BHP makes progress on US asset sale

BHP's Andrew Mackenzie

BHP’s plan to offload its onshore shale assets in the United States remains on track.

Chief executive officer Andrew Mackenzie, speaking at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Florida, said the company was making good progress on the planned exit from the sector.

The quality of acreage, higher oil prices, a lower US corporate tax rate and positive results from recent well trials are contributing to interest from potential bidders.

“We have a simple, unique portfolio of the very best assets, diversified across attractive commodities,” Mackenzie said.

“Our relentless pursuit of productivity, aided by a more agile and connected culture, will make sure we realise the full potential of our assets and capitalise on strong prices. On top of this, we have built an attractive suite of opportunities to drive further improvement.”

BHP is targeting $US2 billion ($2.7 billion) in productivity gains by the end of the 2019 financial year, adding to the $US12 billion achieved since 2012.

Mackenzie believes BHP’s continued delivery of a roadmap to grow long-term shareholder value, together with strong commodity prices, has underpinned an increase in return on capital employed and delivered a 30 per cent increase in its base value over the past two years.

He commented: “We have maximised operating cash flow as we have lowered costs through productivity; we have been disciplined and transparent in capital allocation; and we have identified new options to increase value and returns.”

BHP’s chief pointed to six value drivers at the company over the past two years, such as reduced unit costs by more than 15 per cent; an accelerated technology and innovation program; progress of five high-return, latent capacity projects; sanction of two major projects in copper and oil; discovery of four petroleum exploration prospects; and improved performance at its Onshore US acreage in preparation for an exit from the sector.

“Alongside this, we have reduced net debt by over US$10 billion, returned US$8 billion to shareholders and, crucially, replenished our pipeline with new opportunities,” Mackenzie said.

“This pipeline has the potential to add a further 40 per cent to the value of BHP, subject to our strict capital allocation processes.”

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