BHP Billiton intends to cut its US petroleum operation by 40% due to the falling oil price, which will see the number of its rigs drop from 26 to 16 by July 2015.
The price of both Brent and US crude now below $50 a barrel, indicating a 50% drop since last year, yet for BHP Billiton, onshore US drilling and development expenditure totalled US$1.9 billion in the December 2014.
“In Petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our Onshore US business by approximately 40 per cent by the end of this financial year,” said BHP Billiton Chief Executive Officer Andrew Mackenzie.
“The revised drilling program will benefit from significant improvements in drilling and completions efficiency. Our ongoing shale investment program will remain focused on our liquids-rich Black Hawk acreage. However, we will keep this activity under review and make further changes if we believe deferring development will create more value than near-term production.”
The majority of the revised drilling program will be focused on the liquids-rich Black Hawk acreage with activity in the Permian and Hawkville limited to the retention of core acreage. The company’s dry gas development program will be reduced to one operated rig in the Haynesville, with a focus on continued drilling and completions optimisation ahead of full field development.
Nevertheless, the reduction in drilling activity will not impact 2015 financial year production guidance and BHP Billiton has expressed confidence that shale liquids volumes will rise by approximately 50% in the period.
The company has also promised not to reduce dividends to shareholders despite dramatic price falls in all its main commodities – iron ore, copper and oil.