BHP Billiton Share Discussion Threads

[loganair] 10/4/2018 12:30

Saudi Arabia are targeting $80 oil, which is also positive for BHP Billiton as oil is one of the 4 main commodities they produce.

CEO of Fortescue mining said that with the building of the Silk Road China will continue to need large imports of Iron Ore. However China are now going for the better grades of iron ore to make their steel with.

[loganair] 05/4/2018 23:14

BHP's bashing has gone too far, Citi says:


Citi, while recognising the risk of escalation, does not see increased protectionism as a major impediment to global growth.

Specific to BHP, it thinks the share price could receive a boost when the company gets shot of its US shale assets; recent transactions suggest the resources giant might get more for them than the market has been expecting.

US Permian Basin player Concho recently announced the proposed acquisition of RSP Permian for an enterprise value of US$9.5bn.

Applying the same sort of methodology to BHP’s shale assets would lift Citi’s valuation of the assets from US$10bn to US$14bn.

Citi has abandoned its neutral stance on BHP and upgraded to ‘buy’, with a 1,550p price target.

[loganair] 05/4/2018 10:50

BHP Billiton: A Good Income Investment:


BHP now generates ample excess cash flow; more than enough to pay its dividend and downsized capital expenditure needs in 2018. So far in this fiscal year, BHP has generated $7.3 billion in cash flow from operations, $1.8 billion of which goes into maintenance capital expenditure and another $1.8 billion has gone into the dividend. 'Organic development' takes another $1.9 billion of capital expenditure, presumably to keep production flat. With all that out of the way, BHP has $1.7 billion in free cash flow left over, most of which it is applying to improve the balance sheet. In this environment, it is much better for BHP to delever than it is to plow capital into new projects. BHP remains in a financially strong position.

Pays you to wait:

BHP pays you handsomely to wait, which is one of the reasons I continue to recommend the stock. Currently, BHP yields 5%, there's plenty of cash flow by which to pay that dividend. Expect the dividend to track earnings per share, as BHP is committed to paying half of its earnings per share in the form of dividends and BHP has a long history of a progressive dividend, with the exception of 2016 when the company had no choice. I suspect BHP will at the very least continue to raise dividends by low single-digits.

BHP is a very cyclical company, and share price tends to track earnings tightly. The good news is, it appears the recovery in commodity prices is well underway.

What you'll certainly get from BHP is a generous 5% yield that the company should be able to sustain in any cycle. The commodities BHP are in, copper, iron, and metallurgical coal, are both economically sensitive and volatile. However, BHP has situated itself to the point where it can make an impressive profit even at today's commodity prices. For this reason, I recommend BHP Billiton, particularly as this is a sector which income investors typically gloss over.

[loganair] 05/4/2018 10:41

RBC Capital - Higher long-term coking coal profitability makes BHP Billiton a better bet now.


It sees BHP's relative investment case improving.

“In line with our commodity price update, which sees higher long-term coking coal profitability, the shares are now trading at fair value, in our view,” the broker said.

The broker identified potential share price catalysts as the sale of US onshore assets as well as an eventual restart of operations, or some sort of value-realisation event, at Samarco, the Brazilian asset jointly owned with Vale, where the collapse of the dam in 2015 left 19 people dead and hundreds homeless.

“We would expect Vale to assume control of the asset, but any profit share or monetisation from BHP would be positive to our forecasts,” RBC said.

[loganair] 27/3/2018 14:26

Unlike BHP, over the past few months Rio Tinto have been getting out of coal by selling their coal mines, especially the ones they own in Australia because they say coal is becoming less and less of a productive asset.

The price of Iron ore is expected to drop after the second quarter as China will need less of it.

[loganair] 26/3/2018 10:40

Crude oil prices rose to their highest level in over three years after yuan-backed crude oil futures debuted strongly on the Shanghai exchange.

North Sea Brent Crude surged above $71 per barrel for the first time since 2015.

China surpassed the US to become the world’s largest importer of crude in 2017...so naturally, China would want to play a more active role in influencing the price of crude oil.

Analysts have noted that the launch of the petro-yuan could shatter the petro-dollar’s dominance of the crude oil market.

[loganair] 22/3/2018 07:26

The Saudis are saying they really need the price of oil to be at least $65, $70 would be better to get the IPO of Amarmco away as investors are showing less interest in the IPO then the Saudis thought there would be.

[anley] 13/3/2018 10:40

I agree so BHP can be traded shoert term by those with the skill BUT for me this is a 3/4 year bet with good dividends in the meantime.

[loganair] 12/3/2018 17:35

Don't forget India, they may well become another China when it comes to their infrastructure.

[loganair] 09/3/2018 23:21

Investec put BHP Billiton and Anglo American on its “buy” list.

Despite the threat of base metals being caught up in the centre of a global trade skirmish, Investec’s Hunter Hillcoat told clients that the global miners have significantly lower debt levels and added that rising costs are eclipsed by the recent jump in commodity prices.

[loganair] 09/3/2018 11:57

Shell and Anadarko Petroleum already own lands that sit next to the BHP lands slated for sale. If Shell makes the purchase, it would create a larger contiguous area for the company’s shale drilling and would therefore bring down the per barrel cost of production.

BHP plans to swap its onshore assets with offshore ones in order to exit U.S. shale plays, Steve Pastor, the firm’s president of petroleum operations, said.


Hopefully if BHP go for an asset swap they will gain a higher price for their Shale assets rather then if they were being paid cash for them.

[loganair] 09/3/2018 10:51

Head of Energy at Goldman Sachs is forecasting oil at $80 within 6 months due to strong oil demand and therefore hopefully BHP will get more then $10bln for their shale oil assets.

[fuji99] 09/3/2018 08:26

Royal Dutch Shell and Blackstone reportedly working on joint US$10bn bid for BHP Billiton’s US shale assets
08:03 09 Mar 2018
Shell and Blackstone's offer will only be one of several credible proposals that the world’s biggest miner will receive for the operations, Sky News said on Thursday, citing banking sources
Shale drilling
BHP Billiton put the shale business up for sale last year and said with results last month that initial bids are expected in the June quarter
Royal Dutch Shell PLC (LON:RDSA) and US private equity firm Blackstone Group LP are reportedly working on a joint US$10bn bid for BHP Billiton plc’s (LON:BLT) US shale assets.

Shell and Blackstone's offer will only be one of several credible proposals that the world’s biggest miner will receive for the operations, Sky News said on Thursday, citing banking sources.

BHP Billiton put the shale business – which is on its books at US$14bn -- up for sale last year and said with results last month that initial bids are expected in the June quarter.

The disposal move was one of the strategic changes urged last year by US activist investor Elliott Management which has a 5% holding in BHP Billiton.

Earlier this week, Devon Energy sold some of its shale-gas assets in Texas for US$553mln to what energy analysts identified as a private equity firm, although Devon did not disclose the name of the buyer.

[loganair] 08/3/2018 19:44

Partnering with Blackstone provides the Anglo-Dutch oil giant with additional financing firepower, according to people close to the situation.

[smicker] 08/3/2018 19:35

Speculation Shell and Blackrock preparing to offer $10bn

[raffles the gentleman thug] 08/3/2018 19:34

Royal Dutch Shell and P-E firm Blackstone are working together on a joint $10B bid for BHP Billiton's U.S. shale assets, Sky News reports.A joint Shell-Blackstone offer would be only one of several credible proposals that BHP expects to receive for the shale operations, according to the report.BHP said last year it would exit its underperforming U.S. shale oil and gas business after coming under pressure from activist investor Elliott Management to sell the assets.For Shell, buying the BHP business would accelerate its plans for shale to become a material cash engine by the mid-to-late 2020s.

[action] 08/3/2018 10:15

correction. Ex-Divi Today.

[action] 08/3/2018 10:11

Thank u All. I want to get back in for Divi.

[loganair] 08/3/2018 09:47

It seems all the big miners are down today, it is not just a BHP thing.

[raffles the gentleman thug] 08/3/2018 09:38

And to slightly counter that ....BHP Billiton will consider swapping onshore oil and gas assets with competitors' offshore assets, as part of its plan to exit U.S. shale, says the company's president of petroleum operations.BHP is not looking for existing production platforms, but is seeking acreage that has been found viable for production, "where we can come in as an operator and really unlock significant incremental value through the development phase," Steve Pastor says at the CERAWeek conference in Houston.The asset swaps could augment BHP's exploration program, Pastor says, adding that the company would consider selling dividing its acreage for multiple buyers; BHP currently owns onshore U.S. assets in Texas, Louisiana and Arkansas.

[loganair] 08/3/2018 09:34

BHP Billiton may be able to deliver a bigger-than-expected capital return later this year on news that it could get as many as 50 qualified and interested parties to look at its shale assets.

There’s nothing like a bit of competition to drive up asset prices and BHP has already gotten 24 parties to sign confidentiality agreements to enter its data rooms for the sales, according to the Australian Financial Review.

The market is already expecting the sale of its unconventional oil & gas assets and for BHP to hand most of the proceeds back to shareholders in some form of capital return.

However, investors are pricing in the sale at a big discount to book value as BHP had overpaid for these assets during the “boom” times and had to write down their value.

Even then, these assets (namely Eagle Ford, Haynesville, Permian and Fayetteville) are sitting on BHP’s balance sheet with a US$14 billion ($17.88 billion) valuation – or 42% lower than what the miner thought it was worth in 2015.

I don’t think the market believes BHP can get that much for the assets but the discount to book value may be skinnier than what many are thinking given the intense interest BHP seems to be receiving.

What’s more, the oil price is holding up better than what experts were forecasting last year and that has no doubt contributed to the interest in these assets.

Some keen buyers are offering an asset swap or a combination of assets and cash to consummate the deal. It’s too early to predict the outcome but BHP’s board knows an all-cash deal would be the favoured outcome for investors as the world’s largest miner has indicated that it will give back as much cash as possible to shareholders from the sale process.

Getting a cash offer that is close to book value will trigger a rally in BHP’s share price. To give you a sense of perspective, the miner paid an interim dividend of $2.28 billion this year. Getting sales proceeds that are anywhere close to $18 billion is game changing!

But it’s unlikely that BHP will use a one-off windfall to increase dividends. Most of the cash is likely to be returned through a share buyback of some sort – similar to how Rio Tinto Limited undertook its latest capital return – although a special dividend cannot be totally ruled out either.

As I wrote, the cash-flushed BHP could unseat Commonwealth Bank of Australia as the most generous dividend payer on our market in the not-too-distant future.

[loganair] 08/3/2018 09:31

Could be Trump is due to sign the trade tariffs today...

[action] 08/3/2018 09:27

What is happening here?

[loganair] 26/2/2018 20:56

BHP Billiton is coming out of a very rough patch. After a steep decline in commodity prices and a major disaster in the failure of the Fundao Tailings Dam in late 2015, the stock price plunged by 60 percent and investors took huge losses.

While BHP seemed to have been firing on all cylinders during the mining boom in Australia on the back of huge demand from China, things turned bad very quickly for the company. Management immediately rushed to Brazil to resolve what would later be a possible $61.1 billion dollar fine for both BHP and Vale, in addition to major backlash from the community and a number of the company’s major shareholders.

Since then, BHP has recovered significantly. In a difficult environment, management has proved extremely well prepared to tackle a difficult environment and has been able to improve productivity levels massively. Unit costs are down more than 40% since 2012, resulting in a net savings of $12 billion dollars. Management has also de-levered the balance sheet at a critical time and net debt is down to $16 billion dollars from $25 billion in 2016 with safety levels having improved significantly.

Additionally, a wind in at BHP’s back, commodity prices have inched up from their near recent lows. Here is a simplified table of the major commodities and their respective price increases since 2016 from the company’s annual report.

Natural Resource Price 2017 Price 2016 Price 2017 vs 2016
Crude oil...........$49.6.....$48.4.............15%
Ethane..............$10.3......$9.7.............24%
Copper...............$2.7......$2.2.............10%
Iron ore............$69.5.....$55.0.............35%
Metallurgical coal.$190.4.....$91.5............133%

BHP still has major economies of scale and the company is still the low cost producer with a highly integrated supply. This gives the company a massive competitive advantage.

BHP is also a very mature business, paying out more than 50 percent of its earnings in dividends. This leaves a smaller amount of capital for capital to reinvest in the business, meaning that returns are not likely to be great in the future.

At this valuation level it would be better to hold off on buying shares in BHP and wait for a better entry point sometime in the future. If BHP is part of your existing portfolio and you bought it years ago – hold on.