BHP Billiton Plans To Divest US Onshore Assets

Topics: Asset/portfolio management
Source: BHP Billiton

In its report for year ended 30 June, BHP Billiton yesterday said it was planning to “only divest for value” its US onshore assets. While it considers options, the company will continue to complete well trials, acreage swaps, and look into midstream solutions to increase the value, profitability, and marketability of the assets.

The company reported its second-highest free cash flow on record—$12.6 billion—and reduced its net debt by nearly $10 billion while returning $4.4 billion to shareholders, according to BHP CEO Andrew Mackenzie.

In the report, the company stated, “As part of our ongoing review of our portfolio, the Board and management have determined that our onshore US assets are non-core and options to exit these assets are being actively pursued.” The sale of a portion of the Hawkville shale field located in Texas is anticipated to be completed in the September 2017 quarter.

The company holds more than 838,000 net acres in four shale areas–Eagle Ford, Permian, Haynesville, and Fayetteville. The Black Hawk area of Eagle Ford and the Permian area are two of its largest liquids-focused field developments.

BHP’s petroleum Capex for FY2017 decreased by 42% to $1.5 billion, of which $554 million went to US onshore drilling and development expenditure. As of 30 June, its operated rig count was five, with three rigs in the Haynesville, one in the Black Hawk, and one in the Permian.

During the second half of FY2017, BHP’s drilling and completion costs per well increased in most fields because of changes to well designs to longer laterals and larger frac jobs, according to the company. It expects the increased recoveries to improve well returns and offset the higher costs. It anticipates the Permian’s recoveries to increase more than 60% over the full well life, including a 20% increase in the first year of production.

For FY2018, the US onshore Capex is expected to be $1.2 billion of the total petroleum Capex of $2.0 billion. BHP is considering up to five additional rigs: Hawkville, one rig began operations in July; one rig in the September quarter; Black Hawk, one rig; Permian, two rigs dedicated to completion trials to determine if full pad development will start in FY2019.

In FY 2017, total petroleum production decreased by 13% to 208 million BOE, due in part to the deferral of development activity in US onshore for value and natural field decline, BHP said. In FY2018, the company forecasts its total petroleum production to decrease to between 180 and 190 million BOE, of which US onshore production is forecast between 61 and 67 million BOE. The expanded rig program is expected to deliver growth in the onshore production of approximately 35% in FY2019.

BHP Billiton Plans To Divest US Onshore Assets

Pam Boschee, Senior Editor

23 August 2017