BHP to exit US shale with deals worth $10.8 billion

BHP has entered into agreements to sell its entire interests in the Eagle Ford, Haynesville, Permian, and Fayetteville onshore US oil and gas assets for a combined base consideration of $10.8 billion, payable in cash.

BP American Production Co. agreed to acquire 100% of the issued share capital of Petrohawk Energy Corp., the BHP subsidiary that holds the Eagle Ford, Haynesville, and Permian assets, for $10.5 billion. The assets—470,000 net acres of licenses—have combined current production of 190,000 boe/d, about 45% of which is liquid hydrocarbons, and 4.6 billion boe of resources. In the 2018 financial year these assets produced 58.8 million boe, BHP said.

For BP, the deal includes a new position in the liquids-rich Permian-Delaware basin and increases the liquid hydrocarbon portion its US onshore production and resources to around 27% of production and 29% of resources from the current 14% and 17%, respectively, BP said.

MMGJ Hugoton III LLC, owned by Merit Energy Co., agreed to acquire 100% of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100% of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which hold the Fayetteville assets, for a total consideration of $300 million. The 260,000 net acres produced 13.3 million boe (79.9 bcf of gas) in the 2018 financial year.

Timing

In 2011, near the peak of the petroleum industry’s boom cycle when values were high, BHP invested $20 billion in US shale. Early in the year, the Australian firm acquired leasehold and producing natural gas properties in the Fayetteville in central Arkansas from Chesapeake Energy Corp. for $4.75 billion. Months later, for $12.1 billion plus a $3 billion debt assumption, BHP acquired Petrohawk, giving it operated positions in the Eagle Ford, Haynesville, and the Permian basin(OGJ Online, July 14, 2011).

In May 2017, BHP Chief Executive Officer Andrew Mackenzie said the deal was “poorly timed.” In August of that year, the company confirmed it was seeking an exit (OGJ Online, Aug. 22, 2017).

With news of the sale agreements, Mackenzie said the priority is to maximize value and returns to shareholders. A $2.8-billion posttax impairment charge against the carrying value of its onshore US assets is expected.

Both sales are subject to customary regulatory approvals and conditions. BHP will operate the assets until closing, expected by the end of October.

Contact Mikaila Adams at [email protected].