European shares edge lower, BHP Billiton falls after asset writedown

BHP took another pre-tax hit on the same assets a year ago of $2.8 billion.

BHP’s shares climbed 4.6 percent to A$15.56 at 10:07 a.m.in Sydney, trimming the decline for the year to 13 percent.

BHP spent $20 billion in 2011 on shale oil and gas assets in the US, winning a foothold in USA plays in Arkansas, Louisiana and Texas.

Oil and gas stocks were also in negative territory, as the market braced itself for more Iranian oil exports with Western sanctions expected to be lifted within days.

The charge comes after a bi-annual review of asset values, with price assumptions, discount rates and development plans offsetting productivity improvements.

“Beyond this, investment and development plans for the remainder of the 2016 financial year are under review, with a focus on preserving cash flow”, the company said. The writedown pales into insignificance how much the barbaric Kingdom has lost in oil revenue – and foreign exchange reserves, not to mention their bloated welfare budget – by maintaining production levels.

But the oil price has fallen another 30 per cent in the past 3 months.

BHP Billiton Chief Executive Officer, Andrew Mackenzie, said ‘Oil and gas markets have been significantly weaker than the industry expected.

But weakening global demand and a supply glut pushed oil prices to a 12-year low of $US30 a barrel this week, putting further pressure on the company to correct the book value of its ill-timed push into the USA shale market.

Mackenzie said BHP Billiton remained confident in the long-term outlook of the assets. It also adds to a series of write-downs against that business, including a pretax charge of US$2.8 billion previous year, and another of similar size in 2012.

BHP said the broader carrying value assessment of its assets would be finalised in conjunction with the interim financial results to be released on February 23. “However, we are well positioned to respond to a recovery”.

Investors have argued that BHP should abandon its policy of holding or increasing its dividend at every result, as it is having to rely on debt to fund the payout following a rout in commodity prices and steep fall in profits. Brent and US crude both fell below $30 a barrel, as markets braced for more oil out of Iran.