BHP Billiton cuts oil and gas spending as oil prices plunge
21 January 2015
BHP Billiton has cut oil and gas spending to protect its balance sheet and shareholder dividends as commodity prices plunge, AAP reported.
The company said it would cut oil exploration by 20 per cent to $600 million in 2015, as against its previous guidance.
The move had been expected after fellow US shale companies BP and Schlumberger laid off thousands of workers.
The reduction of rigs in US onshore business by 40 per cent and petroleum exploration spending by 20 per cent comes as the latest reverse for BHP.
But analysts say, the cut did not signal failure of its shale foray.
BHP has spent more than $30 billion in the development of shale - or unconventional oil and gas - assets, but had taken several hits including price falls, write-downs and had also put its US Fayetteville asset up for sale.
The company spent $1.9 billion on US shale in the first half out of a planned $4 billion for the full year and would reveal the extent of the cuts when it reported earnings results in February.
Expected exploration spending fell 20 per cent to $600 million.
According to chief executive Andrew Mackenzie there could be more cuts in shale if oil and gas prices did not recover.
He said the company would keep the activity under review and make further changes if it believed deferring development would create more value than near-term production.
BHP had highlighted shale resources in the US as a focus for capital spending and investment and had spent heavily during the commodities boom to increase its presence in the US shale gas and liquids sector, Financial Times reported.
The company was set to invest about $4 billion annually in its fields from a group capital spending budget of about $15 billion.
According to the commodities giant, the reduction in drilling activity would not impact its 2015 financial year production guidance and it was confident that shale liquids volumes would increase by about 50 per cent in the period.
The company added it would reveal the scale of cuts to its drilling budget next month with the release of its midyear earnings. However, it said it would make impairments of $200 million-$250 million to underlying profits after the sale of some assets.
All BHP's key commodities had come under pressure after the group announced it planned to spin off non-core assets into a separately listed company, to be known as South32 (See: BHP to spin off $14 bn of assets; to form new company).