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BHP To Take $4.9 Billion Impairment; Eagle Ford, Permian Reduction
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BHP Billiton expects to recognise an impairment charge of approximately US$4.9 billion post-tax (or approximately US$7.2 billion pre-tax) against the carrying value of its Onshore US assets.
This charge will be recognised as an exceptional item in the financial results for the half year ended 31 December 2015. The impairment follows the bi-annual review of the Company’s asset values and reflects changes to price assumptions, discount rates and development plans which have more than offset substantial productivity improvements.
The impairment will reduce Onshore US net operating assets to approximately US$16 billion.
No Gas Development (Haynesville, Fayetteville)
BHP Billiton has previously suspended development of its dry gas acreage. The Company has now also reduced its medium and long-term gas price assumptions.
Rig Count Reduction
The Group will reduce the number of operated rigs in its Onshore US business from seven to five in the March 2016 quarter. This will comprise three rigs in the Black Hawk and two rigs in the Permian. Beyond this, investment and development plans for the remainder of the 2016 financial year are under review, with a focus on preserving cash flow.
BHP Billiton Chief Executive Officer, Andrew Mackenzie, said “Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the Onshore US business from 26 a year ago to five by the end of the current quarter.
“While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today. However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery."
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