BHP plans exit on shale
BHP Billiton has decided to abandon its failed $50 billion bet on the US fracking boom after ruling the business does not have the ability to be expanded globally.
Chief executive Andrew Mackenzie said the mining major would seek to sell its loss-making US unconventional oil and gas business via a series of trade sales, although he did not rule out spinning the assets off into a separately listed company.
BHP revealed its sale plans as it announced it was back in the black, posting a full-year profit of $US5.9 billion ($7.4 billion) and tripling its final dividend.
The result was a turnaround from the monster $US6.4 billion ($8.3 billion) loss it posted in the prior year when it was hit with major writedowns on its shale assets and the Samarco dam disaster in Brazil.
Revenue rose 24 per cent to $US38.3 billion as the prices of key commodities such as iron ore, copper, coal and oil notched up healthy doubledigit price gains.
The Melbourne-based miner will also delay a decision to invest a further $US4.7 billion ($6.9 billion) in a potash project in Canada, which its board had been scheduled to consider next year.
Both its US shale business and mooted spend on the Jansen potash project have been questioned by major investors, particularly since US activist investor Elliott Management launched a highprofile push to shake up the Big Australian earlier this year.
Mr Mackenzie said while BHP always took the view of its shareholders into consideration, the decision to exit US shale followed five years of developing the business and working out whether it could fit into the miner’s global portfolio.
“The path to this decision started quite a few years back when we realised that this wasn’t going to be a business that we could expand globally. We just didn’t think the geology and commercial conditions existed anywhere seriously outside the US.”
Former BHP chief Marius Kloppers spent $US20 billion buying into the US shale sector at the height of the fracking boom in 2011, when oil was fetching more than $US100 a barrel.
The mining major has since spent $US18.3 billion developing a suite of assets that posted an underlying loss of $US771 million for the year to June.
BHP will double its capital expenditure on the business to $US1.2 billion this year as it looks to attract a buyer, taking its spend to $US39.5 billion.
Investment bank Macquarie has valued the business at between $US8 billion to $US10 billion while Credit Suisse says it is worth at least $US11 billion.
Shares in BHP closed 1 per cent higher at $25.98.