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UPDATE 1-BHP says will take $2bln charge on U.S onshore energy business

Published 15/07/2015, 01:57 pm
UPDATE 1-BHP says will take $2bln charge on U.S onshore energy business
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* BHP to take $2bln impairment charge on US onshore shale

* Comes as BHP faces revenue declines in other divisions (Updates with quotes, forecasts, share price)

SYDNEY, July 15 (Reuters) - BHP Billiton BHP.AX BLT.L on Wednesday said it will take a $2 billion impairment on its U.S. shale operations - the third writedown in three years.

The charge on fiscal 2015 financial results, pushed BHP's Australian shares to their biggest fall in a week -- down 1.7 percent to $26.64.

The gas-focused Hawkville field in Texas accounts for the substantial majority of the charge to be included in results for the fiscal year that ended on June 30, which BHP estimates will be around $2.8 billion on a pre-tax basis.

BHP announced a $328 million write-down on the Permian field in February and a $2.84 billion impairment on the gas component of the shale division in 2012.

The latest charge comes as BHP, the world's biggest diversified mining company, faces a sharp fall in profits for fiscal 2015 as its main source of revenue, iron ore, declines.

It is also facing less revenue from its coal and copper businesses.

Melbourne-based BHP is tipped to report pre-tax profit of $13.2 billion for the year to June 30, against $22.2 billion a year earlier, according to Reuters I/B/E/S. ID:nL5N0ZS10J

BHP's annual spending on its overall U.S onshore operations, which was set at $3.4 billion in fiscal 2015, will drop to $1.5 billion in the current year, BHP's petroleum division president Tim Cutt said in a statement

"While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore U.S. business," Cutt said.

At an oil price of $60 per barrel and a gas price of $3.00 per thousand standard cubic feet per day (Mscf), overall, the onshore operations should be cash flow positive in the 2016 financial year, according to the company

Henry Hub gas GT-HH-IDX stood at $2.95 per million British thermal units on Wednesday, while oil CLc1 hovered around $53.34 per barrel.

BHP said efficiency gains in onshore drilling have reduced costs, which should help offset future price volatility in oil and gas prices.

The dramatic drop in spending is likely to lead to revised production guidance for the year, which BHP said it will disclose in its July 22 quarterly operations report.

Shale drilling is much easier to shut than conventional oil and gas wells as individual wells are smaller, making it a logical target for cuts.

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