What's new BHP Billiton recently unveiled a strong set of production numbers for the December quarter.

What's new BHP Billiton recently unveiled a strong set of production numbers for the December quarter.

The iron ore division delivered a 2.7 per cent increase on the previous corresponding period to a record 42.2 million tonnes, which was driven primarily by its vast Pilbara operations. Petroleum production on barrels of oil equivalent (BOE) also rose 3.3 per cent on the previous period to 59.9 million. This was aided by a return to full production at the company's Gulf of Mexico oil platforms, as well as better performances from the recently acquired Petrohawk, Fayetteville and Eagles Ford shale fields.

Copper was, however, the standout division, with production up 5.3 per cent year-on-year to 295,200 tonnes. The main driver was an improvement in the operational performance of its key copper mines at Escondida in Chile (BHP Billiton's interest is 57.5 per cent) and Antamina in Peru (33.8 per cent), which was partly offset by a maintenance-induced production fall from Olympic Dam in South Australia.

Various coal productions were also higher, but productions of most base metals fell and its aluminium properties were mixed.

Outlook We expect the solid production numbers to be reflected positively in BHP Billiton's half-yearly financial results. More importantly, BHP continues to advance development and exploration activities across its commodity portfolio. It has about $US21.2 billion ($20.3 billion) of projects under development, with $US9 billion allocated to iron ore and $US4.6 billion to petroleum.

While management has indicated no further commitments to large-scale capital developments for the remainder of the financial year, the pipeline of activity in progress provides ample foundation for future growth.

Price Although BHP Billiton's stock price has been mostly flat during the past year, it has staged a strong recovery in the past six months, rising more than 20 per cent as concerns eased over China's economic health and risk appetite returned to the equities market.

Worth buying? We are attracted to BHP Billiton's suite of tier-1 assets and its low-risk capital strategy of developing projects within its own portfolio. Coupled with its strong balance sheet and our positive view on commodity prices, we believe BHP has the capability to deliver good returns for its shareholders across cycles. Trading at 15.1 times consensus fiscal 2013 earnings per share estimates and declining to 12.6 times the following year, we believe the stock is worth buying at current levels.

Greg Smith is head of research at Fat Prophets sharemarket research.

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