BHP see massive US shale impairment

BHP has announced an impairment of around US$2.8 billion impairment against the value of its US onshore energy assets.

The company stated the majority of this writedown is down to its Hawkville shale field, due to its “geological complexity, product mix, acreage relinquishments, and amended plans,” BHP said in a company statement.

Following this writedown the group expects to have total onshore US net operating assets of around US$24 billion.

BHP petroleum head, Tim Cutt, labelled the impairment a frustration.

“While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore US business,” Cutt said.

“The Black Hawk continues to exceed expectations, the Permian (in Texas) offer significant upside across multiple zones, and the Haynesville, one of the industry’s premier dry gas positions, provides a development option as market conditions improve.”

Despite this impairment, BHP still plans to invest US$1.5 billion in the onshore US assets in the 2016 financial year, basing future operational returns on an oil price of US$60 per barrel and a gas price of US$3 per Mscf, predicting an eventual cashflow positive position for the business to soon follow.

US shale oil has been touted as the driver for the next big oil boom, and put the nation on track to surpass oil giant Saudi Arabia and natural resources hub Russia as the top oil producer.

In the IEA’s World Energy Outlook, released early last year, it stated that the US is now on track to become an oil superpower, mainly due to its oil shale focus and is likely to become energy self-sufficient within two decades.

BHP has also been looking at offshore petroleum and gas assets, recently signing an MoU with Mexican oil powerhouse Pemex, and late last year announcing its commitment to support floating LNG processing off Scarborough in a joint venture between it and ExxonMobil.


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