BHP’s Petrohawk acquisition proving “tremendous”

Mining heavyweight BHP Billiton (ASX: BHP) is set to win big from the acquisition of Petrohawk Energy – which it purchased for $15 billion in 2011 – with Petrohawk’s former president Richard Stoneburner declaring that the value of the deal is highlighted by the Eagle Ford shale region’s “tremendous” returns.

According to The Australian Financial Review, Stoneburner stated that he believes the Petrohawk acquisition will prove to be quite profitable for the miner, despite US gas prices slumping since BHP’s combined $20 billion investments in US shale sites in 2011. Even with gas prices currently sitting at around US$3.45 per thousand cubic feet, Stoneburner stated that BHP will likely still make “attractive” returns from the region.

He also stated “with the acceleration of those tremendous economics and returns in the Eagle Ford that are being brought to fruition, I think BHP’s in pretty darn good shape with the Petrohawk assets and how they can go forward and monetize and extract the value out of them.”

BHP is one of many companies fighting for shares in Texas oil fields, which boast enormous potential. For instance, the company has been ‘vigorous’ in its attempts to secure a share in the 22,270,000 hectare multi-layered shale formation in the South Midland section of the Permian Basin, which has been speculated as being the world’s second largest oil field. Surely enough, BHP already holds 178,000 hectares in the Permian, which came attached as a bonus in the Petrohawk acquisition.

In the Permian region however, BHP is yet to declare commercial production, in which Stoneburner says the company is currently “on a learning curve” as to how to produce the best results. The Permian region is quite complex as compared to other shale regions such as Haynesville, Fayetteville and Barnett.

Meanwhile, it has been cautioned that it is unlikely that countries other than the US will be able to provide the enormous capital requirements to develop shale production, which will likely keep countries such as Australia, Argentina and England from developing their own shale sectors.

Aurora Oil & Gas (ASX: AUT) and Sundance Energy Australia (ASX: SEA) are also focused on producing oil and gas from US fields.

Foolish takeaway

With the Australian dollar plunging to around US90c, an increase in production in the US will be excellent for BHP’s revenues. BHP’s chief executive Andrew Mackenzie has stated that for each cent that the Aussie drops compared to the US greenback, his company will see an additional $100 million in revenue.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.