Investors hope for return from BHP shale sale

BHP investors are watching closely as the miner moves to divest its US shale assets, in the hope that a top-shelf sale price will boost the chance of a capital return.

DataRoom revealed yesterday that finishing touches were being put in place to start the sales process in early March and that Shell and Apache Energy were the most likely buyers of at least part of the business.

The Permian field in Texas is being touted as the most lucrative of the five being put up for sale after BHP’s disastrous decision to spend $20 billion buying them in 2011. The remaining fields are Fayetteville in Arkansas, which BHP tried to sell two years ago with no luck, Haynesville in Louisiana, and Black Hawk and Hawkville in Texas. Citi analysts said in August last year that interest in Haynesville and Fayetteville could be limited, which could leave BHP holding “very non-core assets”.

BHP is believed to be working with Bank of America Merrill and Barclays on the potential for an M&A deal and could open a data room in early March.

It has been reported that Citi and Goldman Sachs are investigating the potential for the shale assets to be spun off in a demerger or listed on the public markets.

A sale price of up to $US10bn has been flagged. Although the company has wiped $US10bn off the shale business since paying $US20bn, something is better than nothing.

Shaw and Partners analyst Peter O’Connor said it was likely that BHP would increase its planned capital management program. It has been foreshadowed that up to $US3bn could be given back to shareholders, but that could be bumped up to $US5bn.

The prospect of a higher payout ratio, or a special dividend, comes after BHP last year said it believed its debt levels were under control.