BHP Billiton Cuts Metallurgical Coal Goal

By FeaturesDow Jones Newswires

MELBOURNE, Australia--BHP Billiton Ltd. (BHP.AU) scaled back guidance for metallurgical coal production for the fiscal year and warned of an impairment hit of up to US$350 million for the first half, largely relating to the Escondida copper operation in Chile.

The downward revision to the goal for steelmaking coal followed a mixed first half for BHP, with copper output rebounding but iron ore production steady and volumes for the petroleum and metallurgical coal operations dropping. Still, the company stuck with full-year production and cost guidance for petroleum, copper, iron ore and energy coal.

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BHP, the Anglo-Australian company that is the world's largest-listed miner by market value, also said it is pushing ahead with its plans to exit its onshore oil-and-gas portfolio and was preparing to open "data rooms" for potential buyers by the end of March, even as it continued to explore an initial public offering or spin off of the division.

In the six months through December, BHP said petroleum volumes fell 7% year-over-year to 99 million barrels of oil equivalent, largely due to the impact of Hurricane Harvey and Hurricane Nate on its U.S. operations.

Metallurgical coal output was down 4% on-year at 20 million metric tons, as record production at four of the company's mines in Australia's eastern Queensland were offset by lower volumes at the Broadmeadow and Blackwater operations.

Iron ore volumes were flat on year at 117 million tons, while copper production jumped 17% to 833,000 tons and energy coal production rose 4% to 14 million tons.

For the full year, BHP said it now expected metallurgical coal output of between 41 million and 43 million tons, down from an earlier target of 44 million-46 million, due to conditions at Broadmeadow and geotechnical issues resulting from wet weather at Blackwater.

BHP said its underlying earnings before interest and tax were expected to include impairment charges of US$250 million-US$350 million in the first half of the fiscal year, mainly related to conveyers at the Escondida mine that are no longer to be used after the completion of an expansion project at the site.

"The momentum we've built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance," Chief Executive Andrew Mackenzie said.

Prices for most of the commodities BHP extracts rose over the half year. Averaged realized prices for oil were up 20% on-year, copper prices were 33% higher and iron ore was up 4% on average.

In August, BHP recorded a net profit of US$5.89 billion in the 12 months through June, a sharp improvement from a year-earlier loss of US$6.39 billion when BHP absorbed an impairment hit on its onshore U.S. oil-and-gas business and a charge for the fatal 2015 dam failure at the Samarco iron-ore operation in Brazil.

The world's big mining companies have restored profits after years working to slash costs and as prices have rebounded for commodities including iron ore and copper needed for everything from high-rise apartments and office towers to power and communications cables. Although growth in China has been cooling, its demand for metals has remained strong, supported by stimulus measures.

BHP said it continued to push ahead with a number of alternatives to exit its onshore U.S. assets, and its rig count there was likely to fall as it tailored plans to get the best value from an exit.

The company in August said it would sell off its onshore U.S. oil-and-gas operations, a shift in strategy for a company that invested billions of dollars grabbing more than 838,000 acres in shale-rich U.S. regions. The decision came after months of campaigning by Elliott Management Corp., a New York hedge fund that has called for sweeping changes and questioned the fit between BHP's petroleum operations and businesses mining iron ore, copper and other minerals.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 17, 2018 17:20 ET (22:20 GMT)

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