HOT STOCK
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.
Frequently Asked Questions about this Article…
BHP Billiton reported a strong December-quarter production update: iron ore hit a record 42.2 million tonnes (up 2.7% year‑on‑year), petroleum rose 3.3% to 59.9 million barrels of oil equivalent (BOE), and copper production increased 5.3% to 295,200 tonnes. Several coal streams were higher while most base metals fell and aluminium results were mixed.
The iron ore uplift was driven primarily by improved output from BHP’s extensive Pilbara operations, which helped deliver the 2.7% year‑on‑year rise to a record 42.2 million tonnes in the December quarter.
Petroleum production rose to 59.9 million BOE (up 3.3% year‑on‑year) after the company returned Gulf of Mexico oil platforms to full production and benefited from stronger performance at recently acquired shale assets such as Petrohawk, Fayetteville and the Eagle Ford fields.
Copper was the standout division, with production up 5.3% year‑on‑year to 295,200 tonnes. The improvement was mainly due to better operational performance at Escondida in Chile (BHP’s 57.5% interest) and the Antamina mine in Peru (33.8% interest), partly offset by maintenance-related falls at Olympic Dam in South Australia.
The report noted varied outcomes across commodities: several coal operations produced more, most base metals saw falls in production, and aluminium results were mixed — some assets improved while others did not match prior output.
BHP has about US$21.2 billion (approximately A$20.3 billion) of projects under development. Of that total, roughly US$9.0 billion is allocated to iron ore projects and about US$4.6 billion to petroleum development, reflecting ongoing investment across its commodity portfolio.
Management indicated there are no further commitments to large‑scale capital developments for the remainder of the financial year. However, the existing pipeline of projects already in progress provides a foundation for future growth.
After being mostly flat over the past year, BHP’s share price staged a strong recovery in the past six months, rising more than 20% as concerns over China eased and risk appetite returned. Fat Prophets’ research led by Greg Smith notes that, trading at about 15.1 times consensus fiscal 2013 earnings per share (and falling to 12.6 times the following year), BHP’s portfolio of tier‑one assets, low‑risk capital strategy and strong balance sheet make the stock attractive and 'worth buying' at current levels according to their view.
Call 1300 880 160
Start a chat
Schedule a call
