Share­hold­ers pile on the pres­sure

Finweek English Edition - - MARKET PLACE - editorial@fin­week.co.za By Mox­ima Gama

BHP Bil­li­ton, the world’s big­gest min­ing group based on mar­ket cap­i­tal­i­sa­tion, is un­der pres­sure from share­hold­ers to di­vest its US petroleum busi­ness.

Hedge funds El­liott Ad­vi­sors and Tribeca Nat­u­ral Re­sources have called on BHP to re­visit its US petroleum as­sets, with Tribeca call­ing on the miner to sell its on­shore oil and gas as­sets (BHP also owns off­shore fields in the Gulf of Mex­ico). Ac­cord­ing to Tribeca’s es­ti­mates, the sale of the on­shore US shale as­sets could raise about $10bn.

“We do not sup­port the con­tin­ued in­vest­ment in the US on­shore as­sets as these as­sets are un­likely to de­liver ap­pro­pri­ate free cash flow and we fail to iden­tify where BHP has any par­tic­u­lar skill that dif­fer­en­ti­ates it from in­dus­try peers. It re­mains to us a tier two as­set that sits in an ir­ra­tional mar­ket,” Tribeca said in a let­ter, ti­tled “Mak­ing BHP Great Again”, that was sent to the board, ft.com re­ported.

BHP paid nearly $17bn in 2011 to buy shale gas as­sets in the US, fol­lowed by bil­lions in fur­ther in­vest­ment. How­ever, due to the down­turn in prices, it has racked up im­pair­ments of $12bn on its US shale busi­ness, which was val­ued at just $12.6bn at the end of 2016, ft.com re­ported.

Tribeca also asked for an over­haul of the board, which it said had over­seen the de­struc­tion of over $30bn in share­holder cap­i­tal, ft.com re­ported. “As is well known, the chair­man [Jac Nasser] is soon to re­tire. This pro­vides a crit­i­cal op­por­tu­nity to rest the cul­ture to one that cov­ets cap­i­tal ef­fi­ciency and earn­ings per share growth, and we hold high hopes that this op­por­tu­nity will not be wasted,” it wrote. How to trade it: Ac­cord­ing to the charts, BHP could give up more of its gains and pos­si­bly hold at 16 500c/share – where buy­ers could re­turn. Fail­ing which, next sup­port would be at 13 630c/share. Go short on con­tin­ued down­side be­low 19 280c/share. Re­vise po­si­tions at 16 500c/share and in­crease po­si­tions on con­tin­ued sell­ing be­low that level. Al­ter­na­tively, if the 19 280c/share level pro­vides strong sup­port, pre­pare to go long above 20 090c/share, as BHP could at­tempt to close its pre­vi­ous gap and retest the 22 350c/share mark. Stay long above that level, as re­sis­tance would then be en­coun­tered at 23 900c/share.

BHP paid nearly $17bn in 2011 to buy shale gas as­sets in the US, fol­lowed by bil­lions in fur­ther in­vest­ment.

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