BHP’s Petrohawk records profit for September quarter

Mining heavyweight BHP Billiton (ASX: BHP) released its September quarterly report for its Petrohawk Energy shale business last week, which saw an increase in valuable liquids production and a net profit of US$10.9 million ($11.5 million).

The net profit was particularly pleasing, given that it compared to a net loss of US$32.7 million in the prior corresponding period. Driving the result was an 81% surge in operating revenues from the previous year to US$952.4 million.

Although average natural gas prices for the quarter were still significantly below the level at which BHP first moved into US shale at US$3.90 per thousand cubic feet, the US$3.33 for the quarter was also much higher than the US$2.67 recorded a year earlier, which provided a boost to revenue.

According to Petrohawk, increased volumes added around US$273.4 million in revenue whilst price movements accounted for US$68.9 million. Meanwhile, gas liquids output climbed 66% and crude oil production more than doubled to 5.02 million barrels.

Petrohawk’s former president Richard Stoneburner has stated that he believes BHP’s acquisition of Petrohawk in 2011 for $15.1 billion will prove to be quite profitable for the miner which should make “attractive” returns from the region – particularly if gas prices rise further.

Foolish takeaway

There have certainly been positive signs regarding the mining sector in recent months, which have been reflected in strong climbs from shares in companies such as BHP, Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG). However, there are still significant risks facing the sector that investors should be mindful of before making any investment decisions.

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

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