BHP CEO rejects oil spinoff for third time

Bloomberg

The previous two times BHP Billiton boss Andrew Mackenzie ran his ruler over the company’s $29 billion oil unit he decided it was still a good fit for the world’s biggest miner. A fresh review following the urging of billionaire activist Paul Singer came up with the same answer.
“I’ve asked the question about the fit of petroleum in our business at every major milestone in my time at the company,” Chief Executive Officer Mackenzie said on Wednesday on a call with analysts, setting out a detailed rejection of Singer’s Elliott Management Corp.’s call for a spinoff of the US petroleum operations as part of a company-wide overhaul. “I continue to conclude petroleum is a good fit with our current strategy.”
Since opening discussions with Elliott eight months ago on the fund’s proposals, the producer sought advice from two investment banks on the petroleum portfolio, Chief Financial Officer Peter Beaven said on a call with analysts. Mackenzie also ordered assessments on the division’s future following his appointment as CEO in 2013 and when company completed the 2015 spinoff of unwanted metals and coal assets into South32 Ltd., he said on a separate call with analysts.
The oil unit, with assets in areas including the US, Australia and the Caribbean, offers BHP a “unique form of diversification and this makes us unusual — but unusually advantaged,” Mackenzie said. The unit’s average margin on underlying earnings before interest, tax, depreciation and amortization of 66 percent over the past five years means the oil division is BHP’s best performer, he said. It’s worth about $29 billion, according to Morgan Stanley.