Nay oil prices are plummeting, BHP Billiton under pressure to sell its shale

The Reasons

Two main shareholders are pressuring BHP Billiton about its oil and gas fields. $20 billion worth active to be sold, but the Company might overcome the selling because of the declining oil prices.

According to the investors opinion, BHP Billiton is a serious producer of deepwater oil and gas. But its shale business (from 2011) is now a capital reflux and shareholders would be in a better position if it sells the business. The main thing is, that now is not a really suitable moment for doing so.  Prices are having a fiasco, and the oversupply just burns it forward.

BHP officials see oil as core business, and they also see shale operations as their core value:

• “The risk is doing it for the wrong reasons – because people are telling you do it – and getting out quickly. We’re at $40 oil. It’s not necessarily the greatest time to be contemplating that.” Said an analyst who owns BHP shares.

Timing is crucial

Based on recent deals performed in the Permian and Eagle Ford shale areas ($30,000 – $40,000 net care),  Australian Tribeca Partners judged that BHP could fetch $10 billion for its shale assets and their value.

BHP announced it wants to hold on to its Permian area. There it has been strengtehning its position. Doing so by picking up high grade acreage. Later it plans to trade acreage or work with other companies in order to boost production.

Company’s success was confirmed when they cut their costs by 64%. That happened in the Black Hawk region during the past 4 years.

“On many measures we’re one of the lowest-cost operators. If we aren’t he The One.” Andrew Mackenzie, company CEO told investors in April.

He was explaining his disallowance of a suggestion for company to spin off its U.S. oil and gas assets. This was suggested by fund manager Elliott Management to company.

Company’s Image

BHP can rely its glory and positive status on energy consultant Wood Mackenzie. He stated that BHP has amid the lowest costs between shale operators. In the Permian Basin area, its richest parts. Costs are about $30.20 a barrel.  

“BHP is active in the swap market, and we expect its operational success to open doors with swap and strategic partners.” Mackenzie also said in one report, thinking about the market for trading acreage with other operators.

Its less attractive Fayetteville acreage, valued at $919 million on its books at the end of 2016, is back up for sale.

The Fayetteville acreage, which value is estimated at about $919 million is upholding sale. It is the company’s less attractive acreage. And this value is assesed at the end of 2016.

Finishing

One way BHP could deprive shale, while retaining exposure to a potential recovery in oil prices, would be to sell the shale assets to a well-regarded shale operator. All of that in order to have a return for an equity stake in that company. And later it could sell down the track. Said BT’s Saunders.

There are different companies active in areas where BHP holds acreage. Some of them are ConocoPhillips, EOG Resources Inc, Anadarko Petroleum, and Marathon Oil Corp, and many others…