* Says onshore U.S. production to be self-funding in 2016
* Seeks to extend liquids production profile
* To focus spending on Australia, US, Trinidad and Tobago
By Clara Ferreira-Marques
LONDON, Dec 10 BHP Billiton, the world's
largest miner and a top investor in U.S. onshore oil and gas,
said on Tuesday its U.S. shale business should generate cash
from 2016, contributing almost $3 billion a year to the group by
the end of the decade.
BHP, one of the largest producers outside the major
integrated oil companies, plans to spend around $4 billion a
year to expand its U.S. onshore oil and gas production.
The company is dedicating a growing slice of its spending to
petroleum, one of the key pillars of its broader business, along
with iron ore in Western Australia, copper and coal.
Some analysts have raised questions over declining returns
in a petroleum business, which they say turned cash negative
this year for the first time in over a decade, reflecting heavy
They have also queried the length of time before BHP
investors will see a payback.
But BHP - whose boss Andrew Mackenzie is a former BP
executive - said in presentations in Houston on Tuesday that the
U.S. shale business was set to become a major cash-flow
The company aims to boost productivity there and trim down
the remainder of its petroleum unit to focus on core assets in
both conventional oil and gas and shale, largely in the United
States and Australia.
"We will continue to simplify the portfolio with a firm
focus on value," said Tim Cutt, a former Mobil and ExxonMobil
executive who took the helm of BHP's petroleum and potash
division in July.
BHP is on track to hit its 2014 petroleum production target
despite a drop in output in the December quarter. It told
investors its spending programme would help it hit a goal of
increasing liquids production from its shale business to 200,000
barrels per day in 2017.
The company sees total onshore U.S. production of 500,000
barrels of oil equivalent per day by the same date, roughly the
total output of a large U.S. independent producer.
Predicated on what BHP forecasts will be a rising U.S. gas
price, this would allow the U.S. onshore business to generate
cash from the 2016 financial year.
BHP, already a significant oil and gas player, moved heavily
into U.S. shale in 2011, acquiring the Fayetteville assets from
U.S. energy group Chesapeake and months later Petrohawk
It spent almost $17 billion - or $20 billion including debt
- just before a major downturn in U.S. natural gas prices in
deals that made it one of the largest foreign investors in U.S.
shale since 2008.
But it has also trimmed back in petroleum as it has across
its divisions, to focus on higher-margin assets. It appointed
advisers in October to sell roughly half its oil and gas acreage
in the Permian basin in Texas to focus on more lucrative assets
The group said on Tuesday it would focus on investment on
Australia, the United States and, potentially, Trinidad and
Tobago, where exploration has focused on promising deepwater
BHP also has assets in Pakistan and Algeria, but said those
assets had limited room for future growth.
It sold its stake in Liverpool Bay, a major integrated
development of five producing oil and gas fields off the British
coast, in October 2013.
BHP has said it plans to spend the bulk of its U.S. onshore
development budget this year on both the Permian basin and Eagle
Ford, another major basin, directing its investment to
liquids-rich acreage at a time of low natural gas prices.
Petroleum accounts for roughly a fifth of total BHP
production, and around a quarter of BHP's operating profit.