BHP Billiton takes $7.2bn writedown on US oil assets

Mining giant BHP Billiton expects to book a $7.2bn (£5m) impairment charge on the value of its onshore US assets in its half-year results due to the steep drop in oil prices.

The writedown, which will cut the company’s onshore US net operating assets to around $16bn, is the second in its US oil and gas assets in six months.

BHP noted oil prices have fallen over 30% in the last three months after the disruption of OPEC and following stronger-than-expected non-OPEC production.

Although the miner reckons prices will bounce off current lows, it has cut its short to medium-term price assumptions, while the group’s long-term forecasts reflect the market's attractive supply and demand fundamentals.

The company will also cut the number of operated rigs in its onshore US business to five from seven in the March quarter. This will include three in the Black Hawk and two in the Permian.

Chief executive officer Andrew Mackenzie said: “Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the onshore US business from 26 a year ago to five by the end of the current quarter.

“While we have made significant progress, the dramatic fall in prices has led to the disappointing writedown announced today. However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery."

BHP Billiton shares were under the cosh in November after a damn collapsed at an iron ore mine in Brazil operated by its joint venture with Vale.