BHP considers exit from oil and gas
The world’s biggest mining group is said to be considering getting out of oil production as investors turn against fossil fuels.
The world’s biggest mining group is said to be considering getting out of oil production as investors turn against fossil fuels.
BHP is reviewing options for its oil business including a trade sale, Bloomberg reported, adding that discussions were at an early stage.
The division could be worth more than $US14bn ($19.1bn), RBC Capital Markets analysts said. An exit from oil by the Anglo-Australian group would mark a strategic shift for BHP, which has long defended retaining the business despite scepticism from investors. Shares in the company rose by 1.9 per cent in London on Tuesday.
BHP is the world’s biggest listed mining group, with net profits of $US8 billion in the year to June 2020. It generates the biggest share of its profits from iron ore, but also has divisions producing copper, oil and coal. The group offloaded its American onshore fracking business to BP for $US10.5 billion in 2018 but retains offshore production, primarily in Australia and the Gulf of Mexico, producing the equivalent of almost 280,000 barrels a day last year.
Last August it said that it would look to exit one of its biggest oilfields off Australia. Asked at the time whether BHP was getting out of oil altogether, Mike Henry, its chief executive, said: “The short answer is no.”
He added: “For oil and gas we think the fundamentals are going to remain strong and we are going to be able to create value and returns for shareholders for at least the next decade.”
A potential change of heart may have been driven by rising investor pressure over climate change and by BHP struggling to achieve a good price for the polluting thermal coal assets that it is attempting to offload in Australia.
Tyler Broda, of RBC, said that he could “see why management might be contemplating an exit” amid rising environmental, social and governance pressures. “BHP is an outlier in the mining sector for its petroleum business and this is often cited in our investors’ discussions as a point of detraction,” he said. He questioned how BHP would use the proceeds of any sale, with shareholder returns healthy.
BHP declined to comment.
The Times
