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BHP Billiton Shale Assets to be Sold Through Elliott Management Pressure

  • August 22, 2017
  • By Pete Nisbet
  • 0

BHP Billiton US shale assets in the US are to be sold. The decision was made after the Australian mining company declared a net profit of $5.89 billion. Although this result was lower than analysts expected it was still better than last year. The global mining firm made a record loss in 20176 of $6.39 billion.

 

Shareholders have been putting pressure on the company to sell its US shale assets due to the shale industry underperforming. New York hedge fund management company, Elliott Management Corporation, has been particularly vociferous.

BHP Billiton US Shale

BHP Dual Corporate Structure Questioned

It has been campaigning for the BHP Billiton US shale assets to be divested along with some other strategic changes at BHP. Among these is a claim for higher shareholder returns. Founded by activist Paul Singer, Elliott Management had also been actively campaigning to eliminate its Anglo-Australian dual-corporate structure.

 

However, it has withdrawn from its proposal for BHP to have its main listing in London rather than Australia. The withdrawal came after opposition from the Australian government.

Elliott Management Corp and BHP Billiton Shareholding

Elliott Management recently upped its 4.5% shareholding in BHP Billiton, to 5%. It also got its way over the shale mining business. BHP Billiton announced that its onshore US shale assets were ‘non-core’ and that exit options were being actively pursued. A major reason for offloading the shale oil business is that it was acquired by BHP when fracking was at a peak in 2011.

BHP Shale Industry Investment ‘A Mistake’

The company invested $20 billion in the shale industry. However, falling oil prices have hit the shale oil business hard, and the firm wrote down $7.2 billion last year. Paradoxically, shale oil production is contributing to a continued depression in oil prices.

 

Jac Nasser, BHP Billiton chairman, admits the investment in US shale assets was a mistake and analysts have predicted that a sale would bring in only half of the $20 billion investment. Jac Nasser stands down as chairman next month, to be replaced by Ken Mackenzie.

BHP US Shale Assets A ‘Small Part’ of Business

BHP Billiton US shale assets are only a relatively small aspect of the company’s mining interests. It is also involved in mining metals. The company has fortunately benefitted from a recovering industrial metals industry. The industry had been depressed by China’s economic slowdown and a glut in supply (just as with crude oil). However, China and other markets are recovering, and industrial metals are now more in demand. BHP shares rose 3.2% in early trading Tuesday.

About Pete Nisbet

Pete has been working in the field of website design and content for many years. He has a great interest in technology and current affairs, particularly business affairs. Pete's interests are technology, writing and world affairs and he is widely traveled. Pete also holds an Honors BSc from the University of Edinburgh.