BHP (ASX:BHP) share price on watch after Q1 update and reaffirming guidance

BHP is tracking in line with its FY 2022 guidance…

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The BHP Group Ltd (ASX: BHP) share price will be one to watch on Tuesday.

This follows the release of the mining giant’s first quarter update this morning.

BHP share price on watch after unspectacular but in line quarter

The BHP share price could be on the move today after it delivered a first quarter update in line with its guidance for the full year.

BHP’s Iron Ore production came in at 63.3Mt for the quarter. This was down 3% quarter on quarter and 4% year on year. Management advised that this reflects planned major maintenance including car dumper one and the impacts of temporary rail labour shortages due to COVID-19 related border restrictions. Positively, the latter improved during September.

Copper production was down 7% quarter on quarter and 9% year on year to 376.5kt. This was driven by lower volumes at Olympic Dam due to the commencement of the planned smelter maintenance campaign. This activity was delayed by approximately one month due to COVID-19 related border restrictions.

BHP’s Petroleum production was a highlight, growing 2% quarter on quarter and 3% year on year to 27.5 MMboe. These higher volumes were driven by increased production from Ruby and higher seasonal gas demand at Bass Strait. This was partially offset by lower production at North West Shelf and natural field decline.

Elsewhere, Metallurgical coal and Energy coal production was down 25% and 6%, respectively, quarter on quarter. For the former, this was due partly to planned maintenance at BMA. Whereas the latter was impacted by lower volumes at NSWEC due to mining in higher strip ratio areas.

Finally, Nickel production dropped 21% quarter on quarter to 17.8kt due to planned maintenance across the supply chain.

Management commentary

BHP’s Chief Executive Officer, Mike Henry, appears pleased with the company’s performance given the challenges faced from COVID-19.

He said: “BHP’s operations delivered reliably during the first quarter and we completed planned major maintenance activities across a number of our assets. We continue to skilfully navigate the ongoing challenges of COVID-19.”

“We progressed the ramp-up of production of high quality iron ore at South Flank and copper from the Spence Growth Option, and we delivered first nickel sulphate from our new plant at Kwinana. We sanctioned the Jansen Stage 1 potash project in Canada, and made a series of targeted investments in copper and nickel exploration in Australia and Canada.”

“These are aligned with our efforts to increase our exposure to future facing commodities and to position the portfolio to continue to deliver attractive returns and long-term value to shareholders,” he added.

FY 2022 guidance

One thing that could support the BHP share price today is confirmation that its FY 2022 guidance remains unchanged.

This includes iron ore production of 249 to 259Mt, copper production of 1,590 to 1,760kt, and petroleum production of 99 to 106MMboe.

Management also confirmed that the proposed merger of its Petroleum business with Woodside Petroleum Limited (ASX: WPL) is progressing to plan. The full form transaction documents are expected in November 2021. It notes that if the deal goes ahead, it will create a global top 10 independent energy company.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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