BHP predicts slower path to US shale profit

BHP Billiton believes its US shale business will be profitable by the 2016 financial year, in what appears to be a slightly less ambitious schedule than the one outlined last year by former petroleum boss Mike Yeager.

The way to profitability for the division was outlined on the second day of BHP's petroleum briefing in Houston, Texas, on Wednesday, which also saw BHP highlight Trinidad and Tobago as potentially the next big investment centre for the company.

Most of the shale division was bought in 2011 under two separate acquisitions costing a total of about $US20 billion, and it has since evolved significantly, with market forces prompting BHP to focus more on liquids production than gas.

BHP indicated that strategy was not about to change, with liquids production set to grow by 75 per cent in fiscal 2014 and help the company hit its long-standing guidance target of 250 million barrels of oil for the overall petroleum division.

While the Eagle Ford will remain the focus of the shale liquids drive, BHP said it was acquiring more acreage in the Permian basin, in Texas, in the hope that it would match Eagle Ford's production of liquids by 2017. If that growth is successful, the US shale division will bring in more revenue than the $US4 billion worth of annual development capital the company is spending there by 2016.

"In this scenario, Onshore US is expected to be self-funding in the 2016 financial year, before generating almost $US3 billion of free cash flow in the 2020 financial year," BHP petroleum president Tim Cutt said.

That outlook appears to be slightly more conservative than guidance given by Mr Yeager 13 months ago, when he suggested the shale business could be profitable by the 2015 financial year.

But the focus on liquids continues to cost BHP on the gas side, where the company took a $US2.84 billion impairment last year.

BHP said it would take a non-recurring charge of $US100 million for the termination of rigs that were expected to be used this financial year.

But there was surprising optimism around the ability of the tiny Caribbean island of Trinidad to host a future "tier one" oil field.

BHP declared that the region had "significant potential" to become another "core region" for the company, alongside its US and Australian petroleum regions. Mr Cutt said the company was "very excited" by some of the fields there.