BHP has reported its second-half 2018 operations review

January 21, 2019

HOUSTON -- Below are the highlights of BHP's second-half 2018 upstream operations review:

  • Full year unit costs for all major assets are expected to be in line with guidance(2), predominantly reflecting stronger anticipated volumes in the second half of the year. However, unit costs were tracking above full year guidance at the December 2018 half year as a result of planned maintenance and production outages during the period.
  • All major projects under development are tracking to plan.
  • In petroleum, the first appraisal well at Trion in Mexico (Trion-2DEL) encountered oil, in line with expectations. A downdip sidetrack is currently being drilled to further appraise the field.
  • The onshore U.S. sale process was completed on Oct. 31, 2018, with the net proceeds of $10.4 billion to be returned to shareholders. On Dec. 17, 2018, a $5.2 billion off-market buyback of BHP Group Limited shares was successfully completed. The balance of the net proceeds will be paid on Jan. 30, 2019 as a special dividend of $1.02 per share.
  • The financial results for the December 2018 half year are expected to reflect certain items as summarized in the company's full report online.

BHP CEO Andrew Mackenzie, said: “In Petroleum, our first appraisal well at Trion in Mexico encountered oil and we added to our exploration options with successful bids for two licenses offshore Eastern Canada. We completed the sale of our US shale assets and returned $5.2 billion to shareholders through a share buy-back program, with a further $5.2 billion to be returned as a special dividend on Jan. 30, 2019.”

BHP expects its financial results for the first half of the 2019 financial year to reflect certain items as summarized in their online table. The table does not provide a comprehensive list of all items impacting the period. The financial statements are the subject of ongoing work that will not be finalized until the release of the financial results on Feb. 19, 2019. Accordingly, the information is subject to update.

The onshore U.S. sales process was completed Oct. 31, 2018, with the net proceeds of $10.4 billion to be returned to shareholders through an off-market buy-back and a special dividend shareholder return program. On Dec. 17, 2018, the $5.2 billion off-market buy-back of BHP Group Limited shares was successfully completed and enabled the buy-back of approximately 265.8 million shares (5.0 per cent of the total issued capital of BHP Group Limited and BHP Group Plc) at A$27.64 per share. In addition, the Board of BHP determined to pay a special dividend to shareholders of $1.02 per share, representing the residual US$5.2 billion of net proceeds, based on the reduced number of shares on issue (approximately 5,058 million) following completion of the off-market buy-back.

Total Conventional petroleum production was broadly flat at 63 MMboe. Guidance for the 2019 financial year remains unchanged at between 113 and 118 MMboe, with volumes expected to be towards the upper end of the guidance range. Crude oil, condensate and natural gas liquids production declined by five per cent to 29 MMboe due to natural field decline across the portfolio and a 70 day planned dry dock maintenance program at Pyrenees completed during the September 2018 quarter. This decline was partially offset by higher uptimes at our Gulf of Mexico assets. Natural gas production was broadly flat at 206 bcf, reflecting increased tax barrels at Trinidad and Tobago in accordance with the terms of our Production Sharing Contract. This was partially offset by planned maintenance at Trinidad and Tobago in the December 2018 quarter and natural field decline across the portfolio. On Nov. 30, 2018, BHP completed the sale of its interests in the Bruce and Keith oil and gas fields in the United
Kingdom to Serica Energy UK Ltd, with an effective date of Jan. 1, 2018.

In the U.S. Gulf of Mexico, a sidetrack of the Samurai-2 exploration well commenced on Aug. 25, 2018 to further appraise the discovery, and was plugged and abandoned on Nov. 2, 2018 after delineating the Samurai discovery. Appraisal and development planning is in progress. In the Western U.S. Gulf of Mexico, the Ocean Bottom Node(5) seismic acquisition is expected to be completed in the March 2019 quarter. This is the world’s first deepwater exploration ocean bottom node seismic acquisition.

In Trinidad and Tobago, the Concepcion-1 well was spud on Sept. 30, 2018 to further test the Magellan play, with no commercial hydrocarbons encountered. The well was plugged and abandoned on Oct. 25, 2018. This completed Phase 2 of our deepwater exploration drilling campaign in Trinidad and Tobago.

In Mexico, we spud the Trion-2DEL appraisal well on Nov. 15, 2018 and encountered oil in line with expectations. This was the first well drilled by an international operator in the Mexican deepwater. A downdip sidetrack of the Trion-2DEL well commenced on Jan. 4, 2019 to further appraise the field, including the oil water contact.

BHP was successful in its bids to acquire a 100% interest in, and operatorship of, two exploration licenses for blocks 8 and 12 in the Orphan Basin, offshore Eastern Canada. BHP’s aggregate bid amount of $625 million reflects the costs of the drilling and seismic work likely to be performed during the exploration phase, although there is no minimum work program under the license agreements. BHP’s minimum commitment under the license agreements, if no work is performed, is approximately $119 million for block 8 and $38 million for block 12.

Petroleum exploration expenditure for the December 2018 half year was $316 million, of which $166 million was expensed. A $750 million exploration and appraisal program is being executed for the 2019 financial year.

The onshore U.S. sales process was completed Oct. 31, 2018, with the rights to the economic profits transferring to the purchasers from July 1, 2018. Onshore U.S. production for the July 2018 to October 2018 period was 26 MMboe, with drilling and development expenditure of $0.4 billion. Our operated rig count remained unchanged at five, with two rigs at Eagle Ford, two rigs at Permian and one at Haynesville. We continue to provide certain transitional services to BP for up to nine months following completion, however no further production will be reported by BHP.

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