BHP leaves door open to U.S. shale gas write-down

ADELAIDE Mon May 14, 2012 4:23am EDT

A man walks past the head office of BHP Billiton in central Melbourne. REUTERS/Mick Tsikas

A man walks past the head office of BHP Billiton in central Melbourne.

Credit: Reuters/Mick Tsikas

ADELAIDE (Reuters) - BHP Billiton's (BHP.AX) petroleum chief executive left the door open to the possibility of a write-down on the company's U.S. shale gas assets on Monday, but defended their long-term value.

The company will review its assets at the end of the fiscal year on June 30, BHP chief petroleum executive J Michael Yeager told reporters in a briefing on Monday.

"If we have to take an accounting snapshot here, we hope everybody knows that we'll take another accounting snapshot in the future and whenever those circumstances are changed, that whatever action we take now, may get reversed later on," Yeager said.

BHP bought the Fayetteville and Petrohawk shale gas assets last year for a total of $17 billion. Shale gas prices have halved since the acquisitions, and analysts say the world's biggest miner could write down the value of the assets.

But Yeager said the long-term value of the assets was still high.

"When you have something like this, where the resources are definitely in the ground, the market is the largest in the world, it will go forward, prices are recovering and the long-term view is irrefutable that this is going to be valuable."

BHP has said that one of the big advantages of the Petrohawk business is that it has liquids as well as gas, so the company has been focusing on drilling the oilier parts of the its assets.

Oil prices at near $100 a barrel are much higher than gas prices in the United States, making gas plays with high oil liquids content potentially more lucrative.

"Any near-term downward view on gas and its value as a part of this has been more than offset by the liquids," Yeager said, adding that the company will likely spend only slightly less than what it had planned to on those assets.

"We will end up spending this year in the U.S. onshore a little less than the $4 billion that we (said previously), mainly as a result of backing off from the gas, but I think it's safe to say we'll spend more next year than we've spent this year," Yeager said.

"Our approach is the same as everybody else's," he said in a presentation at an industry event earlier. "We'll scale back, reduce rigcount and wait."

The company's Eagle Ford basin assets could produce 300,000 barrels of oil equivalent per day (boepd) in five to six years, he said in a presentation earlier on Monday. Of that, 150,000 bpd would be oil liquids.

BHP Billiton's Permian basin acreage could produce another 100,000 boepd in 3 years, he added.

(Additional reporting by Simon Webb; Editing by Jonathan Hopfner and Himani Sarkar)

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