🕐11.12.13 - 17:27 Uhr

INVESTEC: BHP BILLITON : NOTES FROM PETROLEUM ASSET SITE VISIT – DAY 2 - BUY



BHP Billiton (Price: 1845p | Target: 1926p | Rec: Buy) The second day of presentations from the BHP Billiton’s US onshore petroleum analyst site visit presented a roadmap for extracting value from its US onshore assets by directing capex towards maximising liquids production, minimising holding costs and benefiting from learning curves and extraction technology improvements.

In our view, the debate among investors over what is achievable with these assets is likely to be stimulated further before it settles. * The company holds some 1.5 million net acres of onshore US shale gas assets with a resource base of ca.

6.4bboe of hydrocarbons of which ca.1.2bboe are liquids.

Having acquired these assets some three years ago, BHP Billiton has had time to evaluate them better and adjust its exploitation plans in response to lower natural gas prices, but continuing firm oil prices. * Key targets presented include production of 200kb/d (ca.

70mmboe per annum) of liquids by 2017 (of which roughly one third would be NGL) and a free cash flow target of US$3bn p.a.

by the end of the decade.

We believe that our current assumptions are overall close to the revised guidance, with some changes offsetting one another, e.g.

higher liquids, but lower gas.

However, we will need to review our financial model, earnings forecasts and valuation with the new information provided. * 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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