BHP cuts US shale oil

Anglo-Australian mining company BHP Billiton announced Wednesday that it would reduce the number of its US shale oil rigs from 26 to 16 by the end of the June in response to weaker oil prices.

"In petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40 percent by the end of this financial year," Chief Executive Andrew Mackenzie said.

He also said that the firm's US operations would concentrate on its Black Hawk field in Texas, and added: "We will keep this activity under review and make further changes if we believe deferring development will create more value than near-term production."

The world's biggest mining company, however, is expecting shale volumes to grow by approximately 50 percent during the period on the back of "significant improvements in drilling and completions efficiency" including hydraulic fracturing, or "fracking."

BHP Billiton made the announcement after global oil prices were sliding further on Tuesday. US benchmark West Texas Intermediate (WTI) for February sank $2.30 (1.99 euros), or 4.7 percent, to $46.39 a barrel, not far from its lowest level since March 2009.

"The announcement that BHP will reduce the number of US onshore oil rigs it operates by the end of this financial year is a pointer to the industry-wide supply response on lower oil prices that is yet to come," CMC Markets' chief market analyst Ric Spooner said in a note published on Wednesday.

Commodities slump hits BHP

On Tuesday, the International Monetary Fund reduced its global economic growth forecast to 3.5 percent this year and 3.7 percent in 2016 on the back of weaker momentum in nearly all major economies except the United States. Both estimates were 0.3 percentage point lower than in its October forecast, and caused commodities prices to fall further.

Prices in iron ore, one of BHP's core commodities, slumped 47 percent in 2014 amid a global supply glut and softening demand from China.

For its current fiscal year, the miner is expected to book a charge of up to $250 million for the sale of petroleum and gas assets in the United States, and up to $350 million in after-tax charges for the Nickel West mine in western Australia.

Nevertheless, CEO Mackenzie said BHP's operational performance over the past six months was strong and the firm was cutting costs and lifting productivity faster than it had planned.

He added that the company remained committed to its planned demerger, due to be completed by the end of the financial year, which will see a new independent company called South32 created by spinning off non-core assets including aluminum, manganese, silver and selected coal and nickel operations.

uhe/sgb (dpa, AFP)