BHP Billiton Urged by Activist Investor to Shed U.S. Oil Operations -- Update

By Robb M. Stewart 

MELBOURNE, Australia--Activist investor Elliott Management Corp. on Monday urged BHP Billiton Ltd. to spin off its large U.S. petroleum assets and outlined a significant restructuring plan for the world's largest listed miner.

Elliott, a New York hedge fund known for shareholder activism, is the latest big investor with an outsize voice to wade into the mining industry. Indian billionaire Anil Agarwal last month bought about 12% of British mining giant Anglo American PLC, while Harris Associates, a Chicago hedge fund with a history of activism, took a large stake in Glencore PLC in 2015, just before that miner launched a rescue plan.

Elliott targeted BHP's oil-and-gas portfolio, which produces about 660,000 barrels of oil equivalent a day but has dragged on the company's profit amid a prolonged crude-price downturn. BHP's main source of earnings comes from its mining operations, especially iron ore, a key steelmaking ingredient that is in demand in China.

Elliott called on BHP to ditch its dual Sydney-London listing and unify its headquarters and shares in Australia. Elliott said BHP should adopt a consistent plan of buying back shares rather than using cash for what it called "value-destructive" large-scale acquisitions.

BHP didn't immediately respond to a request for comment.

Shares in the company rallied late in the Australian trading day, closing 4.6% higher. In London, they rose over 5% in morning trading.

Chief Executive Andrew Mackenzie said in February during a call with analysts that the company wants to increase its oil-and-gas output while lowering its costs. The company has significant oil-and-gas operations in the Gulf of Mexico, Texas shale country and Australia.

"I wouldn't say we're hot to trot, but we're playing a game," Mr. Mackenzie said on the call.

Elliott says it owns a 4.1% stake in BHP's London-listed shares, which isn't enough to give it a board seat or the ability to seek changes on its own. But it can rally support among other shareholders who may be concerned that BHP is lagging behind its peers during a commodity price upswing. BHP's London shares up about 3% this year, compared with 4.5% for Rio Tinto PLC, almost 8% for Anglo American and over 17% for Glencore.

"Despite being a leading global resources company with a portfolio of best-in-class large-scale diversified mining assets, in recent years BHP as an investment has underperformed a portfolio of comparable mineral and petroleum companies," Elliott said in a news release.

Elliott said it had already discussed the plan with BHP executives and was now releasing it to the public so the company "can engage openly with all parties on the plan to unlock shareholder value."

Elliott said its analysis showed that the plan would enable BHP's management to provide shareholders with an increase in value of up to almost 49% on the Australia-listed shares and about 51% on the U.K.-listed shares.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

April 10, 2017 06:12 ET (10:12 GMT)

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