BHP eyes $US1bn oil exploration

The mining giant could spend an implied $US1bn on offshore oil exploration next financial year.

Andrew Mackenzie speaks as it is announced he will be replacing Marius Kloppers as BHP Billiton CEO, in Sydney on February 20, 2013. The 56-year-old Mackenzie, currently chief executive non-ferrous, has over 30 years experience in oil and gas, petrochemicals and minerals and joined BHP Billiton in November 2008. South African Kloppers has been running the world's largest miner since October 2007, steering it through the global financial crisis. AFP PHOTO/William WEST

BHP Billiton could spend up to $US1 billion on offshore oil exploration next financial year after securing a second drill rig that will let it test big targets in the Gulf of Mexico and Trinidad in Tobago at the same time.

In its quarterly report today, the company confirmed it had boosted its 2015-16 exploration guidance by $US40 million to $US640m, representing a June quarter spend of $US250m as it starts drilling in earnest as part of a plan to balance its big shale exposure with conventional oil.

With two rigs running, the fourth-quarter spending rate implies a $US1bn spend for next year, something the big miner is getting ready for if successful with a Gulf of Mexico well this quarter.

Last month, The Australian revealed BHP was accelerating offshore exploration by trying to secure the extra drill rig in the Americas, despite cutting back other spending across the group.

More recently, BHP chief Andrew Mackenzie said the miner’s February decision to abandon a progressive dividend policy that would have cost it $US6.5bn this year had been a major factor in the exploration boost.

“We have a very attractive exploration portfolio which we are able to actually drill up more quickly now that rig rates are a lot less,” Mr Mackenzie told The Australian.

“That’s one of the advantages of, to some extent, the new divided policy; that we have the cash to do things at the bottom of the cycle that are good things to do.”

BHP’s recent exploration push is focused on big potential oil, rather than gas, targets in the Gulf of Mexico, Trinidad and Tobago and the Beagle sub-basin off Western Australia.

Yesterday, BHP revealed it had encountered hydrocarbons in the Gulf at its Shenzi North ST3 exploration well.

Results from the well are being analysed and a follow-up well in the Gulf is now planned for this quarter.

The new drill rig is now being mobilised for an eight-well program off Trinidad and Tobago, where BHP recently finished the world’s biggest private-sector seismic studies.

Additional reporting Barry FitzGerald.