BHP Makes Progress on Exit From Onshore US Business

- May 16th, 2018

Earlier this week, BHP’s CEO Andrew Mackenzie confirmed the company is making good progress with the exit from its onshore US business. Last year, the miner announced its planned exit from the on US shale formations to focus its attention on offshore assets.

In his address earlier this week to attendees of the Bank of America Merrill Lynch Global Metals Mining & Steel Conference, BHP’s (ASX:BHP, NYSE:BHP,LSE:BLT) CEO Andrew Mackenzie said the company is “making good progress with the exit from its onshore US business.”

Last year, the Anglo-Australian miner announced its planned and calculated exit from the US onshore shale oil and gas business to focus its attention on offshore assets. Some analysts believe the move was also prompted by pressure from activist investors to back out of the controversial onshore oil and gas projects.

“We have determined that our onshore US assets are non-core and we are actively pursuing options to exit these assets for value,” the company said in a 2017 financial outlook statement.

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BHP had implemented a two-year target for its exit from what is estimated to be a US$10-billion unit, however this past February the company revised the exit date to be as early as November 2018.

“We continue to progress a number of alternatives to exit our onshore US assets for value,” BHP told Bloomberg. “We have commenced marketing each of the fields.”

Since 2012, BHP has been actively working to reduce costs and increase revenues. The focus on fiscal responsibility has generated US$12 billion in gains so far, and the company expects to add US$2 billion more by the end of 2019.

“We have reduced net debt by over US$10 billion, returned US$8 billion to shareholders and, crucially, replenished our pipeline with new opportunities,” Mackenzie told the crowd. “This pipeline has the potential to add a further 40 percent to the value of BHP, subject to our strict capital allocation processes.”

Last month in an effort spur on potential buyers,  BHP’s president of petroleum operations, Steve Pastor, said the company would consider swapping certain onshore oil and gas resources with competitors’ offshore assets. The company is especially interested in offshore wells in the Gulf of Mexico. BHP, is also prepared to offer the assets in seven packages, including three in the prized Permian Basin.

BHP is the world’s largest mining company, with assets spanning the globe, and is poised to stay on top through its increased revenue and the future sale or swap of the onshore projects. The company expects to receive top dollar for its offerings due to the quality of acreage higher oil prices, a lower US corporate tax rate and positive results from recent well trials.

“We have maximized operating cash flow as we have lowered costs through productivity; we have been disciplined and transparent in capital allocation; and we have identified new options to increase value and returns,” Mackenzie concluded.

On Wednesday (May 16), BHP’s share price was up 1.87 percent, closing at GBP 1,744.20.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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