🕐10.12.13 - 18:54 Uhr

INVESTEC: BHP BILLITON : NOTES FROM PETROLEUM ASSET SITE VISIT – DAY 1 - BUY




BHP Billiton (Price: 1845p | Target: 1926p | Rec: Buy) The first day of presentations from the BHP Billiton’s US onshore petroleum analyst site visit included an overall bullish view on global energy markets, taking cognisance of the changing Chinese growth model with rising contribution from India and other emerging markets.

The day also included a general update and reiteration of strategy from CEO Andrew Mackenzie, who repeated the four pillar strategy (focus on iron ore, coal, petroleum, copper), with potash a potential fifth pillar (although BLT may consider a sell-down or JV).

Aluminium, nickel and manganese remain non-core. * The Day 1 presentations appear to be setting the scene, with more detailed and asset-specific presentations expected from Day 2.

The presentations were split into four parts: A general update on BHP Billiton and a reiteration of strategy by the CEO, Andrew Mackenzie, then a view on the energy markets by Mark Swinnerton, a view on the petroleum and gas markets by Brett Langley and a view on the US shale gas regulatory environment by external consultant, Andrew Slaughter.

We summarise our assessment of the key points in this note. * Andrew Mackenzie’s presentation illustrated that the business is being managed for cash flow and that productivity gains remain a key focus.

With forward capex of $15bn, the company can grow AND also provide good returns to shareholders.

Cash generation is meanwhile being assisted by what it admits are "better than expected" iron ore prices. * Our recommendation and NPV/PER-based target price remain unchanged.

While our expected forecast total return of 8.5% technically puts BHP Billiton into Hold territory, we note that iron ore prices remain resilient such that our forecasts are likely to increase during our quarterly commodity price review (in early January), with a consequent lift in the target price expected.
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
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