Oil and gas ‘fires’ BHP

Production of majority of commodities higher than last year

BHP Billiton’s (ASX: BHP) production in many of its commodities has increased compared to last year.

The company released its September 2012 quarterly figures today, with production of copper, zinc, petroleum, iron ore and energy coal all increasing over the previous corresponding period.

Queensland coal volumes rose by 20% as production increased, while petroleum production averaged a record 666,000 barrels of oil equivalent per day (boe), after two facilities in the Gulf of Mexico recommenced production. BHP has confirmed guidance for 240 million boe for the 2013 financial year. That’s around three times more than Australia’s largest pure oil and gas company, Woodside Petroleum (ASX: WPL), which expects to produce between 77 to 83 million boe this year.

Copper production from its giant Escondida mine in Brazil remains on track to increase by 20% in the 2013 financial year, following a 24% increase since September last year.

Diamond production has fallen, and following the company’s sale of its 37% in Richards Bay Minerals to Rio Tinto Limited (ASX: RIO), BHP looks likely to divest the diamonds division in the not too distant future.

Western Australian Iron Ore (WAIO), which contains the majority of BHP’s iron ore projects, is expected to increase production by 5% in 2013, despite iron ore prices falling. Rio announced yesterday that it had also increased iron ore production, with further plans to ramp up to 353 million tonnes per year by 2015. Media have speculated that Fortescue Metals Group (ASX: FMG) could decide to restart its expansion of the Kings mine, which would boost output by 40 million tonnes per year.

The expansion of BHP’s oil and gas business with the US$5 billion purchase of shale gas assets from Chesapeake Energy in February 2011, and the purchase of Petrohawk Energy for US$15 billion in August 2011, looks to be paying dividends. That’s despite the writedown of the Chesapeake assets by US$2.8 billion this year.

The company also reiterated its plans to spend US$22 billion this year on new and existing mining projects, and a further US$4 billion for onshore US drilling and development.

The results show that BHP’s diversity is one of its great assets. While some resources it produces have fallen, others have taken up the slack. The company’s move to rapidly expand its oil and gas business in the US, should see that business become a major profit driver for the company in future.

If you only invest in one company this year, make it our “Top Stock for 2012-13”. Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

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Motley Fool writer/analyst Mike King owns shares in BHP and Woodside. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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