Monday, May 14, 2012

BHP Billiton Ltd. Shale Gas Writedowns Could Give Insight Into Value of Chesapeake Assets (BHP; CHK)

Let's see what one of the behemoths thinks the current market value of shale assets is.
From Moneyweb (South Africa):
BHP to assess value of shale assets
BHP Billiton Ltd. (BHP) (JSE:BIL) plans to decide at the end of next month whether to write down the value of the U.S. shale gas assets it acquired for $20 billion, while cutting back on drilling natural gas wells until prices recover.

Australia’s largest oil and gas producer will take an “accounting snapshot” as of June 30, when its financial year ends, J. Michael Yeager, chief executive officer of BHP’s petroleum division, said today at a media briefing in Adelaide when asked about potential writedowns.

BHP’s foray into U.S. shale gas has been hit by a plunge in natural gas prices to a decade low, prompting Citigroup Inc. to say in a May 1 report that the mining and energy company may cut the value of the assets by as much as $5 billion. BHP has increased production of higher-priced liquids from its shale fields following a similar decision by Royal Dutch Shell Plc. (RDSA)

“It looks like they have paid a lot of money for those shale assets,” Steven Robinson, a Sydney-based senior investment manager at Alleron Investment Management Ltd. who helps oversee about A$2 billion ($2 billion) including BHP shares, said by phone. “What you want to see from BHP is the investments that they’re making are generating at least the same sort of return on investment as their existing operations.”

Gas Slump
U.S. gas prices have declined about 46 percent since Marius Kloppers, BHP’s CEO, announced the company’s entry into shale on Feb. 22 last year with the $4.75 billion purchase of the Fayetteville shale assets from Chesapeake Energy Corp. (CHK) The world’s biggest mining company also acquired Petrohawk Energy Corp. for $15.1 billion, including debt....MORE