BHP On Track To Meet 2015 Production Guidance

(RTTNews) - Miner BHP Billiton Plc. (BHP.AX, BLT.L, BBL, BHP) Monday said it remains on track to meet all financial year production guidance for 2015. The company has initiated marketing its Fayetteville asset, but would pursue divestments only if full value can be realized for the owners.

In an investor presentation, the firm said it is positioned for another year of record production, adding that it targets at least another $3.5 billion of productivity-led gains from its core portfolio.

BHP had announced a demerger proposal in August. CEO Andrew Mackenzie, said today, "We are confident that our productivity drive will be accelerated by the demerger proposal we announced in August. A simpler portfolio, focused on our 19 core1 assets, will retain an optimal level of diversification while generating even stronger growth and margins."

Production from the core portfolio is expected to climb 23 percent over the two years to the end of fiscal 2015, as the company completes high-return, brownfield projects and embeds productivity-led volume gains.

BHP's core portfolio includes a suite of development options that are expected to generate an average rate of return of over 20 percent. The miner said as its capital efficiency improves it would be able to create more value for less investment.

The company believes it can significantly reduce annual capital expenditure relative to its current plans while maintaining the growth trajectory.

The Group has cut unit costs across all its mineral businesses and expects further cuts across the core portfolio. Production costs in the Copper business have also fallen despite grade decline.

At Queensland Coal, a 24 percent reduction was achieved in operating costs. The company expects to reduce unit costs by another 10 percent, to below $90 per tonne, in 2015.

In Petroleum, drilling costs in the Black Hawk fell 16 percent in 2014. Onshore US operating costs are also expected to improve with a 10 percent reduction projected in 2015.

BHP Billiton expects to embed a minimum of $3.5 billion in annualized productivity gains by the end of 2017 with over $2.3 billion expected to come from cash cost savings.

The firm said, in the Eagle Ford and Permian, it projects liquids production of about 200 thousand barrels per day by fiscal 2017. This is expected to generate significant value as investments in the liquids-rich Onshore US wells typically generate returns of over 50 percent.

Mackenzie added, "In time, we expect to fully develop our Haynesville gas field given the quality of our acreage. As we look to improve the balance of liquids and gas across our Petroleum portfolio we have initiated the marketing our Fayetteville acreage. However, we will only divest the field if it maximises value for shareholders."

BHP bought the Fayetteville assets from Chesapeake Energy in 2011 for $4.75 billion to get a foothold in the U.S. The firm booked a $2.84 billion charge on the assets in August 2012, prompting then CEO Marius Kloppers to forego his bonus for fiscal 2012.

The stock added 1.2 percent in early morning trade on the LSE at 1,647.00 pence.