BHP Billiton, the world’s largest mining company, has finally decided to exit the shale energy industry entirely. In a recent statement, BHP Billiton has asked four investment banks to assist in either selling or spinning off its underperforming U.S. shale oil and gas assets. Unfortunately, for BHP, the company sunk nearly $50 billion on its shale assets and will be lucky to receive $10 billion.
Something must have changed at corporate headquarters because the company stated last month that they were considering selling their shale assets over the next two years. However, the company now wants to make a decision and get the ball rolling by early 2018. So, there seems to be a motivating factor to unload their shale assets sooner than later.
What a change in the company’s strategic position from just a year ago when they decided to stick with their U.S. shale assets for the long haul. According to the article published in October 2016, BHP Billiton Bets Long On Its Shale Assets:
Yet the head of BHP’s petroleum business says the company remains committed to its shale assets, which he believes can outstrip its conventional oilfields and plug a supply gap that it sees emerging from the industry-wide investment drought brought about by the collapse in crude prices since mid-2014.
“We admit straight away that we didn’t get the timing right [of the shale deals],” says Steve Pastor in an interview in London. “But what we did pick up were fantastic assets.”
Interestingly, the head of BHP’s petroleum business says they were committed to their “fantastic” shale assets. Amazing how one year’s time will change a “fantastic asset” to one that needs to be unloaded .. ASAP (As Soon As Possible).
I knew back in 2011 when BHP Billiton was buying up their U.S. shale assets that it was going to a BIG MISTAKE. However, the company thought it had purchased some of the best “Shale Energy Jewels” the U.S. had to offer. According to their 2011 Investor Presentation on their shale assets, the company had big plans:
The management running BHP’s petroleum business stated that they had acquired a “World class accessible resource, material to BHP Billiton Large, long-life, low cost, with significant future development. Out of those four strategies; world-class resource, long-life, low-cost, and significant future development, only one was true. Which one? Well, BHP did spend one hell of a lot of money on “significant future development of its shale resources.” I believe I came across a $15 billion capital investment figure that BHP sunk to develop, drill, and extract shale oil and gas from its resources.
And, here is a list of BHP’s shale assets as of November, 2011:
As we can see, BHP lists its high-quality shale portfolio in its Nov. 2011 Investor Presentation in which it states at the bottom, “Multiple, 30-year opportunities for optimisation.” Well, how fast 30 years came and went… ahh? It’s been only six years, and the company is getting ready to DUMP its assets as quickly as it can and hopefully to the next POOR SLOB who is stupid enough to purchase them.
Now, the last BHP investor presentation slide provides us with some comedic relief. According to BHP’s Top Men running their petroleum business, “Shale offers the ability to rapidly increase volume growth and earnings over the long term:”
You see, shale energy promises that it was going to provide PAYBACK in a matter of months, not 5+ years as was true for BHP’s offshore conventional deepwater projects. Unfortunately, BHP and the overwhelming majority of companies producing shale didn’t make any money in the process. Thus, the one thing that was true for the industry, the companies were able to rapidly increase shale oil and gas production, but at the expense of the investor. That’s correct. The investor became the Shale Industry BAG HOLDER.
Also, besides the $15 billion BHP spent to produce its unprofitable shale oil and gas resources, it also suffered $12 billion worth of impairment write-downs on its supposed “high-quality” shale assets in 2015 and 2016. So, I can imagine BHP’s CEO is looking forward to getting rid of its shale assets (liabilities) which have been one of the biggest drains on the company’s balance sheet for decades.
The American public has no clue that the Great Shale Oil Ponzi Scheme has only bought a bit more time so they can continue borrowing money to buy crap they don’t need. While the U.S. economy seems to be humming along, few realize that its domestic shale energy industry is just a few years away from disintegrating.
When the U.S. shale oil industry finally goes belly-up, most Americans are going to be thrown into an economic depression they have never witnessed before. Those who were wise enough to purchase these little gold and silver colored coins before-hand will enjoy better options than individuals who kept all their chips in the Wall Street Casino.
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