BHP Billiton is set to take a $10.3 billion write-down on its US shale oil and gas assets, following a plunge in energy prices over the past year-and-a-half.
The diversified mining giant said in a statement to the share market that it will book an impairment charge of approximately $US7.2 billion ($10.3 billion) in its next half-yearly accounts, due out in February.
After tax, BHP Billiton estimated that the write-down will be around $US4.9 billion ($7 billion).
The write-down reflects the plunging value of oil, which has fallen more than 70 per cent from $US115 a barrel in mid-2014 to recent lows below $US30 a barrel for Brent crude.
BHP Billiton said it had lowered its future oil price expectations and altered its development plans, reducing the value of its onshore shale oil and gas assets to $US16 billion.
In particular, BHP Billiton cites ongoing weakness in US gas prices as a factor in the write-down.
The company had already suspended development of its dry gas acreage, but has now also slashed its medium and long-term gas price assumptions.
BHP has also cut its short and medium-term oil price assumptions, reflecting a current global glut, but believes oil prices will recover over the longer-term.
“Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the Onshore US business from 26 a year ago to five by the end of the current quarter,” said BHP Billiton’s chief executive Andrew Mackenzie.
“While we have made significant progress, the dramatic fall in prices has led to the disappointing write-down announced today.”
Investors actually seem relieved by the write-down and associated cost-cutting, pushing BHP Billiton shares up 4.4 per cent to $15.53 by 10:05am (AEDT).