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BHP Billiton - Is it still booming after the recent Operational Results?

October 25, 2015 | Team Kalkine
BHP Billiton - Is it still booming after the recent Operational Results?



On-track Performance:

BHP Billiton Limited (ASX: BHP) recently reported that they are on track to meet their full-year production in 2016. The company reiterated the full year guidance with regards to all the commodities it deals in with. The target that BHP is still latching on to includes production of 247 million tonnes of iron ore, 237 million barrels of oil, 1.5 million tonnes of copper and 80 million tonnes of coal (metallurgical and energy) for FY16. BHP produced 61 million tonnes of total iron ore in last three months to September that is a 7% surge over prior corresponding period. The record amount of iron ore produced during the September quarter comes in support of the ramp-up of the Jimblebar mine in the Pilbara. Improvements in productivity at Newman and port facilities were other factors. The company reported that it could achieve above median estimates for the copper output which was of the order of 377,000 tonnes.


Capital and Exploration Expenditure (Source: Company Reports)

Enhancing Assets and Focusing on Operational Efficiency: 

The reduction in spending at the shale oil and gas operations in the United States through cutting drilling rigs from 10 to 7 has also been indicated. Thus, BHP’s cost reduction efforts in petroleum are ongoing for Onshore US as well as Conventional businesses, and on track to meet its production targets with US$200 million less capital investment. The group is developing four major projects worth of US$7.0 billion in Petroleum, Copper and Potash as of September 2015 quarter. The group got 100% working interest on 9 blocks in the Western Gulf of Mexico Lease while 17 are still subject to regulatory approval.

Further Prospective Acreage:

BHP Billiton would continue to add high-quality oil plays to its portfolio by further prospective acreage in the Beagle sub-basin in Western Australia and the Western Gulf of Mexico. BHP Billiton also got over 13,000 square kilometers in the Beagle sub-basin in Western Australia during the period. The company isalso enhancing its balance sheet and recently priced Eur 2.0 billion of subordinated fixed rate reset notes across two tranches, GBP600 million of subordinated fixed rate reset notes and USD 3.25 billion of subordinated fixed rate reset notes across two tranches, and diverting these proceeds to cover its debts. Meanwhile, the group approved a US$600 million exploration program during the fiscal year of 2016 focusing on the acreage access and seismic data acquisition across three major areas, in which BHP intends to test over the coming three years. BHP also got approval for operational permits extension for Cerro Colorado till 2023.


September Quarter Production Highlights (Source: Company Reports)

Stock Performance: 

BHP Billiton shares fell over 16% in the last six months (as of October 23, 2015) offering a decent entry point. We also note a bit of recovery of about 7.85% in the last one month. The company also has a sound dividend yield of 6.86%. The balance sheet is strong and seems to help the company still recoup from the volatility in commodity prices along with the above on-track production results. We reiterate our “BUY” recommendation on the stock at the current price of $24.59.
 

BHP Daily Chart (Source: Thomson Reuters)
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