BHP has confirmed that it has sold its troubled US onshore oil and gas interests for nearly $US11 billion (more than $A14 billion), ending a loss riddled few years of wasted capital.
Most of the money raised will be returned to shareholders, according to Friday’s statement from BHP said. The timing and method will be announced once the deals are completed. That means around the time of the annual meetings in November.
BHP said it expects to recognise an impairment charge of approximately US$2.8 billion post- tax (or approximately US$2.9 billion pre-tax) against the carrying value of its Onshore US assets. The impairment charge will be recognised as an exceptional item in the results for the 2018 financial year, to be announced in August. BHP told the ASX before trading opened that it had entered into agreements for the sale of its entire interests in the Eagle Ford, Haynesville, Permian and Fayetteville Onshore US oil and gas assets for a combined base consideration of $US10.8 billion, payable in cash.
The main buyer is the BP American Production Company, a wholly owned subsidiary of BP Plc. BHP said BP had agreed to acquire 100% of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which holds the Eagle Ford, Haynesville and Permian assets, for a consideration of US$10.5 billion (less completion adjustments).
"One-half of the consideration is payable at completion, with the balance (deferred consideration) being payable in six equal instalments over a six month period, the first instalment to be paid one month after completion. Payment of the deferred consideration is not subject to any conditions,”BHP said.
A second group, MMGJ Hugoton III, LLC, a company owned by Merit Energy Company, has agreed to acquire 100% of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc and 100% of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which hold the Fayetteville assets, for a total consideration of US$300 million (less customary completion adjustments), payable at completion.
BHP said both sales are subject to the satisfaction of customary regulatory approvals and conditions precedent, and completion tis expected o occur by the end of October 2018. The effective date at which the right to economic profits would transfer to the purchasers is 1 July 2018.
BHP Chief Executive Officer, Andrew Mackenzie, said in the statement: “Our priority with this transaction is to maximise value and returns to shareholders. In August 2017, we confirmed that we would seek to exit our US shale assets for value. Following a robust and competitive process, we have delivered on that commitment. We are pleased that we have agreed to sell all of our shale assets in two simple transactions that provide certainty for shareholders and our employees.
“The sale of our Onshore US assets is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come,” he said.
“With net debt currently toward the lower end of our target range of US$10 to US$15 billion, and consistent with our Capital Allocation Framework, we expect to return the net proceeds from the transactions to shareholders. We will confirm how, and when, at the time of completion of the transactions.”
BHP said it anticipates that the estimated income tax expense from the transactions will be approximately US$0.2 billion, and that the estimated cash tax payable will be less than US$0.1 billion after utilisation of carried forward tax losses held by the BHP US tax consolidated group.
