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MarketScreener Homepage  >  Equities  >  AUSTRALIAN SECURITIES EXCHANGE LIMITED  >  BHP Group    BHP   AU000000BHP4

BHP GROUP

(BHP)
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Miner BHP taps oil, gas for growth after shale exit

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11/11/2019 | 05:10am EST
FILE PHOTO: A BHP executive is silhouetted against a screen projecting the company's logo.

BHP Group touted bullish plans on Monday to expand in oil and gas after quitting a disastrous foray into U.S. shale, defying investors who want the world's biggest miner to cast off the business.

The company's petroleum head said the business is set to deliver strong returns and cash flow through the 2020s and beyond, supported by high-potential projects in the Gulf of Mexico, Western Australia and Trinidad & Tobago.

Petroleum, which accounted for about 16% of BHP's underlying earnings in 2018/19, could potentially generate margins of more than 60% over the next decade, Geraldine Slattery, President Operations Petroleum, told a briefing.

Excluding the shale business, the company's oil and gas arm has long had some of the strongest returns in the group's portfolio, including iron ore, copper and coal.

With projects awaiting approval, the division could support average annual volume growth of up to 3% in the decade to 2030, and deliver average internal rates of return for major projects of around 25%, she said at the company's first petroleum briefing since 2016.

"In a decarbonising world, deepwater oil and advantaged gas close to established infrastructure can offer competitive returns for decades to come," Slattery said.

BHP said it made sense to expand in oil, even in a world with rapid uptake of electric vehicles, with demand for petroleum set to grow for trucks, petrochemicals and fertilisers well into the second half of this century.

It singled out potential growth from the Scarborough gas project operated by Woodside Petroleum, the Wildling Phase I and Trion projects in the Gulf of Mexico, and its Trinidad & Tobago North assets - all still unsanctioned.

"Scarborough offers material growth potential to our Australian portfolio," Slattery told analysts at a briefing.

She said BHP sees the highest returns from adding resources through exploration, but did not rule out making acquisitions.

Last year, BHP ended a massive loss-making seven-year foray into shale by selling most of its U.S. onshore shale oil and gas assets to BP Plc for $10.5 billion. (reut.rs/34MGsox)

RBC Capital said in a note on Monday that while the petroleum division had suffered from the misadventure, three offshore projects under construction should substantially boost production over the next three years.

A return to growth for the petroleum division, where output is slated to fall this year, would also differentiate BHP from the wider, iron ore-heavy diversified mining sector, RBC said.

BHP's Australian-listed shares closed down 0.3%, roughly in line with the broader mining index.

(Reporting by Niyati Shetty in Bengaluru; Additional reporting by Sonali Paul in Melbourne; editing by Richard Pullin)

Stocks mentioned in the article
ChangeLast1st jan.
BHP GROUP -1.37% 36.73 End-of-day quote.9.47%
BP PLC -0.92% 497.1 Delayed Quote.0.23%
WOODSIDE PETROLEUM LTD -1.15% 33.6 End-of-day quote.9.93%
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Financials (USD)
Sales 2020 44 880 M
EBIT 2020 17 828 M
Net income 2020 10 459 M
Debt 2020 10 530 M
Yield 2020 5,42%
P/E ratio 2020 12,0x
P/E ratio 2021 13,9x
EV / Sales2020 2,90x
EV / Sales2021 2,95x
Capitalization 120 B
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Mean consensus HOLD
Number of Analysts 16
Average target price 24,88  $
Last Close Price 25,31  $
Spread / Highest target 7,62%
Spread / Average Target -1,72%
Spread / Lowest Target -19,7%
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Managers
NameTitle
Andrew Mackenzie CEO & Non-Independent Executive Director
Mike Henry Chief Executive Officer-Elect
John Kenneth Norman MacKenzie Chairman
Daniel Malchuk President-Americas Minerals Operations
Geraldine Ann Slattery President-Operations Petroleum
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