Is BHP Billiton seeking a simpler oil and gas portfolio?

The Financial Times reports that BHP Billiton is likely to refocus its oil business, which currently makes up one of the company’s four businesses or ‘pillars’. It is believed the announcement will be made next month when BHP’s CEO Andrew Mackenzie will present a review of the division.

Reports suggest that since 2011, the performance of BHP’s petroleum division has deteriorated, with significant declines in returns and cash flow. Although this is partly because the company has invested heavily (reportedly $20 billion) in the US shale market, it also reflect the poor production volumes from its conventional fields.

Analysts expect the announcement to reveal that BHP plans to refocus the business and offload non core assets, and seek a simpler oil and gas portfolio. BHP has also put up for sale half of its oil and gas acreage in the US Permian basin.

According to The FT, BHP has a tail of petroleum assets and joint ventures which sit awkwardly with the company’s philosophy of investing in projects that are “large, long life, low-cost, expandable” (and preferably located in OCED countries). These include the Liverpool Bay operation in the UK, the Pyrenees oilfields in Australia as well as assets in Algeria, Trinidad and Tobago and Pakistan.

According to analysts at Morgan Stanley, the sale of these assets could generate $6bn to $7.7 billion. It is thought the proceeds could be used to either pay down debt, reinvest in existing business or returned to shareholders.


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