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How BHP Billiton Is Preparing for its US Shale Asset Exit

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Spinning off US shale assets

BHP Billiton (BHP) is planning to exit its US shale assets business. It’s preparing to invite potential buyers to go over its books for US onshore oil and gas assets. It’s still looking for alternative ways to exit the business, including an initial public offering. In August 2017, BHP decided to sell its onshore US operations. The assets have long been held in the company as part of the core portfolio. This decision is widely seen as a result of activist investors, especially Elliott Management’s, pressuring the company to exit the business.

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Missteps leading to exit?

BHP’s previous chairman, Jacques Nasser, conceded that the company’s $20.0 billion investment in shale assets at the peak of the cycle was a mistake. Its chief executive officer, Andrew Mackenzie, also stated that the company mistimed its entry into the business, overpaying during peaking natural gas prices. These assets have been written down many times since then to reflect weaker energy prices (USO). Energy peers (XLE) ConocoPhillips (COP), ExxonMobil (XOM), Chevron (CVX), and Pioneer Natural Resources (PXD) also reported impairments due to weaker energy prices.

Preparing for the exit

The company has scaled back its capital expenditure for the segment from $2.0 billion to $1.9 billion. It currently has nine rigs in the US onshore space. The company is expected to remove rigs from the Eagle Ford and Haynesville fields over the coming months. The company is slowly preparing for its exit from this business. The company’s CEO, however, mentioned that the company wouldn’t rush the exit.

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