Photo by: Bloomberg
PERTH (miningweekly.com) – Mining giant BHP Billiton on Wednesday warned of a $2-billion after-tax impairment on the carrying value of its onshore US assets for the 2015 financial year.
The miner said the gas-focused Hawkville field accounted for a substantial majority of the write-down, reflecting its geological complexity, product mix, acreage relinquishments and amended development plans.
The remainder of the impairment related to goodwill associated with the Petrohawk acquisition.
“While the impairment of Hawkville is disappointing, it does not reflect the quality of our broader onshore US business. Black Hawk continues to exceed expectations, Permian offers significant upside across multiple zones, and Haynesville, one of the industry’s premier dry gas positions, provides an excellent development option as market conditions improve,” said BHP petroleum president Tim Cutt.
He noted that, with industry-leading drilling costs and recoveries, BHP was well positioned to realise significant value as it developed its high-quality resource base.
The company would invest some $1.5-billion in its onshore US operations during the 2016 financial year, which would support the development progamme of ten operating rigs.
At an oil price of $60/bl and a gas price of $3/Mscf, the company expected its onshore US business to be cash flow positive during the 2016 financial year.
Following the impairment, BHP’s onshore US business would have a net operating asset of around $24-billion. Cutt added that the value of the business was supported by ongoing cost reductions and improving well performance, which would help offset increased commodity price volatility and lower near-term capital expenditure.