BHP ditches shale and heads offshore for petroleum growth
BHP petroleum boss Steve Pastor is accelerating offshore growth plans as he exits shale.
BHP petroleum boss Steve Pastor is accelerating offshore growth plans as he exits shale, acquiring lease interests near the company’s big Wildling discovery in the US Gulf of Mexico to speed appraisal of the region and getting ready to boost activity off Mexico.
And if the company’s sale of its $US11 billion ($14bn) onshore US shale business does not fetch the right price, Mr Pastor may acquire more conventional assets.
He revealed yesterday that BHP is in talks, in parallel to its shale sale process, to swap onshore ground for big offshore conventional assets.
During the CERA week conference in Houston, Mr Pastor described the Wildling discovery, where BHP has not revealed how much oil it may have, as a growth opportunity, along with the more advanced Trion project in Mexico’s share of the gulf.
BHP will also look to expand its interests off Mexico and is readying to bid in the next round of Mexican releases, billed as the biggest Gulf of Mexico lease sale to date.
“We have growth opportunities (at) Trion and Wildling,” Mr Pastor said. “We will use our knowledge in those areas and our strengths to be able to advance those projects quickly, which is an important, exciting opportunity at this low point in the cost cycle in the deep-water environment.”
Oil was discovered at the Wildling-2 well in multiple horizons last year but the company has not released any more information.
Mr Pastor said BHP had taken a 33 per cent stake in the Murphy Oil-operated Samurai prospect near Wildling, where a well is due to be drilled next quarter.
The well cost to BHP is expected to be about $US15 million.
“Those (two Samurai leases) are part of the Wildling Basin that’s north of Shenzi (a BHP oil platform), and so that’s a great opportunity for us to consolidate our position ... and appraise the northern area of that basin more cost-effectively and sooner,” Mr Pastor said.
He said the next appraisal well at Trion, where BHP became the first company to strike a farm-in deal with the national oil company, Pemex, in 2016 was due at the end of this calendar year.
After that, it would take two more wells next year to see if the development was economic.
But Mr Pastor said Mexico offered a lot more opportunities.
“We see a whole wealth of opportunity that will evolve over time in Mexico that’s not front and centre necessarily in the conversation today,” Mr Pastor said.
Separately at CERA, he said BHP would participate in the next Mexican lease auction.
“We are excited abut the potential of the licensing round coming up in late March. We’ve identified where we are most interested in pursuing additional access, so look for us to be active in the coming round.”
Mr Pastor said the miner is in talks to swap some onshore US shale ground with big conventional offshore oil assets, in parallel with its asset sale process.
He said the company was fielding strong interest for the onshore assets, which are valued at $US11bn on its books, and on which more datarooms were opened this week.
But he said BHP was chasing better value than the oil futures curve, which has prices falling back to about $US51 a barrel after 2020, was predicting.
“The main value lever will be the price interested parties are using in their valuation and there’s a pretty significant range between what we view as a reasonable mid-case price expectation and the strip price for both oil and gas, so we’ll have to see what comes in,” Mr Pastor said when asked if he thought book value was achievable. He said a trade sale for cash was preferred but that asset swap conversations were proceeding.
“We’re advancing asset swap opportunities for assets that have characteristics that are a good fit within our core strategy, so they need to be tier one, high-quality conventional oil assets in regions where we have demonstrated ability to perform well, synergistic with our current position. Those are relatively few and far between but there are some counterparties that have those types of assets with those characteristics and those discussions are advancing nicely. It could be some combination between asset swaps and cash.”