BHP Billiton Share Discussion Threads

[loganair] 06/6/2018 18:15

BHP have a responsibility to its share holders to sell its US shale assets for as much as it can get.

Once sold I am hoping that BHP give its share holders a Special Dividend from part of the sale proceeds, reduce its debt further and invest the rest productively.

[loganair] 06/6/2018 18:06

Mining company BHP Billiton has received bids from industry giants such as BP and Chevron for its US shale portfolio which has been valued between $7bn (£5.2bn) and $9bn, sources told Bloomberg.

According to the sources, Royal Dutch Shell in partnership with private equity firm Blackstone Group made a bid in late May for the entire unit. BP is pursuing the shale assets alone while Chevron has teamed up with a private equity firm.

As this was the first bidding round, the price is expected to increase as BHP expects to receive about $10bn for the sale of the entire unit or as much as $13bn if the assets are sold piece by piece when the bidding moves to the second round.

The Anglo-Australian company, which is also the biggest miner in the world, owns more than 838,000 acres spread across four US shale sites in Texas and Arkansas.

The final purchase of all the shale assets is not expected to happen until very late 2018 or even sometime in 2019.

Several other companies such as private equity firm Apollo Global Management have bid for certain parts of the shale operation according to sources.

At the closing of the market, BHP's share price was up 2.45 per cent at 2pm today up to 1,779p per share.

[grahamite2] 31/5/2018 21:32

After several years badly in the red I was able to take a decent profit today. Will look again when it's next below £10.

[loganair] 23/5/2018 15:16

6 reasons why BHP Billiton is better than Rio Tinto by James Mickleboro:


As some readers will be aware, I’ve been very bullish on both BHP Billiton and Rio Tinto over the last couple of years.

And even though both shares have run incredibly hard during this time, I still see a lot of value in them.

While I think both companies would be great investments, my preference continues to be BHP Billiton.

I believe that its diverse operations, undemanding valuation, and the positive outlook for the commodities it produces has positioned it to outperform over the next couple of years.

I’m not alone in thinking this way, either. According to a note out of Goldman Sachs this morning, its analysts have named six reasons why BHP Billiton is a better investment than Rio Tinto.

Reason one - is BHP’s diverse commodity base. The broker has pointed to Rio Tinto’s reliance on iron ore after recent asset sales as a potential negative.

Reason two - is its growth optionality. The broker believes BHP has better growth opportunities from brownfield expansions in stable jurisdictions, whereas Rio Tinto has only a few pockets of growth in relatively risky jurisdictions.

Reason three - is its free cash flow generation. Goldman expects FY 2018 to be the first evidence of higher FCF. It has pointed to the potential offloading of its US shale assets as a future catalyst for higher returns.

Reason four - is its shareholder returns. It has lagged Rio Tinto for some time now but moving forward its expects BHP to outperform Rio Tinto in this regard.

Reason five - is its catalysts. The broker is of the opinion that BHP has a number of catalysts on the horizon that could give it a short term boost. These include its FY 2018 results, higher cash conversion, and asset sales.

Reason six - its valuation. The broker has pointed out that historically BHP has traded at a 3% premium to Rio Tinto’s shares on 12-month forward EV/EBITDA basis. Whereas, at present it currently trades at a 10% discount.

In light of these six reasons, the broker has lifted its price target on BHP Billiton’s shares from $35.50 to $40.00. This implies potential upside of almost 19% for its shares over the next 12 months.

Should you invest?

While there are risks that a global trade war could lead to a faltering global economy and weigh on commodity prices, I remain optimistic that this will be avoided.

As a result, I completely agree with Goldman Sachs on this one and believe BHP Billiton would be a great investment today.

[loganair] 22/5/2018 09:47

BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are becoming dividend plays by Rosemary Steinfort:

Mining companies usually not perceived as dividend plays, such as Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) are paying annual dividend yields of 4.6% and 3.8% respectively, both fully franked. Mining companies have been able to step up their dividend payments after becoming awash with cash from the rebound in commodities prices, as well as keeping capital expenditure under control and restructuring their businesses when commodity prices went south.

[loganair] 22/5/2018 09:44

BHP Billiton Limited eyes growth opportunities by Rosemary Steinfort:

At Bank of America Merrill Lynch’s Global Metal Mining and Steel Conference in Miami, BHP Limited Chief Executive Officer, Andrew MacKenzie, said that the company has its eyes on some small and large growth opportunities that could add US$31 billion of value to the company. The company revealed that it had reduced its net debt into its target range of US$10 billion to US$15 billion. As the company’s plans are delivering, future free cash flow will also find its way back to shareholders.

Speaking at the conference, Mr Mackenzie said: “We have maximised operating cash flow as we have lowered costs through productivity; we have been disciplined and transparent in capital allocation; and we have identified new options to increase value and returns.”

Critical messages were reaffirmed include maximising cash flow, capital discipline and increasing value and returns to shareholders.

[loganair] 16/5/2018 21:00

BHP’s US-based shale gas operations are in high demand with a list of potential trade buyers queuing up. Initially, the thought was that the assets would be spun off or there would be an initial public offering, but now a sale seems to be on the cards. The assets were bought for around $20 billion during the boom times, but now the sale price is half that at up to $10 billion.

[loganair] 16/5/2018 12:31

The oil price is going to keep rising – here’s how to profit by Dominic Frisby:


The best ways to play a rising oil price:

BHP Billiton (LSE: BLT) is another favourite. Even though it’s known for mining, oil is its biggest product and BHP tracks the oil price well. That was 700p when we recommended it back in 2016 and it’s now 1,700p, so it’s done well too. There’s still plenty of room for it to go higher (in 2011 it hit 2,600p), particularly if things get inflationary.

[loganair] 14/5/2018 14:34

A looming East Coast gas shortage, China’s push for quality iron ore and a Banking Royal Commission spooking investors off big four bank stocks has contributed to strong share price gains out of BHP Billiton of late – with shares now sitting at a 52-week high.

The Sydney Morning Herald last week reported BHP would benefit from Chinese steel-making customers willing to pay higher prices for quality iron ore and coking coal as the country sought to reduce its environmental footprint.

BHP has also benefited from a rapid increase in oil prices off the back of Middle East fears and the company logged an impressive operational review for the period ended March 31 with all major projects tracking to plan and 6% volume growth expected for the 2018 financial year.

[loganair] 09/5/2018 22:01

Barclays recommends BHP Billiton over Rio Tinto:


Barclays analysts upgraded BHP Billiton’s rating to 'overweight' on Friday and reduced that of Rio Tinto to 'equal weight', citing an expectation that BHP will close ground on Rio Tinto following five years of underperformance.

In a research note sent to clients, Barclays said the driving factor is the projected monetisation of BHP’s US shale acreage, with potential upside depending on valuations attributed to the Permian Basin acreage in particular.

With oil prices and shale valuations were on the rise, powered by recent changes to the US tax code, they saw scope for the company to return between $7.8bn and $11.1bn in cash proceeds to shareholders as a result.

The analysts forecast those sales had the potential to add between 7% and 9% to the company’s yield and to provide a boost to returns on equity.

Elsewhere, analysts said that a "more aggressive" approach to addressing equity underperformance was potentially possible.

"Additional non-core asset sales are one option. We see $9.5bn (8% of market cap) of potential proceeds based on NPV, equivalent to ‘a second shale’ in terms of both quantum and potential impact on ROE. Assets include Cerro Colorado, Nickel West, UK & Algeria petroleum, Samarco, Cerrejon and Mt Arthur," they said.

They also suggested that the company could ration commodity supply of iron ore, as Rio Tinto has successfully done with iron ore, because the company holds a large enough market share to move the price.

"We believe the various catalysts outlined above offer a credible pathway to materially improve returns on capital and underpin a meaningful step-up in shareholder returns, which in turn should set BHP up to regain its premium rating," they explained.

Barclays also boosted BHP's target price to 1,800p per share from 1,600p.

Rio Tinto, meanwhile, saw its target price remain static at 4,400p.

The Rio Tinto downgrade from 'overweight' meanwhile was a reflection of the company’s shares now looking expensive in comparison to those of BHP “despite lower margins, lower returns post-shale sale, lower forecast growth” and limited strategic options to rebalance away from iron ore.

[loganair] 03/5/2018 23:33

BP Plc is weighing an acquisition of some of BHP Billiton Ltd.’s energy assets as the British oil major seeks more U.S. shale, according to people familiar with the matter.

The London-based company is working with Morgan Stanley to advise on the plans, said the people, asking not to be identified as the matter is private. BP is weighing teaming up with other suitors or swapping conventional assets -- where oil and gas typically flow more easily to the surface than shale -- with BHP, they said.

No final decisions have been made and BP could decide against proceeding with a formal bid, the people said. Spokesmen for BP, BHP and Morgan Stanley declined to comment on the sale.

BHP is selling 800,000 net acres in the Eagle Ford, Permian, Haynseville and Fayetteville basins it has said are worth at least $10 billion. It is preparing to sell those assets in up to seven packages, including three in highly-prized Permian, people familiar with the matter said this month. It’s not clear which of those assets BP wants to buy.

BP held Permian properties until 2010, when it sold a number of such assets to raise cash for expenses tied to its Gulf of Mexico oil spill. It has since considered various options for the area, “but it’s been really hard” in the past three to four years to find deals that add to earnings, Chief Financial Officer Brian Gilvary told Bloomberg News last month. The company is looking at BHP’s Permian assets, he said.

BP is working to regain the trust of shareholders, who are urging it to maintain financial discipline. The largest oil companies overspent during the days when oil was above $100/bbl, eroding returns when prices dropped. Gilvary said funding a deal in the Permian would be “tough” within BP’s current capital constraints.

Data rooms are open and bids are due by June, the Melbourne, Australia-based mining company said last month. It could announce one or more transactions by the end of December. BHP said it’s also evaluating asset swaps, an initial public offering or potentially spinning off the division.

BHP disclosed plans to sell its onshore U.S. division last summer after activist investor Elliott Management Corp. said its foray into shale had wiped out $40 billion. The company, which spent $20 billion on two U.S. oil and gas acquisitions in 2011, said in November the divestiture process could take two years.

Royal Dutch Shell Plc is also potentially interested in BHP’s Permian basin assets, Andy Brown, its upstream director, said in an interview in February. Explorers can spend as little as $15/bbl to drill in the Permian, the main source of the current surge in U.S. output. Shell and Blackstone Group LP are planning a joint $10-billion bid for BHP’s U.S. assets, Sky News reported in March, citing sources it didn’t identify.

Shell already has about 280,000 net acres in the Permian, according to its website, with a sizable position near BHP’s assets in a fast-growing part of the Permian known as the Delaware basin.

BP, which now lacks a meaningful presence in the Permian, controls 3.1 million net developed acres in other shale fields in Texas, Arkansas, Colorado, and elsewhere in the U.S. that primarily produce gas, according to its annual report.

A measure of its first-quarter profit rose to $2.59 billion, the highest since 2014, the company reported on Tuesday. That surpassed analysts’ forecasts. Its shares this week rose to their highest level since May 2010.

[loganair] 03/5/2018 15:46

BP now also thinking of buying BHP's shale assets.

[loganair] 24/4/2018 12:45

Fundamentals for industrial metals looking good. China is putting 2,000 electric buses on their roads every week which is good for Copper one of the four main commodities of BHP.

[loganair] 19/4/2018 11:01

What you need to know about BHP Billiton Limited’s market update:


The share price of BHP Billiton Limited (ASX: BHP) rallied to a two-month high this morning even as the world’s biggest miner cut its iron ore production guidance in its March quarter production update.

The stock is 2.6% higher at $30.85 in late morning trade compared to a 0.5% gain by the S&P/ASX 200 index.

BHP cut its FY18 iron ore output forecast to between 272 million and 274 million tonnes due to reliability problems with its car dumpers. The miner was initially forecasting a range of 275 million to 280 million tonnes.

There are also issues with its Olympic Dam operations where the ramp-up was slower than expected in the latest quarter due to smelter maintenance, although this wasn’t enough for the miner to reduce its production forecast for copper.

Instead, the miner narrowed its production guidance range for the red metal to 1.7 million to 1.785 million tonnes versus its original estimate of 1.655-1.79 million tonnes.

But investors are quick to forgive as BHP said petroleum output for the financial year would be at the upper end of its 180 million to 190 million barrels of oil equivalent guidance and reaffirmed its guidance for other commodities like metallurgical coal and energy coal.

Perhaps the bigger reason for BHP’s outperformance is the brightening outlook for commodities in general with most industrial metals recording strong gains in overnight trade on speculation that the US expand its sanctions against other Russian mineral producers.

[loganair] 19/4/2018 10:58

By Mathew Hodge:

The bulk of our BHP Billiton fair value estimate derives from just three commodities: iron ore, copper, and petroleum. Our price scenarios also factor in currency, operating, and capital cost adjustments.

In our bull case, we expect commodity prices to increase by 15%. Our fair value estimate in this scenario is £16.50 a share, against a current price in London of £15.30. In our bear-case scenario, we project prices to fall by 15%. Our bear-case fair value estimate falls to 800p a share.

We think the attractive forecast 2018 earnings and returns are fuelled by favourable commodity prices, underpinned by unsustainable growth in China’s debt, and more recently trade unrest. While trade sanctions may restrict global commodity supply in the near-term, longer-term those assets are productive and likely to continue to contribute.

BHP’s production guidance for the 2018 financial year is retained for petroleum, metallurgical coal and energy coal, while the range was narrowed for copper. Iron ore output was softer than expected and BHP has lowered guidance by approximately 2% to 272 to 274 million tonnes.

However, higher commodity prices more than make up for the short fall. Plans to exit US onshore petroleum assets continue to progress. There were no major changes on the capital expenditure front and we still expect the large diversified miners to remain frugal with new expenditure in the near to medium term.

[loganair] 18/4/2018 20:45

HSBC today reaffirms its hold investment rating on BHP Billiton (LON:BLT) and raised its price target to 1610p from 1480p.

[loganair] 18/4/2018 15:21

Could be to do with today announcement:

BHP Billiton is expanding its business as a supplier of battery minerals at its nickel refinery in Western Australia, planning to start producing nickel sulphate next year and looking at cobalt output as well, a company executive said.


Cobalt and nickel are both critical ingredients for lithium ion batteries, and are expected to see a boom in demand as global automakers transition into producing electric vehicles.

Most of the world’s cobalt supply comes from the Democratic Republic of Congo (DRC), which has been beset by governance and human rights concerns. After the DRC, Australia has the world’s second-largest mineral reserves.

“Part of our transition to becoming a global supplier of battery materials means we have started looking at cobalt options as well,” Eduard Haegel, president of BHP Billiton’s Nickel West refinery, said on Wednesday at a battery materials conference in Shanghai.

“We see cobalt as remaining in short supply ... For this reason we are looking to broaden our support of the battery sector by increasing our contribution to cobalt supply.”

BHP is already due to start producing nickel sulphate at its Nickel West project next year, Haegel said, and is in the early stages of considering a plan to double that output.

The miner could grow its cobalt production and sell it as cobalt sulphate, a battery ready form of the metal, he said.

BHP could do this by developing a cobalt circuit at its Kwinana Nickel refinery and by increasing cobalt recovery at its Kalgoorlie smelter, both in Western Australia, as well as potentially taking third party cobalt concentrate, he said.

The miner said last year it would retool its Nickel West operations to focus on producing supply for the battery industry, and Haegel said it has been building a solid chain of battery customers.

It expects to have sold 90 percent of its nickel sulphate supply by the end of 2019, two years earlier than anticipated.

BHP expects to sell 65-70 percent of this year’s nickel output to the battery sector, about 45,000-50,000 tonnes of metal, based on last year’s figures, Haegel said.

Although an investment decision to go ahead has not yet been made, BHP is advancing plans to potentially double capacity at its nickel sulphate operations to 200,000 tonnes, depending on industry demand, which would create the world’s largest nickel sulphate plant at Nickel West, he said.

[ashbox] 18/4/2018 14:56

Nice rise into the 9 month operational review due out tomorrow. Hope its good to maintain the momentum.

[loganair] 16/4/2018 12:44

Goldman has upgraded BHP Billiton from neutral to a buy rating and increased the price target on its shares to $35.50 from $30.00. The broker feels that BHP is poised to outperform due to its belief that its cash conversion will improve in the second half. Goldman estimates that BHP will generate an extra US$1.7 billion in free cash flow in the second half compared to the first. Further to this, its analysts estimate that BHP’s shares are trading at a 9% discount to Rio Tinto versus a historic premium of 3%. Goldman expects this gap to close in the near future.

BHP Billiton is worthy of an investment right now. Especially if the world avoids a trade war and continues its strong economic growth.

This should ensure that demand for commodities remains strong and prices stay favourable for at least the next couple of years.

[loganair] 13/4/2018 10:50

Commodity companies - During last bull market, over supply, mis-allocation of capital and took on too much debt.

Now the companies have got their act together, more disciplined and therefore looking good for the rest of 2018 and for 2019.

[loganair] 11/4/2018 12:30

Deutsche Bank now sees the mining major as a 'buy' and it has a price target of £17 per share:


The move to ‘buy’ from ‘hold’ was made on valuation grounds following the de-rating of the stock in the wake of February’s interim results.

The target price of £17 is around £2.50 higher than the current share price.

Deutsche said the market had been unsettled by BHP’s overheads, which were higher thanks to one-off costs associated with the Olympic Dam and Bass Strait projects, the Escondida mine and metallurgical coal.

However, its analysts think these have been more than priced in with the Anglo-Aussie giant trading at less than 85% of its net present value.

Important to their ‘buy’ case was its impressive cash flow yield, which is expected to be around 11% next year, while strengthening balance sheet also supports that investment proposition Deutsche believes the company has headroom to make disposals worth US$10bn.

It concludes that BHP is a “simple yet compelling” story.

[loganair] 11/4/2018 09:28

India saying $50 to $60 is a fair price for oil, whereas Saudi Arabia and Russia the two biggest oil exporters are looking for $80.

Around $60 is called the sweet spot as it is a price that is fair for the oil consumers, importers and producing exporters.

[loganair] 10/4/2018 16:00

Citigroup has kicked off the trading week with an upgrade for diversified natural resources company BHP Billiton pushing it up from a neutral rating to a buy.

Citi has upgraded BHP to buy with an increase on its price target for the stock to $33 off the back of momentum from the company’s shale assets – which are up for divestment and may catch a higher price than previously thought.

Citi’s calculations project BHP’s shale might attract US$14 billion instead of US$10 billion saying rumours of global upheaval due to rising risks from economic protectionism are “overdone̶1;.

BHP’s share price has tracked upwards in the last 12-months, from $25.73 at this time last year recovering from a mid-2017 low of $22.10.