BHP looking at Fayetteville shale sale

BHP Billiton Ltd. said it it is again considering the possible sale of its Fayetteville shale natural gas assets in Arkansas a little more than two weeks after billionaire Paul Singer proposed spinning off the mining company's U.S. petroleum division.

"The Fayetteville field is currently under review and we are considering all options including divestment," BHP said Wednesday in its quarterly production report. Separately, the miner said bids are already being evaluated for the sale of as much as 50,000 acres in the southern part of its Hawkville gas field in Texas.

The world's biggest mining company had put the Fayetteville assets up for sale in October 2014 before abandoning the attempt after a slump in oil prices dented the value of bids. BHP bought the assets from Chesapeake Energy Corp. in 2011 for $4.75 billion but was later forced to cut their value by nearly $3 billion because of falling prices for natural gas.

Singer's Elliott Management Corp. has called for the miner to exit its U.S. petroleum operations as part of a company-wide overhaul. In response, BHP Chief Executive Officer Andrew Mackenzie said he's reviewed the unit's status three times and is confident it remains a good fit with the company's current strategy.

The potential divestment of BHP's Fayetteville Shale holdings should be part of a broader sell-down of BHP's U.S. onshore unit, said Craig Evans, a Sydney-based portfolio manager at Tribeca Investment Partners Pty, which manages about $1.7 billion, including BHP shares. "We believe that BHP should be looking to divest the entirety of their U.S. onshore assets and begin a formal process for this."

Others are calling for an even bigger change. BHP's entire oil portfolio is non-core for a mining company and should be offloaded, Sanford C. Bernstein Ltd. analyst Paul Gait said in a note Wednesday. The company should "take the bold decision rather than suffer death by a thousand cuts," he said.

The Fayetteville shale purchase marked BHP's first foray into shale gas as it sought to add to its stakes in U.S. Gulf of Mexico oil projects and natural gas assets in Western Australia. Five months later the Melbourne-based producer splashed a further $15.1 billion to buy shale gas company Petrohawk Energy Corp. making it the biggest overseas investor in U.S. shale.

BHP could reap $10 billion for its entire U.S. onshore asset base, according to Tribeca, but the Fayetteville shale assets alone may hold limited appeal for buyers. "A broader package and strategic thought is required," said Evans. "The market would not value Fayetteville assets highly. Nor have there been many recent transactions in the region, making pricing difficult."

Business on 04/27/2017

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