DOMINOES BEGIN TO FALL: BHP Chairman Says $20 Billion Shale Investment “MISTAKE”
2 July, 2017
As the U.S. and Global Oil and Gas Industry continues to cannibalize itself to stay alive, the Shale Dominoes begin to fall as BHP Chairman announced its shale investment was a MISTAKE. Yes, it’s true, BHP Chairman Jacques Nassar said his company’s $20 billion shale investment six years ago, in hindsight, was a mistake.
BHP entered the shale business at the height of the fracking boom in 2011 and invested billions more developing the operations. The fall in oil prices since then has led to pre-tax writedowns of about $13 billion on the business. Activist shareholder and hedge fund Elliott Management, holding 4.1 percent of BHP’s London-listed shares, has been trying to gain support from other shareholders to persuade BHP to sell the shale oil and gas business.
“If you had to turn the clock back, and if we knew what we knew today, we wouldn’t do it, of course we wouldn’t do it, but go back and put yourself in our position at that time,” Nasser told a business seminar, referring to the shale purchase.
“We bought exactly what we thought we were buying, but the timing was way off.”
BHP Billiton has moved to bulk up its energy holdings, entering the US shale market with a deal to buy Chesapeake Energy’s Arkansas-based gas business for $4.75bn.
The Anglo-Australian miner said on Monday that it would buy 487,000 acres of leasehold gas properties in the Fayetteville shale, funding the deal from its existing cash balances.
The assets, which currently produce about 400m cubic feet of gas per day, will increase BHP’s oil and gas reserves from current levels by about 45 per cent. The company sees potential to triple the production from the Fayetteville acreage during its 40-year operating lifetime.
Andrew Mackenzie, BHP chief executive, said on Tuesday he was willing to sell its US shale business, as he prepared to meet Elliott Advisors for the first time since the activist investor called for a major restructuring of the world’s largest mining company by market capitalisation.
Elliott said last month that BHP should spin off its US petroleum business, which includes onshore shale assets as well as fields in the Gulf of Mexico, and the hedge fund also called on the Anglo-Australian company to simplify its corporate structure.
“If there is a natural owner out there who believes in more upside that can be achieved within this shale business than we do, we will be more than happy to talk turkey with them,” he added.