BHP Billiton to exit loss-making US shale business

Anglo-Australian mining giant BHP Billiton today announced plans to exit an unprofitable shale gas business in the United States, even as the company reported increased underlying full-year profit, helped by a recovery in industrial commodities.

BHP Billiton said it would book a $7.2 billion writedown on the value of its US shale assets, reflecting a slump in oil and gas prices and a bleak near-term outlook.

The hefty impairment is the third after BHP entered US shale business in 2011, with an investment of $20.6 billion, including assumed debt, on two acquisitions at a time when oil and gas prices were much higher than they are now.

BHP Billiton reported a 192 per cent year-on-year increase in its after-tax profit (attributable to members of the BHP Group) to $5.89 billion while its revenues were up 24 per cent at $38.29 billion

The news about the shale business exit was welcomed by shareholders, especially those like US hedge fund Elliott Management, pressing the company to rethink its investment in oil and boost shareholder returns.

BHP Billiton's performance during the year ended 30 June 2017 has been boosted by a recovery in industrial commodities markets, which helped the miner generate more cash than in some years of the mining boom.

The company said it cut net debt by nearly $10 billion to $16.3 billion and triple its final dividend to $0.43 a share from 14 cents in the previous financial year.

Net tangible assets per fully-paid share were $11.04 million as of 30 June 2017, compared with $10.51 million on 30 June 2016.

Final dividend for current period works out to 43 cents (fully franked) against the final dividend for the previous corresponding period of 14 cents.

The board of directors has set the record date for payment of dividend as 8 September 2017 and the payment date as 26 September 2017.

Other miners have also boosted payouts in the current earnings season to reward shareholders as commodity prices surged. Rio Tinto and iron ore miner Fortescue Metals paid record dividends, while Anglo American restored its dividend.

In response to calls from a number of shareholders for the disposal of the shale business it acquired at the height of the oil boom, the miner said it was "actively pursuing options to exit."

BHP has worked its way back to financial health after it took huge charges over the Samarco dam disaster in Brazil, in November 2015. Nineteen people died in the disaster, while 700 were rendered homeless. The incident sparked global outrage against the company

BHP also today announced a global multi-currency bond repurchase plan - comprising of two separate transactions, one targeting certain bonds issued under BHP's US debt capital markets programme and another targeting certain bonds issued under the Euro Medium-Term Notes Programme.

The multi-currency plan will be subject to a global aggregate cap of $2.5 billion and will be funded by BHP's $14.2 billion cash position. Any early repurchase of bonds under either transaction will extend BHP's average debt maturity profile and enhance the group's capital structure, a company release stated.

The US bond repurchase plan will target 2021, 2022 and 2023 US dollar denominated Notes.

BHP Billiton Finance (USA) Limited, a wholly-owned subsidiary of BHP Billiton Limited, today announced that it is offering to purchase for cash, upon the terms and subject to the conditions set forth in the offer to purchase, dated 21 August 2017, its outstanding $529,978,000 senior notes bearing a coupon rate of 3.250 per cent due 2021, its $859,938,000 senior noted of 2.875 per cent coupon due 2022 and its $1,500,000,000 senior notes of 3.850 coupon due 2023, from holders of any of the notes.

BHP has also initiated a separate and concurrent tender offer for 6 series of notes outstanding under BHP's Euro Medium-Term Note Programme (the Euro Tender Offers). The Euro Tender Offers are being made pursuant to a separate tender offer memorandum and solely to qualified investors that are outside the United States.