BHP flags shale exit, starts search for buyers

BHP's Fayetteville shale asset. Image: BHP

BHP looks set to offload its shale assets in the United States after describing them as a non-core part of the company’s diversified business.

The Australian miner’s US petroleum division has been under scrutiny this year, with investor Elliott Associates proposing it divest the assets as part of a company restructure.

BHP today confirmed it is exploring options to sell its onshore US petroleum assets, announcing the plans in the company’s 2017 financial report.

“We have determined that our onshore US assets are non-core and we are actively pursuing options to exit these assets for value,” BHP reported.

“In the meantime, we will complete well trials, acreage swaps and assess mid-stream solutions to increase the value, profitability and marketability of our acreage.”

BHP, meanwhile, recorded underlying net profit of $US6.7 billion ($8.48 billion) in fiscal 2017, a 454 per cent improvement on the $US1.21 billion it delivered in 2016.

Iron ore, which surged in value over the first half of the financial year, was the standout performer for BHP.

Its iron ore division’s earnings before interest and tax increased to $US7.2 billion from the $US3.7 billion recorded a year earlier. The average price BHP received for iron ore over the year was 32 per cent higher against 2016.

BHP chairman Jac Nasser, who leaves his position at the end of the month, said the company had reduced unit costs by over 40 per cent and achieved over $US12 billion in productivity gains.

“Our capital allocation framework provides flexibility at the bottom of the cycle and discipline at the top,” Nasser said.

“We have shifted our focus to low-cost, high-return latent capacity projects which has allowed us to reduce capital expenditure by over 70 per cent.”

BHP announced it would pay a final dividend of US43 cents, up from last year’s US14 cent final payout.

Chief executive officer Andrew McKenzie said BHP had a strong financial year, with the free cash flow of $US12.6 billion its second highest on record.

“Productivity gains across our simpler portfolio of tier one assets increased our return on capital to 10 per cent,” McKenzie said.

“This strong momentum will be carried into the 2018 financial year, with volume growth of 7 per cent and further productivity gains expected.

“Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year.”