BHP Billiton Ltd. plans to sell its Fayetteville Shale assets to balance its portfolio and focus on oil and natural gas liquids, the Australian company's lead executive said Monday in a presentation in London.
BHP Billiton's decision to shed the assets comes after two years of prolonged low natural gas prices and the company's announcement earlier this year that it would spin off several of its metals and mining assets into a new company.
"As we look to improve the balance of liquids and gas across our petroleum portfolio, we have initiated the marketing our Fayetteville acreage," said Andrew Mackenzie, chief executive officer of BHP Billiton. "However, we will only divest the field if it maximizes value for shareholders."
BHP Billiton, one of the world's largest mining companies, said in August that it would spin off some of its aluminum, coal, manganese, nickel and silver assets to allow it to improve the productivity of its largest operations.
Shares of BHP Billiton fell almost 1 percent Monday to close at $52.34 on the New York Stock Exchange. The company has traded between $51.73 and $71.44 in the last 52 weeks.
When asked about the BHP Billiton's decision to place its Fayetteville Shale assets on the market, a company spokesman referred to Mackenzie's earlier statement.
BHP Billiton will only divest its Fayetteville Shale assets "if full value can be realised for our owners," according to material at the company's presentation.
BHP Billiton purchased its assets in the Fayetteville Shale from Chesapeake Energy in 2011 for $4.75 billion.
The company also obtained other shale liquids and gas assets through its acquisition of Petrohawk Energy Corp. for about $12.1 billion the same year. Those assets are in the Fayetteville Shale and other formations.
BHP Billiton's drilling activity in the Fayetteville Shale in north-central Arkansas has slowed in the past few years.
"I don't think they have drilled any [new] wells this year," said James Williams, an energy analyst who operates WTRG Economics near Russellville.
"Most of the decline has frankly been this year," he said. "And that follows their halt in drilling in December."
The other two major operators in Arkansas -- Southwestern Energy Co. and XTO Energy Inc., a subsidiary of Exxon Mobile Corp. -- have also scaled back operations.
A low-cost producer such as Southwestern Energy, the main operator in the Fayetteville Shale, would be a "logical buyer" for BHP Billiton's assets, Williams said.
Drilling in the Fayetteville Shale has declined despite the nation's current shale boom as the three companies have focused on other formations that are rich in oil and natural gases.
The number of drilling rigs in the shale has fallen from a peak of more than 60 in 2008 to only nine on Monday, according to Baker Hughes, an oil field services company.
BHP Billiton's assets in the Fayetteville Shale took a hit in 2012 when the company had to reduce their value by $2.84 billion because of depressed natural gas prices.
When the company announced the write-down, it said it was shifting its focus to liquid formations.
Houston-based Southwestern Energy's natural gas and oil assets also took a hit in 2012. The company had a $935.9 million charge on its assets in the United States.
Activity in the Fayetteville Shale began to wane in 2012 when natural gas prices plummeted below $2 per million British thermal units for a while and stayed below $4.
At such prices, Arkansas' dry natural gas has become less attractive than the more profitable oil and natural gas liquids found in Texas, North Dakota and Pennsylvania.
Mackenzie said in the presentation that BHP Billiton will focus on drilling for liquids in onshore shale formations in the United States, particularly in the Eagle Ford Shale and Permian Basin in Texas
"The prices aren't good enough to make it exceptionally attractive," Williams, the WTRG Economics analyst, said, referring to BHP Billiton's assets in the Fayetteville Shale. "They have more profitable prospects, particularly in the Eagle Ford."
A Section on 10/28/2014