BHP Billiton takes a $2.8 billion write-down on US shale

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Source: DollarPhotoClub

Mining giant BHP Billiton has said it plans to write-down its US oil and gas assets by $2.8bn in this year’s financial results, most of it related to the Hawkville shale gas field in South Texas, acquired as part of a $15 billion deal with Petrohawk Energy in 2011.

This is BHP’s second impairment this year, following a $328 million impairment on its Permian shale in February, bringing the total book value write-down of it’s shale division to almost $6.3 billion over the past three years.

BHP now value the operating assets of it’s US shale division at around $24 billion although some analysts disagree, with JP Morgan placing the value at $17 billion and Citi at only $11.2 billion.

While some shareholders were disappointed by the write down, Tim Cutt – President of BHP Petroleum – defended the decision, insisting that cutting costs and improving well productivity would help protect the division from low oil prices.

In a statement on Wednesday Mr Cutt said “While the impairment of the Hawkville​ is disappointing, it does not reflect the quality of our broader onshore US business”.

“The Black Hawk continues to exceed expectations, the Permian offers significant upside across multiple zones and the Haynesville, one of the industry’s premier dry gas positions, provides an excellent development option as market conditions improve”

“With industry-leading drilling costs and recoveries, we are well positioned to realise significant value for shareholders as we develop our high-quality resource base”

In January, the company had said it would cut its shale operations by 40% because of falling oil prices and in February revised it’s shale drilling budget from $4 billion to $2.2 billion. In Wednesday’s statement that budget has been cut again to just $1.5 billion and the number of rigs has been reduced from 26 in December to 10 for the 2016 financial year.

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