Are shareholders in BHP Billiton Limited set for an $18bn windfall?

Mining giant BHP Billiton Limited (ASX: BHP) may be able to deliver a bigger-than-expected capital return later this year on news that it could get as many as 50 qualified and interested parties to look at its shale assets.

There’s nothing like a bit of competition to drive up asset prices and BHP has already gotten 24 parties to sign confidentiality agreements to enter its data rooms for the sales, according to the Australian Financial Review.

The market is already expecting the sale of its unconventional oil & gas assets and for BHP to hand most of the proceeds back to shareholders in some form of capital return.

However, investors are pricing in the sale at a big discount to book value as BHP had overpaid for these assets during the “boom” times and had to write down their value.

Even then, these assets (namely Eagle Ford, Haynesville, Permian and Fayetteville) are sitting on BHP’s balance sheet with a US$14 billion ($17.88 billion) valuation – or 42% lower than what the miner thought it was worth in 2015.

I don’t think the market believes BHP can get that much for the assets but the discount to book value may be skinnier than what many are thinking given the intense interest BHP seems to be receiving.

What’s more, the oil price is holding up better than what experts were forecasting last year and that has no doubt contributed to the interest in these assets.

Some keen buyers are offering an asset swap or a combination of assets and cash to consummate the deal. It’s too early to predict the outcome but BHP’s board knows an all-cash deal would be the favoured outcome for investors as the world’s largest miner has indicated that it will give back as much cash as possible to shareholders from the sale process.

Getting a cash offer that is close to book value will trigger a rally in BHP’s share price. To give you a sense of perspective, the miner paid an interim dividend of $2.28 billion this year. Getting sales proceeds that are anywhere close to $18 billion is game changing!

But it’s unlikely that BHP will use a one-off windfall to increase dividends. Most of the cash is likely to be returned through a share buyback of some sort – similar to how Rio Tinto Limited (ASX: RIO) undertook its latest capital return – although a special dividend cannot be totally ruled out either.

As I wrote, the cash-flushed BHP could unseat Commonwealth Bank of Australia (ASX: CBA) as the most generous dividend payer on our market in the not-too-distant future.

But BHP isn’t the only high-yielding blue-chip that should be on your radar for 2018. The experts at the Motley Fool have just nominated their three favourite big caps for the year.

Click on the link below to get your free report on these stocks and to find out why they are well placed to generate a superior total return in 2018.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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.