BHP weighs further sale of US shale gas assets

Bloomberg

BHP Billiton Ltd. is considering further sales of its US shale gas assets as it fends off the second round of attack from activist hedge fund Elliott Management Corp. over the future of the energy business within the world’s biggest mining company.
“If there is a natural owner out there who believes more upside can be achieved within this shale business than we do, then we will be more than happy to talk turkey with them,” Chief Executive Officer Andrew Mackenzie told investors at a conference in Barcelona. “We are actively considering further divestments. We will pursue only those options that fully realize the value of our acreage.”
Earlier, billionaire Paul Singer’s Elliott sent a second letter to the board of BHP, this time demanding an independent review of the company’s oil division, which Deutsche Bank AG values at about $22.5 billion. The two sides are scheduled to meet on the sidelines of the conference tomorrow, according to two people familiar with the situation.
BHP spent about $20 billion buying US shale assets earlier this decade and has since written off more than half the value of the acquisitions. Investors have long criticized the timing of the deals, which preceded a slump in the oil price.
“We acknowledge that the acquisitions that took us into this business were poorly timed, that we paid too high a price,” Mackenzie said, pointing to a reduction in operating costs within the business. “We’ve had to move heaven and Earth to try and ensure that we were absolutely best in class in the shale assets that we’ve chosen to retain.”
BHP, which has halved its shale holdings since 2012, previously flagged its intention to sell parts of a Texas gas field and the possibility of exiting the Fayetteville shale gas assets in Arkansas. The company is now fighting a rising tide of analysts and investors who back the sale of the shale assets.
The company should sell the assets and could receive about $9 billion based on recent deals in the sector, Deutsche Bank analysts including Paul Young said in a May 4 note. Divesting the assets would provide “additional capital to focus on the higher returning conventional assets and minerals portfolio,” the analysts said.