David Stringer
BHP BILLITON, the biggest overseas investor in US shale, will cut the number of its rigs there by about 40 percent as plunging petroleum prices add to concerns about lower iron ore earnings.
Drilling and development spending on US onshore oil and gas fell to $1.9 billion (R22bn) in the six months to December from $2.1bn a year ago, the Melbourne-based company said yesterday. BHP Billiton would cut the number of active rigs to 16 from 26 by July, it said.
Brent crude, a benchmark for more than half of the world’s oil, declined 48 percent last year as increasing output in the US contributed to a global glut. The price of iron ore, the biggest earner at BHP Billiton, slumped 47 percent in 2014 as the largest producers raised volumes amid weaker demand from China, the largest buyer.
“Their plans to cut oil drilling rigs in the US is a pointer to what’s to come in the oil market,” said Ric Spooner, a chief strategist at CMC Markets in Sydney. “We will eventually see a supply response to the drop in the oil price from the US onshore producers.”
Steepest decline
US drillers have cut the number of oil rigs in service by 209 since December 5, the steepest six-week decline since Baker Hughes began tracking the data in July 1987. The count was down 55 to 1 366 in the week to January 16, the data show.
Investment in BHP’s shale programme will focus on the Black Hawk operations, though it will continue to review spending and may make additional cuts, said chief executive Andrew Mackenzie. The company will retain a single rig in its Haynesville gas operations.
The world’s biggest mining house also flagged an after-tax impairment of as much as $350m on its Nickel West unit in Australia after it said in November it failed to attract a suitable bid for the unit from potential buyers.
– Bloomberg