You are here

BHP makes US$7.2 billion writedown on US shale assets

bhp.jpg
Mining giant BHP Billiton Friday said it expects to book a US$7.2 billion pre-tax writedown against the value of its struggling onshore assets in the United States as tumbling oil prices hit shale gas.

[SYDNEY] Mining giant BHP Billiton Friday said it expects to book a US$7.2 billion pre-tax writedown against the value of its struggling onshore assets in the United States as tumbling oil prices hit shale gas.

The Anglo-Australian company will also further reduce the number of working onshore US rigs from seven to five in the March 2016 quarter, down from 26 a year ago.

The hefty writedown equates to US$4.9 billion after tax and follows BHP, a major player in the US oil and gas industry, taking a US$2.8 billion pre-tax hit on the same assets last year.

Chief executive Andrew Mackenzie blamed "significant volatility and much weaker" prices in the oil and gas industry, adding that the company had been forced to reduce its medium- and long-term price assumptions.

sentifi.com

Market voices on:

Oil and gas prices have fallen dramatically with the US benchmark West Texas Intermediate hovering near 12-year lows at around US$31.20 a barrel.

"Oil and gas markets have been significantly weaker than the industry expected," Mr Mackenzie said in a statement to the market.

"We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the onshore US business from 26 a year ago to five by the end of the current quarter.

"While we have made significant progress, the dramatic fall in prices has led to the disappointing writedown announced today." Despite this, Mr Mackenzie said he remained "confident in the long-term outlook and the quality of our acreage".

"We are well positioned to respond to a recovery," he added.

The writedowns will reduce the book value of BHP's US net operating assets to about $US16 billion.

AFP

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom