments,” he said.

Earlier this year, US hedge fund Elliot Associates put forward a proposal to BHP suggesting it should restructure and operate as a London-listed company as well as divest its US petroleum assets.

BHP, however, dismissed the proposal as its disadvantages would outweigh the benefits.

“The board and management have concluded that the costs and associated disadvantages of each element of Elliott’s proposal would significantly outweigh the potential benefits. We believe that Elliott materially overstates the potential value that could be created by its proposals,” BHP said.

BHP also reinforced the strength of its petroleum assets as a separate entity.

“With our strong business plan, our view is that the Petroleum business as a part of the BHP Billiton portfolio currently offers more value to shareholders than if it were a separate entity,” the company added.

BHP is also continuing to focus on minerals exploration, particularly Greenfield minerals exploration to advance its copper targets in South Australia, Chile, Peru, Canada and the United States.

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