MELBOURNE (dpa-AFX) - Mining giant BHP Billiton Ltd. (BHP, BHP.AX, BBL, BLT.L) said late Thursday that it would incur $3.29 billion in write-downs related to its U.S. shale and Australian nickel assets, citing low US gas prices and margin deterioration.
The company will record an impairment of $2.84 billion before tax against the carrying value of the Fayetteville shale gas assets acquired from Chesapeake Energy last year. This is due to low US gas prices owing to a short-term oversupply of gas.
The $4.75 billion acquisition of Chesapeake's interests in the Fayetteville Shale was announced in February 2011. The Fayetteville shale assets include 487,000 acres of leasehold and producing natural gas properties located in Arkansas and increased BHP's net reserve and resource base by 45 per cent. The interests generated strong margins and returns on capital at that time.
BHP said today that it would also recognize $450 million before tax charge against the carrying value of its Nickel West assets due to margin deterioration. Both impairments will be recognized as exceptional items.
BHP Billiton's CEO Marius Kloppers said, 'The Fayetteville charge reflects the fall in United States domestic gas prices and the company's decision to adjust its development plans by shifting drilling from dry gas to the more liquids rich fields. While we have responded appropriately to the changed market conditions today's impairment is clearly disappointing.'
The value of the more extensive onshore U.S. shale liquids and gas assets acquired through the acquisition of Petrohawk Energy Corp. in August 2011 has not been affected. BHP expects the development of these assets to create substantial, long term shareholder value.
It was in August 2011 that BHP announced the acquisition of US oil and natural gas producer Petrohawk Energy in an all-cash deal of $12.1 billion. That deal gave BHP access to a portfolio of three resource plays of the Eagle Ford and Haynesville shales, and the Permian Basin, covering assets about one million net acres in Texas and Louisiana.
BHP Billiton Chairman Jac Nasser said the Board continues to believe that the investment in the US shale assets is the right decision for BHP Billiton shareholders. The assets acquired, especially the substantial Petrohawk business, are of high quality and would generate good returns for shareholders, he added.
Marius Kloppers and Petroleum CEO Mike Yeager have advised the Remuneration Committee that they do not wish to be considered for bonus for 2012. The Remuneration Committee and the Board agreed with that decision.
Early this year, peer Rio Tinto Plc (RIO, RIO.L, RTNTF.PK, RTPPF.PK, RIO.AX) had booked impairment charges of $9.29 billion related to its Aluminum business.
BHP.AX is currently falling 2.28 percent at A$31.29 on 4.99 million shares.
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© 2012 AFX News
