5 reasons BHP Billiton Limited shares have surged 9%

BHP Billiton Limited (ASX:BHP) has been one of the market’s strongest performers over the last week.

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Shares of BHP Billiton Limited (ASX: BHP) have rallied another 3.4% this morning, following on from Wednesday’s 2.1% jump. The shares are now trading for $29 and have risen an impressive 9.4% over the last five trading days.

Here are five reasons the stock has been surging higher…

  1. Crisis mode. In its first-half operational review, released yesterday morning, the miner said it would be cutting oil production next year whilst also slashing its exploration budget by 20%. Given the uncertainty over future oil prices, this move was welcomed by investors.
  2. Cash Flow. Lower exploration costs will also ease the pressure on BHP’s cash flow which improves the odds of it maintaining its progressive dividend policy. As it stands, the miner is tipped to yield 5.2% this financial year, fully franked.
  3. Iron Ore. Although iron ore fell marginally overnight to be trading at around US$67 a tonne, it has shown signs of stabilising more recently. Given that the commodity accounts for the majority of BHP Billiton’s earnings, more stability will come as a relief for investors.
  4. Australian dollar. Resources stocks are generally considered to be net beneficiaries of a weaker Australian dollar. The local currency weakened overnight, falling below US81 cents, as a result of the surprise rate cut made by the Bank of Canada.
  5. Oil. There is no way of knowing how low oil prices will fall before they bottom out, but Brent oil rose US77 cents overnight to US$48.76 a barrel. Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and various other energy stocks have also rallied this morning as a result.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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