BHP says no more “major write-downs” for US gas assets

Speaking at his first Annual General Meeting in London on Thursday, BHP Billiton’s (ASX: BHP) chief executive Andrew Mackenzie stated that the company’s US onshore shale gas assets are in no danger of a “major write-down” in the near term.

After having impaired its Fayetteville shale gas assets by a massive US$2.84 billion last year (which it purchase in 2011 for US$4.75 billion), the company has cut its number of rigs from 40 to 27 this year as a result of reduced capital spending. It is also looking to sell around 250,000 of “non-core” acres in the Permian Basin following speculation that the region may not boast as much potential as first thought.

Mackenzie downplayed the possibility of further write-downs, stating that the company is firmly focused on trying to understand the areas that will deliver the greatest benefits. He said, “There may be some small adjustments going forward, particularly if we choose to highlight areas we don’t think we want to bring on production for many years, probably decades, but I don’t foresee in the near term the threat in that business of any further major write-downs.”

Foolish takeaway

BHP is a much more diversified miner than its rivals, including Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG), and is strategically strengthening its balance sheet in order to cut costs and increase long-term sustainability.

Although there are certainly positive signs for the miner, the industry is still facing significant headwinds and investors must ask themselves whether or not the potential benefits are worth the risks.


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

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