InvestSMART
The Intelligent Investor Growth Fund is listing on the ASX. Initial Offer now open

BlackRock swipe at BHP 'We are waiting to be educated by BHP on these transactions.' 'We are waiting to be educated by BHP on these transactions.' EVY HAMBRO BlackRock managing director

ONE of BHP Billiton's biggest and most influential shareholders has accused the company of keeping investors in the dark over its $US20 billion push into shale gas.

ONE of BHP Billiton's biggest and most influential shareholders has accused the company of keeping investors in the dark over its $US20 billion push into shale gas.

Global investment group BlackRock one of the world's biggest investors in the mining and resources sector warned yesterday that the market would remain cautious towards BHP until the company better explained why it had moved so aggressively into the controversial shale scene.

Speaking in Melbourne, BlackRock managing director Evy Hambro said the lack of clarity over BHP's shale ambitions and a paucity of capital returns to shareholders had helped quell investor enthusiasm for the global miner.

BHP's Australian shares hit $49.55 in April but have fallen to just above $37 during a six-month period in which most ASX-listed stocks have lost significant value.

Under its "tier-1" acquisition strategy, BHP targets only large, long-life, low-cost assets, but Mr Hambro said that strategy was "very narrow" and meant BHP had missed out on many good opportunities among mid-tier assets.

"They've now embarked on a relatively aggressive [push] into a commodity that no one knew they liked [shale gas], and until they are able to educate investors as to the reasons why they have gone and done these transactions there are going to be some question marks around the use of that capital," he said.

"When you start putting something on your stall that you've never told investors about, people are naturally a bit reserved, so when you are suddenly exposed to shale gas you want to know why.

"We are waiting to be educated by BHP on these transactions . . . there are some question marks whilst we are in the dark."

The comments come just days after BHP chief Marius Kloppers used a speech in London to distance shale gas extraction from the more contentious coal seam gas.

Mr Hambro said BHP did a "great job" on the $US10 billion share buyback program it conducted between April and June, but had made a "mistake" by not launching a second round this financial year.

"Share prices have obviously been very weak over the last few months and [BHP] could have easily been there in the market picking up their shares on a relatively cheap basis and continuing that share buyback plan," he said.

"Share buyback plans are a little bit like special dividends, if you only do one occasionally you don't get much credit for it but if you do one every year for many years in a row people start to build it into their return expectations."

It is believed BHP plans to bring its petroleum division chief, Mike Yeager, to Australia to help introduce investors to the new shale assets.

BHP spokeswoman Fiona Martin said this year's acquisition of shale play Petrohawk Energy and the shale assets of Chesapeake Energy were entirely consistent with BHP's "tier-1" strategy.

She said returning cash to shareholders remained a third priority behind reinvesting in the business and returning the company to a solid "A" credit rating.

Mr Hambro said BlackRock believed the broader resource sector was very cheap at the moment, with opportunities that were "too good to be true".

He said the group remained most bullish on commodities such as coal, iron ore and copper, but had shifted away from platinum.


Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles