BHP said to mull shale split to speed $10-billion sale

The world’s biggest miner continues to favor a sale of the portfolio to a single buyer, the people said. It values the assets at $10 billion or more, though the Melbourne-based company could also consider a swap of onshore U.S. acreage for offshore wells in the Gulf of Mexico, according to the people, who spoke on condition of anonymity as the details are private.

BHP is putting up the trove of shale acreage at a fortuitous moment. Oil prices are finally on the mend after a three-year slump and President Donald Trump has moved to slash regulations and taxes on the U.S. oil industry.

“BHP is selling assets at a reasonable time and may end up with a fair price at the least,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said in a Wednesday note. A sale price approaching $10 billion could spur higher returns to shareholders, he said.

Four plays

BHP owns acreage across four U.S. shale plays. That includes 83,000 acres in the Permian in West Texas and New Mexico, the most productive and profitable shale basin in the country. It also includes land in the Eagle Ford in south Texas and the natural-gas-rich Fayetteville and Haynesville plays in Louisiana and Arkansas.

BHP declined to comment. The producer advanced 0.7% to A$30.395 at 10:24 a.m. in Sydney trading Thursday, extending gains this year to about 3%.

Data rooms that will let potential buyers peek at information about the assets could be opened by the end of March, the producer said in January. A decision to prepare separate asset packages is a recognition it may be tough to find a single buyer for BHP’s disparate holdings.

BHP’s contentious $20-billion purchase of the shale assets in 2011 has become a focus for investor dissent over management missteps, and was highlighted in an activist campaign launched publicly last year by New York-based Elliott Management Corp.

Though BHP continues to study alternatives, including an initial public offering of the shale business, trade sales remain the most likely path, CEO Andrew Mackenzie told investors in Melbourne in November. The company will seek to exit the business “within two years, and ideally in less than that,” he said.

One possible option being explored by BHP would include separate packages in the Haynesville and Fayetteville plays, an Eagle Ford sale focused on oil wells and another on natural gas and condensate wells. There are also three separate Permian packages -- one for oil and gas wells, one for “midstream" infrastructure like pipelines and processing facilities, and a third for stakes in operations run by other companies.

In flux

All of this planning remains in flux, the people said, with no final decision having been made.

BHP would consider a deal that includes a trade of shale properties for rights in the Gulf of Mexico, where the company already has offshore operations, according to one of the people. It’s unclear if that option has gained any traction with potential buyers.

The Permian property would be the most highly sought after and could attract bids from Royal Dutch Shell Plc or Anadarko Petroleum Corp., both of whom have drilling leases nearby, Macquarie Group Ltd. said in July. Shell declined to comment at the time.

Anadarko Chief Financial Officer Robert Gwin has called the two companies’ assets “very natural fits." But Texas-based Anadarko has since committed $2.5 billion of its available cash to share buybacks, potentially complicated any bid for a BHP acquisition.