Tim Cutt, President of Petroleum at BHP Billiton Limited (ASX:BHP) is confident that BHP will create significant value from its Petroleum resources. He spoke at the Barclays CEO Energy-Power Conference in New York overnight.
Petroleum President Tim Cutt believes that BHP can focus on value rather than volume due to BHP’s diversified portfolio and strength of its balance sheet. The Petroleum development programs are flexible, so that the company “can wait until the time is right before investing.”
He said: “We are well positioned on the cost curve and our productivity programs are making us even more competitive. BHP Billiton Petroleum is a leader in safety. We have best-in-class operating costs and deepwater drilling capabilities in our Conventional business. And we continue to reduce our Onshore US drilling costs and build on our industry leading well completion efficiency.”
BHP is driving to continuously improve its onshore US operations, prioritising high-return liquids production. During FY16 US$1.5bn of capital expenditure will be available to support rig development programs. However if market conditions remain subdued BHP has the ability to scale back activity. Its Black hawk operations are the single largest producer in its Petroleum portfolio and generates positive EBITDA as long as WTI crude oil trades above US$15 per barrel.
Tim Cutt is confident “We are the top performer in the Black Hawk, where we generate returns of 35 per cent at current prices with a further three to five years of development ahead of us.”
The Petroleum presentation at the CEO Energy-Power Conference in New York is yet another appearance of the mining giant trying to show confidence and assuring that its diversified business is robust enough to weather price volatility and remain profitable even in the current market conditions.
In conclusion Tim Cutt states that BHP has a portfolio of high quality assets with multi-decade resource potential in stable geographies. Due its balance sheet strength BHP is able to respond to market conditions and scale back operations if needed while preserving value. The company however expects higher oil and gas prices going forward due to natural field decline and demand growth.
Author: Simon Herrmann
Sep 10, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.