Miner puts big money into oil, gas

The Star Early Edition - - COMPANIES -

BHP BIL­LI­TON, the largest over­seas in­vestor in US shale, boosted spend­ing on its on­shore oil and gas di­vi­sion as ris­ing prices lure drillers to add rigs and spur a deals spree.

The com­pany boosted spend­ing on the unit to $165 mil­lion (R2.21 bil­lion) in the three months to De­cem­ber 31, from $108m the pre­vi­ous quar­ter, ac­cord­ing to a BHP state­ment yes­ter­day.

It also boosted over­all planned petroleum ex­plo­ration spend­ing by 17 per­cent to $820m for fis­cal 2017 af­ter its suc­cess­ful bid for Mex­ico’s Trion field and pos­i­tive drilling re­sults in the Gulf of Mex­ico.

The oil in­dus­try is ex­pected to raise spend­ing for the first time in three years af­ter slash­ing al­most half-amil­lion jobs glob­ally dur­ing the down­turn, in­dus­try con­sul­tant Graves & Co said this month.

Projects in BHP’s petroleum di­vi­sion will ac­count for about half of its cap­i­tal ex­pen­di­ture over the next five years, ac­cord­ing to Mac­quarie Group.

Hedg­ing

“We will ac­cel­er­ate our counter-cycli­cal oil ex­plo­ration ef­forts this year,” BHP chief ex­ec­u­tive An­drew Macken­zie said. “Af­ter the first suc­cess­ful rig, our on­shore US gas hedg­ing pro­gramme will also be ex­panded to se­cure at­trac­tive re­turns.”

BHP, which last year booked write-downs of $7.2bn against the shale unit, lifted the num­ber of oper­at­ing rigs in its US on­shore di­vi­sion to three from two at the end of Septem­ber, fol­low­ing the suc­cess­ful ex­e­cu­tion of its hedg­ing pi­lot, ac­cord­ing to the state­ment.

BHP, which earns about 21 per­cent of rev­enue from its petroleum busi­ness, in­clud­ing off­shore as­sets, sees oil and nat­u­ral gas as bet­ter placed for price gains into next year than iron ore, its top earner.

Oil prices have risen since Opec reached a deal to cur­tail sup­ply last year. The Novem­ber 30 agree­ment has prompted a surge in ac­tiv­ity in the US, which is not an Opec mem­ber.

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