BHP Billiton expects to recognize an impairment charge of approximately US$2 billion post-tax (or approximately $2.8 billion pre-tax) against the carrying value of its onshore US assets as an exceptional item in the 2015 financial year results.
The gas focused Hawkville field accounts for the substantial majority of this charge reflecting its geological complexity, product mix, acreage relinquishments and amended development plans. The remainder relates to the impairment of goodwill associated with the Petrohawk acquisition.
Following this impairment, BHP Billiton’s onshore US business will have net operating assets of approximately $24 billion. The value of this business is supported by ongoing cost reductions and improving well performance which help offset increased commodity price volatility and lower near term capital expenditure. Consistently positive results from the appraisal and development of the Permian have also unlocked significant value and we now see the ultimate potential of this field at over 150,000 boe/d.
“While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore US business. The Black Hawk continues to exceed expectations, the Permian offers significant upside across multiple zones and the Haynesville, one of the industry’s premier dry gas positions, provides an excellent development option as market conditions improve. With industry-leading drilling costs and recoveries, we are well positioned to realize significant value for shareholders as we develop our high-quality resource base,” said Tim Cutt, BHP Billiton Petroleum president.
BHP Billiton plans to invest $1.5 billion in the onshore US in the 2016 financial year, which will support a development program of 10 operated rigs. At an oil price of US$60/bbl (West Texas Intermediate) and a gas price of $3.00/Mscf (Henry Hub), BHP Billiton expects its onshore US business to be free cash flow positive in the 2016 financial year.
Image: Tim Cutt/ BHP Billiton