BHP Billiton results for 2016
Published on Wed, 25 Jan 2017
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Image Source: BHP Billiton
BHP Billiton Chief Executive Officer, Andrew Mackenzie, said: “We have performed well during a period of higher prices, with record iron ore volumes achieved at WAIO. Our simpler organisational structure has freed our assets to focus on what matters most and to deliver safer and more productive operations. Our consistent delivery of operating and capital productivity, and strict adherence to our capital allocation framework have positioned us to maximise shareholder value. In Petroleum, we will accelerate our counter-cyclical oil exploration efforts this year. Our successful Trion bid leaves us in a leading position to develop the newly opened Mexican acreage in the Gulf of Mexico, where we can leverage our core expertise. We are encouraged by recent positive drilling results at the LeClerc well in Trinidad and Tobago and the Caicos well in the Gulf of Mexico. After the first successful rig, our Onshore US gas hedging program will also be expanded to secure attractive returns.”
Highlights
Record production for the half year was achieved at Western Australia Iron Ore (WAIO).
Full year production guidance maintained for Petroleum, Iron Ore and Coal.
Production guidance for Copper reduced to approximately 1.62 Mt, two per cent below prior guidance, reflecting lower volumes now expected at Olympic Dam.
In Petroleum, following the successful bid for Trion in Mexico and positive drilling results at LeClerc and Caicos, an US$820 million exploration program is now planned for the current financial year.
All major projects under development are tracking to plan. The Bass Strait Longford Gas Conditioning Plant project achieved initial gas sales in the December 2016 quarter. Mechanical completion was achieved at the Escondida Water Supply project with first water expected in the March 2017 quarter.
Underlying attributable profit(1) in the December 2016 half year is expected to include gains related to asset divestments in a range of approximately US$150 million to US$200 million
Petroleum (MMboe) - 106 (15%) Deferral of development activity in Onshore US for value and natural field decline in Conventional assets.
Copper (kt) - 712 (7%) Reduced volumes at Olympic Dam, maintenance at Pampa Norte and lower copper grades as expected at Antamina.
Iron ore(2) (Mt) - 118 +4% Record WAIO volumes for the half year due to the continued ramp up of additional capacity at Jimblebar.
Metallurgical coal (Mt) - 21 +1% Strong performance at four Queensland Coal mines more than offset the cessation of production at Crinum.
Energy coal (Mt) - 14 (4%) Lower production at NSWEC partially offset by strong performance at Cerrejón.
Production for the December 2016 half year and quarter and guidance for the 2017 financial year are summarised in the table below.
Zie PDF.
Major development projects
During the December 2016 quarter, the Bass Strait Longford Gas Conditioning Plant project achieved initial gas sales, under budget, and production is ramping up to full rate. In December 2016, mechanical completion was achieved at the Escondida Water Supply project with first water expected to be delivered in the March 2017 quarter, on schedule and budget. These two projects will not be reported in future Operational Reviews.
BHP Billiton has two major projects under development in Petroleum and Potash, with a combined budget of US$2.9 billion over the life of the projects. Both projects remain on time and on budget.
Corporate update
BHP Billiton expects Underlying attributable profit(1) in the December 2016 half year to include gains related to asset divestments in a range of approximately US$150 million to US$200 million (Underlying EBITDA(1) impact of US$175 million to US$225 million).
In addition, the Group expects to record an exceptional item of US$164 million (US$115 million post-tax) related to the cancellation of the Caroona exploration licence and subsequent reimbursement received during the December
2016 half year.
On 20 December 2016, Samarco, Vale and BHP Billiton Brasil agreed a non-binding term sheet outlining the general terms and conditions for the use of Vale’s Timbopeba pit by Samarco to deposit its tailings, should Samarco restart. A definitive agreement remains subject to a successful commercial negotiation, due diligence and relevant government approvals. These processes are likely to occur during the 2017 calendar year.
On 18 January 2017, Samarco, Vale and BHP Billiton Brasil have also entered into a preliminary agreement with the Federal Prosecutors’ Office in Brazil in relation to the Fundão tailings dam failure on 5 November 2015(3) (Preliminary Agreement). The Preliminary Agreement outlines the process and timeline for negotiation of a settlement of the BRL 155 billion (approximately US$47.5 billion) Civil Claim relating to the dam failure.
For the December 2016 half year, we are not yet in a position to provide an update to the ongoing potential financial impacts on BHP Billiton Brasil of the Samarco dam failure. Any financial impacts will continue to be classified as an exceptional item.
The above guidance will be updated should material information or events arise as the Group finalises its financial statements.
Marketing update
The average realised prices achieved for our major commodities are summarised in the table below. The majority of iron ore shipments were linked to the index price for the month of shipment, with price differentials predominantly reflecting product quality and market fundamentals. The majority of metallurgical coal and energy coal exports were linked to the index price for the month of shipment or sold on the spot market at fixed or index-linked prices, with price differentials reflecting product quality.
Source : Strategic Research Institute