Drop in out­put a blow to BHP

Townsville Bulletin - - NEWS -

MIN­ING gi­ant BHP Bil­li­ton pre­dicts a fall in petroleum pro­duc­tion next year af­ter rack­ing up $ 3 bil­lion in write­downs.

BHP, which spun off as­sets to fo­cus on iron ore, petroleum, cop­per and coal, down­graded its petroleum pro­duc­tion fore­casts yesterday de­spite am­bi­tions of grow­ing the busi­ness to ri­val its iron ore di­vi­sion.

The com­pany pre­dicts 2016 full- year pro­duc­tion for its petroleum di­vi­sion will fall 7 per cent, while cop­per is tipped to de­cline by 12 per cent and met­al­lur­gi­cal coal is likely to drop 6 per cent.

De­spite the down­beat out­look for three of its four key com­modi­ties, BHP said iron ore pro­duc­tion would in­crease by 6 per cent to 247 mil­lion tonnes in fis­cal 2016.

BHP beat its full- year iron ore pro­duc­tion guid­ance, ship­ping 254 mil­lion tonnes of iron ore dur­ing the 2014/ 15 fi­nan­cial year, above the 250 mil­lion tonne tar­get it an­nounced in May.

It also ex­pects to cut pro­duc­tion costs at its West Aus­tralian Iron Ore pro­ject to $ US16 per tonne.

But the com­pany will take a $ US650 mil­lion ($ A875 mil­lion) hit to its full- year un­der­ly­ing profit due to write­downs and re­dun­dancy costs, mostly linked to its cop­per busi­ness.

The im­pair­ments come on top of $ US2 bil­lion in post- tax write­downs to its US shale oil busi­ness, which were an­nounced last week.

De­spite cut­ting an­nual shale in­vest­ment by more than 50 per cent in its petroleum di­vi­sion, chief ex­ec­u­tive An­drew Macken­zie said BHP ex­pected to main­tain pro­duc­tion in its Black Hawk and Per­mian liq­uids oper­a­tions in the US in fis­cal 2016.

“Although our de­ci­sion to cut spend­ing in the on­shore US will mean de­fer­ring gas vol­umes in the near term, we ex­pect to re­alise greater value by de­vel­op­ing our acreage later,” Mr Macken­zie said.

BHP lifted iron ore pro­duc­tion by 13 per cent dur­ing the year, con­tribut­ing to a 9 per cent in­crease in to­tal group pro­duc­tion for the year, the com­pany’s June op­er­a­tional re­view said.

The com­pany lifted petroleum pro­duc­tion 4 per cent to 256 mil­lion bar­rels of oil equiv­a­lent ( mm­boe).

But cop­per pro­duc­tion was flat at 1.7 mil­lion tonnes, while met­al­lur­gi­cal coal pro­duc­tion was up 13 per cent to 43 mil­lion tonnes.

IG mar­kets strate­gist Evan Lu­cas said BHP’s iron ore busi­ness was likely to de­liver a strong re­sult next month but ru­mours of fur­ther petroleum write­downs and a sub­dued per­for­mance of its gas on­shore fields were con­cern­ing.

“The for­ward guid­ance is the con­cern,” Mr Lu­cas said.

“Petroleum clearly is an is­sue, con­sid­er­ing chief ex­ec­u­tive An­drew Macken­zie is from that di­vi­sion.

“Part of the rea­son they got him into that role as CEO is some­thing they could be scratch­ing their heads about.”

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