Mining giant BHP Billiton Friday said it expects to book a US$7.2 billion pre-tax writedown against the value of its struggling onshore assets in the United States as tumbling oil prices hit shale gas.
The Anglo-Australian company will also further reduce the number of working onshore US rigs from seven to five in the March 2016 quarter, down from 26 a year ago, due to the precarious state of the industry.
The hefty writedown, which will be booked in its next half-yearly accounts due in February, equates to US$4.9 billion after tax and follows BHP, a major player in the US oil and gas industry, taking a US$2.8 billion pre-tax hit on the same assets last year.
The firm's shares were nevertheless 3.83 percent higher at Aus$15.45 in late morning trade. They were up around six percent in London overnight.
Chief executive Andrew Mackenzie blamed "significant volatility and much weaker" prices in the oil and gas industry, adding that the company had been forced to reduce its medium- and long-term price assumptions.
"Oil and gas markets have been significantly weaker than the industry expected," he said in a statement to the market.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."
The writedowns will reduce the book value of BHP's US net operating assets to about $US16 billion.
Mackenzie added that the diversified miner's investment and development plans for the remainder of the year were under review as it desperately looks to preserve cash with commodity prices continuing their drawn-out slump.
Oil and gas prices have fallen dramatically in recent months with the US benchmark West Texas Intermediate hovering near 12-year lows at around US$31.20 a barrel as investors worry about prolonged global oversupply and an uncertain demand outlook.
Gas prices have also been under intense pressure.
Despite this, Mackenzie said he remained "confident in the long-term outlook and the quality of our acreage".
"We are well positioned to respond to a recovery," he added.
Miners globally have been struggling to cope with collapsing commodity prices and China's once insatiable appetite -- boosted by an unprecedented investment boom in the world's second-largest economy -- waning.
Sharp falls in oil prices have ravaged the bottom line of miners across the world, pushing smaller players to the brink while tearing billions in revenue out of the government budgets of resources-dependent economies such as Australia.
BHP's share price dropped by more than 40 percent last year, while stocks in rival Rio Tinto slid 26 percent. AFP
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