PERTH (miningweekly.com) – Mining giant BHP Billiton on Friday warned of a $4.9-billion post-tax impairment ($7.2-billion pretax) on its onshore US oil and gas assets during the half-year ended December.

The impairment followed a review of the company’s asset values and reflected the changes to price assumptions, discount rates and development plans, which more than offset productivity improvements.

The impairment was expected to reduce the onshore US net operating assets to about $16-billion.

“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,” said BHP CEO Andrew Mackenzie.

The company would reduce the number of operating rigs in its onshore US business from seven to five before the end of March, with three rigs remaining operational at the Black Hawk project, and two rigs in the Permian.

Beyond this, investment and development plans for the remainder of the 2016 financial year were under review, with BHP focusing on preserving cash flow.

BHP had previously suspended development of its dry gas acreage and had also now reduced its medium- and long-term gas price assumptions.

“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,” Mackenzie said.

He added that BHP was also well positioned to respond to a recovery in the oil price.

Since the start of 2016, the price of oil has plunged by more than 15%, with Brent, the global benchmark, this week falling below $30/lb for the first time in more than a decade. West Texas Intermediate futures, the US benchmark, also sank below $30/lb this week – its lowest level since December 2003.