BHP Group Limited (BHP)

[Timothy Smith]

$BHP says ‘Katy bar the door’ on Eagle Ford, Permian

Australian miner BHP Billiton appears to have firmed up its bullish outlook on US shale, announcing plans to spend $4.0 billion/year over the next four years largely on Eagle Ford and Permian operations with expectations of ~$3.0 billion in annual cash flow generated by the end of the decade.

This is a massive focus on the US for the company, which plans total oil and gas spend of $5.5 billion per year. Total overall capex should run near $16 billion. By the end of FY14 (in June), BHP expects to have produced an average 685,000 boepd. BHP sees this climbing to 849,000 boepd by FY17 driven by 500,000 boepd of US onshore unconventional (200,000 boepd oil). The company projects US operations should be self-funding by 2016.

BHP petroleum division head Tim Cutt said the company would continue simplifying its portfolio during this period, “with a firm focus on value.” Just a few months ago, the company put half of its Permian acreage on the block. But it has definitely not written off the play, planning to split the majority of US spend between the Permian and Eagle Ford (Black Hawk play).


America’s biggest onshore investor has been on a bit of a rollercoaster in the US over the past few years. BHP rolled out ~$17 billion in US acquisitions in 2011 including the $12.1 billion acquisition of Petrohawk and billions in Chesapeake assets. The Chesapeake assets then bit BHP in 2012, driving a $2.8 billion impairment on Fayetteville holdings acquired in the buy due to the implosion of gas prices. But in early 2013 BHP showed its long-term hand, announcing plans for a 30-story skyscraper in Houston’s Galleria to support the company’s US onshore shale business.