BHP Flags Write-Downs in Petroleum Business

By Rhiannon Hoyle 

SYDNEY-- BHP Billiton Ltd. flagged up to $250 million in write-downs on its petroleum business and a sharp reduction in U.S. drilling activity, in the latest example of falling oil prices roiling a major energy producer.

The moves come as BHP reported higher production of key commodities including iron ore, oil and steelmaking coal in the six months through December in defiance of broadly lower commodity prices. The Melbourne, Australia-based company also said it would likely to take an impairment charge of up to $350 million after failing to find a buyer for its Australian nickel assets.

BHP joins a raft of global energy companies in cutting back spending on energy projects to protect profits. Suncor Energy Inc. said earlier this month it would cut its 2015 capital spending by 1 billion Canadian dollars (US$826 million) in response to the sharp drop in crude-oil prices, while Houston-based ConocoPhillips said last month it also planned to lower its spending by 20%.

"In petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore U.S. business by approximately 40% by the end of this financial year," said BHP Chief Executive Andrew Mackenzie. The asset write-downs in this division relate to the sale of oil assets in North Louisiana and gas assets in the Permian Basin in Texas.

On Wednesday, BHP reported a 9% on-year rise in group production for the six months through December. That included a 15% increase in Australian iron-ore output to 124 million metric tons, and a 21% rise in metallurgical coal production to 26 million tons.

Write to Rhiannon Hoyle at [e-mail]

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