BHP to cut debt in asset sell-off
BHP Billiton has more than 10 assets on the chopping block -- believed to include coal interests in Australia and oil and gas holdings offshore -- which would add substantially to the $US4.47 billion raised from the sale of four assets since last August.
The asset sales program is being portrayed as a continuation of its strategy of divesting non-core and underperforming assets rather than a Rio Tinto-like need to reduce debt.
But with BHP debt standing at $US30 billion ($29.4bn) and a stated preference for debt reduction in the near term, cash freed by the planned asset sales would serve to secure BHP's solid A credit rating, should iron ore prices fall in the second half of the calendar year -- as most analysts are tipping -- squeezing free cashflows in the process.
BHP has been preparing for that potential cashflow squeeze by slashing costs under chief executive Marius Kloppers. His replacement, Andrew Mackenzie, has promised a laser-like approach to costs.
The cost-cutting has so far delivered annualised cost savings of $US1.9bn but much of that is considered easy in that it came from the slashing of the group's mineral exploration budget.
In closed briefings to sell-side analysts this week, BHP chief financial officer Graham Kerr said BHP's divestment program was focusing on at least 10 assets. The Weekend Australian later confirmed the comment with BHP.
While Mr Kerr did not name the specific assets, BHP recently announced the potential divestment of the Gregory-Crinum coal mining operation in Queensland.
And at BHP's recent interim profit report, Mr Kerr said that BHP remained committed to simplifying the portfolio, and that the company would continue to selectively pursue asset divestment opportunities, with a firm focus on value.
Apart from Gregory-Crinum, analysts were left to speculate about the 10 assets that BHP was looking to chop....MORE (informed speculation)
