BHP to sell US shale acreage

Miner says it plans to sell about half of Permian Basin acreage.

BHP Billiton (BHP). confirmed that it is selling about half of its oil and gas acreage in the Permian Basin of Texas and New Mexico to focus on its more lucrative assets in the region. 

BHP, already a significant oil and gas producer, expanded its petroleum portfolio in 2011 by grabbing thousands of acres of shale assets in the US with the $US12.1 billion takeover of Petrohawk Energy Corp. and $US4.75 billion purchase of Chesapeake Energy Corp.'s Fayetteville operation. After spending nearly $US17 billion on shale assets, natural gas prices dropped, prompting BHP to take a write down on those purchases. 

A BHP spokeswoman confirmed that the company is selling some of its Permian Basin acreage but isn't exiting the basin. 

"The drilling program has now defined our primary area of focus in the basin and, while this program is at a relatively early stage, we see the potential to build a sizeable business," the spokeswoman said in an emailed statement. "As we continue with our evaluation we will concentrate our efforts on the acreage that holds the most immediate interest for us while divesting some other parts of our holdings." 

Toronto-based Scotia Waterous, BHP's adviser on the sale process, said on its website that BHP is selling 250,000 net acres in West Texas region of the Permian Basin: 165,000 net acres in the Delaware Basin and 85,000 net acres in the Midland Basin. 

Scotia Waterous noted that the sale doesn't represent BHP's exit from the Permian Basin as BHP will retain a significant interest in both the Delaware and Midland Basins. BHP declined to comment on how much acreage is being sold. BHP Billiton held about 500,000 net acres in the Permian Basin at the end of June, according to the company's latest annual report. 

The story was first reported by Reuters

Last year, Chesapeake sold 618,000 net acres in the Permian basin to Royal Dutch Shell PLC for $1.935 billion, or $3,131 an acre. Using this valuation metric, BHP could potentially fetch about $800 million for the acres it plans to sell. Such a valuation, however, is subject to change depending on a myriad of factors including oil and natural gas price trends.

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