BHP Billiton Limited (ASX: BHP) has announced a monstrous write-down this morning, reflecting the extreme pressure miners are under as a result of crashing oil prices.

The global miner, which generates a considerable portion of its earnings from oil assets, said this morning that it expects to recognise a US$7.2 billion (AU$10.3 billion) writedown on its Onshore US assets.

The after-tax effect will be roughly US$4.9 billion and will be one of the biggest impairment charges booked by any Australian company in recent memory.

It will also reduce Onshore US net operating assets to approximately US$16 billion, highlighting just how significant the impairment charge actually is.

Although BHP has done a reasonable job in cutting production costs and improving operating efficiencies, their efforts have been more than offset by the impact of crashing oil prices. Brent oil recently slipped below US$30 a barrel, down from more than US$37 a barrel just last week, while West Texas Intermediate crude is also hovering around the US$30 a barrel mark. Oil hasn’t traded at these levels in more than a decade.

The trouble is many economists expect conditions to continue declining from here. Some are suggesting a US$20 price tag is expected, and others are saying it could fall as low as US$10 a barrel before a turnaround begins.

In response, BHP said it will reduce the number of operating rigs in its Onshore US business from seven to five in the March 2016 quarter. It said: “This will comprise three rigs in the Black Hawk and two rigs in the Permian. Beyond this, investment and development plans for the remainder of the 2016 financial year are under review, with a focus on preserving cash flow.”

BHP Billiton’s chief executive officer, Andrew Mackenzie, said “we remain confident in the long-term outlook and the quality of the acreage. We are well positioned to respond to a recovery.”

What does this mean?

According to figures from Capital IQ, BHP’s shares have been trading at a discount to their book value, measured by the value of their net assets, which suggests that investors were expecting some writedowns to be announced.

The trouble is, BHP still isn’t out of danger yet. As highlighted above, most economists expect oil prices to continue deteriorating and to remain weaker for the long term. The Australian Financial Review, for instance, said that Standard & Poor’s recently cut its long-term price target for the resource to US$50, which is down US$20 from its previous target.

If conditions continue to deteriorate and a recovery doesn’t eventuate as soon as BHP expects it to, further writedowns are possible. The same goes for the miner’s iron ore, copper and coal assets, with all three commodities languishing near multi-year low prices as well.

In case the risks weren’t obvious enough already, BHP’s US$7.2 billion writedown shows just how volatile conditions in the resources sector are right now. Personally, I think there are far greater investment opportunities investors can focus on instead.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.