21st Oct 2015 12:14
LONDON (Alliance News) - BHP Billiton PLC Wednesday alleviated market concerns by reiterating its production guidance for the full year across all of its commodities and by further reducing its capital expenditure budget as tough commodity markets continue.
The reaffirmation of production guidance follows BHP's commitment last week to keep production going after news that peer Glencore PLC would slash its zinc production by a third.
Alongside that, the FTSE 100 multi-commodities miner reported a 7% year-on-year rise in iron ore production in its first financial quarter ended September 30, to 61.0 million tonnes. That was also up 2% compared to the immediate previous quarter.
Production of iron ore rose due to a ramp up at the Jimblebar mining hub in western Australia that started in the last financial year.
Iron ore is key to BHP, as it is the world's third largest producer behind peer Rio Tinto PLC and Brazilian firm Vale SA. BHP maintained its aim to produce 247.0 million tonnes of iron ore in the full year.
However, production of its other commodities was not so positive, with all segments experiencing falls in the first quarter of the financial year.
Copper production totalled 377,000 tonnes, which was down 3% year-on-year and down 13% quarter-on-quarter whilst copper production from the Escondida mine in Chile was down 14% year-on-year and 31% quarter-on-quarter to 230,000 tonnes.
BHP still aims to produce 1.5 million tonnes of copper in the full year and a further 940,000 tonnes from Escondida.
Copper production has suffered from lower grades at Escondida which has been offsetting the company's operational improvements.
Metallurgical coal production was flat year-on-year but down 8% from the previous quarter, totalling 10.0 million tonnes. Thermal coal, used to generate energy, also totalled 10.0 million tonnes which was also flat year-on-year but down 7% from the previous quarter.
BHP plans to produce 40.0 million tonnes each of thermal and metallurgical coal in the 2016 financial year.
Copper production was flat year-on-year because productivity improvements at its mettalurgical coal operations in Queensland, Australia, managed to offset plant shutdowns and longwall moves whilst higher production of thermal coal at Cerrejon offset lower production from New South Wales in Australia.
Petroleum production in the quarter came in at 65.0 million barrels of oil, which was down 4% year-on-year but up 2% from the fourth quarter of the last financial year. BHP aims to produce 237.0 million barrels of oil in the full year.
BHP produced more natural gas and less crude and condensate in the first quarter compared to the fourth quarter of the last financial year.
BHP's US onshore operations yielded 30.0 million barrels of oil equivalent in the quarter which was down 2% year-on-year and down 5% from the previous quarter, but once again it reiterated its guidance to produce 112.0 million barrels in the full year.
BHP Billiton said it has further reduced its capital expenditure budget for its petroleum business in the 2016 financial year. The company has now budgeted USD2.90 billion for petroleum in the year, which is down 6.0% from its original guidance of USD3.10 billion.
Of that USD2.90 budget, around USD1.40 billion will be spent on the US onshore business. The other USD1.50 billion that will be spent on its conventional business, which will focus on infill drilling in the Gulf of Mexico and Australia whilst extending the life of the North West Shelf and Bass Strait projects in Australia.
In the first quarter, petroleum expenditure on its onshore US assets totalled USD463.0 million, and the company reduced its rig count to 7 from 10 after it improved its drilling efficiency, meaning it will have reduced its costs.
Petroleum exploration will focus on the Gulf of Mexico, the Caribbean, and the Beagle sub-basin in Australia. BHP said it bid for 26 new blocks in the Gulf of Mexico in August and was awarded all of them with a 100.0% stake, of which nine have been awarded with the other 17 due to follow after regulatory approval has been secured. BHP also secured 13,000 square kilometres of extra acreage in Australia during the period.
Petroleum expenditure came in at USD171.0 million in the first quarter, of which USD78.0 million was expensed. Overall, it will spend USD600.0 million on exploration in the full year.
"In petroleum, we continue to reduce costs in both our onshore US and conventional businesses, and will meet our production targets with USD200.0 million less capital investment. We successfully acquired prospective oil acreage in Western Australia and the Western Gulf of Mexico and will continue to invest through the cycle to create value for shareholders," said Chief Executive Andrew Mackenzie.
Despite a strict focus on capital expenditure and costs across the industry, BHP has four major projects across the petroleum, potash and copper divisions under development with a combined budget of USD7.00 billion.
Last week, BHP priced USD3.25 billion in subordinated fixed-rate reset notes in the dollar market and said the note issue was completed in two tranches, one of USD1.0 billion and one of USD2.25 billion.
That dollar issuance followed euro and sterling deals. BHP priced EUR2.0 billion of subordinated fixed rate reset notes in the euro market across two trances, and GBP600 million of subordinated fixed rate reset notes in the sterling market.
BHP shares were trading up 0.9% to 1,103.00 pence per share on Wednesday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
BHP Billiton PLC