Mining heavyweight BHP Billiton Limited (ASX: BHP) is reportedly looking to buy conventional oil projects in order to offset falling production and to take advantage of the depressed oil price.
As is being reported by the Fairfax press, BHP Billiton is looking at projects in and around the North American offshore oil fields despite having dismissed acquisition prospects as recently as last week. With oil having nearly halved in value since last June, now could be an excellent time to start looking.
Although BHP Billiton has declined to comment on the reports, such a move would make sense for the miner. After all, it has positive cash flow while various other miners are struggling to cope with the lower price environment and may be looking to offload assets. Given the heavy fall in the price of oil, it's also possible those assets could come quite cheap.
However, BHP Billiton is unlikely to act on those initiatives for some time yet. With each of BHP Billiton's core commodities (iron ore, copper, coal and petroleum) sitting near multi-year low prices, the miner will need to continue cutting costs to show that acquisitions would be an appropriate move. It would also need to assess whether such a move would impact its ability to maintain its progressive dividend policy of returning more cash to investors.
According to Fairfax, BHP Billiton will wait until it has successfully completed the spin-off of South32 around the middle of this year before it attempts any acquisitions.
