The latest with these two miners – BHP Billiton Ltd and South32 Ltd

 

BHP Billiton Limited

Ongoing cost cutting along with huge untapped Petroleum asset base would continue to support the stock: BHP Billiton Limited (ASX: BHP) reiterated their confidence of a recovering long term outlook for oil and gas markets. The global consumption is expected to be 100,000 barrels of liquids per day by 2025 and management believes that they are well positioned to leverage this opportunity. The group has been cutting their operating as well as capital costs, while investing in a range of shale and conventional investment opportunities. BHP has a strong petroleum asset base comprising up to 1,200 undrilled net oil wells, contingent upon trials in the Eagle Ford, and 220 undrilled net gas wells which could deliver a minimum 15% internal rate of return (IRR) at US$50 per barrel of oil and US$3 per MMbtu.
 

Well positioned in the next decade (Source: Company Reports)
 
The group has an access to over one billion barrels of oil equivalent (boe) in Permian positioning it to be a free cash contributor in its Petroleum portfolio within five years. Moreover, for conventional, the group forecasts the unit operating costs to be over US$10 per boe for 2017 and 2018 financial years. BHP’s portfolio of brownfield project options has an overall capital expenditure of US$2.5 billion with an average IRR of 45% which would offset the field decline. The group also announced positive drilling results at the Caicos exploration well in the Gulf of Mexico giving hopes of a possible commercial development opportunity in the area. BHP stock recovered over 42.2% in the last six months (as at October 07, 2016) and we believe this positive momentum will continue in the coming months. We maintain our “Buy” recommendation on the stock at the current price of – $23.30
 

BHP Daily Chart (Source: Thomson Reuters)
 

South32 Ltd

Improving production base: South32 Ltd (ASX: S32) is enhancing its annual production records at Australia Manganese (ore), Worsley Alumina, Brazil Alumina, Mozal Aluminum and Cannington (payable zinc). The group utilized the entire Worsley operation, producing at expansion capacity of 4.6Mtpa (100% basis) across the entire year. Moreover, S32 has been controlling its costs by US$386 million, which is more than their estimated target of US$300 million, while cutting capital expenditure by US$306 million. S32 has been continuously making efforts of leveraging its potential and accordingly made an agreement with the Groote Eylandt traditional owners and the Anindilyakwa Land Council to access the Eastern Leases and the Southern Areas at GEMCO (Australia Manganese).
 

Klipspruit Colliery (Source: Company Reports)
 
The group also finished the Appin Area 9 (Illawarra Metallurgical Coal) and Premium Concentrate Ore (Australia Manganese) projects, while developing La Esmeralda Mineral Resource at Cerro Matoso and the Klipspruit Life Extension project at South Africa Energy Coal. S32 is expanding its international operations and accordingly made an option agreement with Northern Shield Resources for Huckleberry property in Northern Quebec, Canada. The stock was down 4.3% on October 07, 2016 and traded close to its 52-week high price. We give a “Hold” recommendation on the stock at the current price of – $2.43

 
S32 Daily Chart (Source: Thomson Reuters)

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