BHP Billiton Ltd, the world’s No. 1 miner, yesterday said that it was cutting back its operating US shale oil rigs by 40 percent amid slumping prices, but expected production output to rise for the fiscal year.
BHP said it would reduce the number of rigs from 26 to 16 by the end of June in response to weaker oil prices. Shale volumes were still forecast to grow by about 50 percent during the period.
“In petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40 percent by the end of this financial year,” chief executive Andrew Mackenzie said. “The revised drilling program will benefit from significant improvements in drilling and completions efficiency.”
Mackenzie said that while the firm’s drilling operations would focus on its Black Hawk field in Texas: “We will keep this activity under review and make further changes if we believe deferring development will create more value than near-term production.”
BHP shares closed up 2.07 percent to A$28.05 yesterday in Sydney trading.
Oil prices slid again on Tuesday after the IMF slashed its forecast for world economic growth and revived concerns about the strength of crude demand.
US benchmark West Texas Intermediate for next month sank US$2.30, or 4.7 percent, to US$46.39 a barrel, not far from its lowest level since March 2009.
“The announcement that BHP will reduce the number of US onshore oil rigs it operates by the end of this financial year is a pointer to the industry-wide supply response on lower oil prices that is yet to come,” CMC Markets’ chief market analyst Ric Spooner said in a note.
BHP added that its iron ore output had risen by 16 percent for the three months to December last year compared with a year earlier, hitting 56.4 million tonnes.
Prices in iron ore, a core BHP commodity, slumped 47 percent last year amid a global supply glut and softening Chinese demand.
The Anglo-Australian miner also booked a charge of up to US$250 million for the sale of petroleum and gas assets in the US, and up to US$350 million in aftertax charges for the Nickel West mine in western Australia.
BHP said in November last year that it had called a halt to the planned sale of Nickel West, as no bidder had offered the right price.
Mackenzie said BHP’s operational performance over the past six months was strong and the firm was cutting costs and lifting productivity faster than planned.
He added that BHP remained committed to its planned corporate restructuring — to be completed by the end of the fiscal year — which includes a new independent firm called South32 created by spinning off non-core assets including aluminum and selected coal and nickel operations.
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