Wednesday, 21 January 2015

BHP Billiton: cutbacks consistent with revitalisation strategy

Having touched on the latest production information from Rio Tinto just over a day ago (link here) today it was the turn of BHP Billiton to unburden themselves of their latest information.  As detailed below there are many moving parts and actually hard to discern a trend (it is noteworthy that for petroleum, copper and iron ore the production trend was in the opposite direction sequential quarter-on-quarter versus the year-on-year quarter-on-quarter!)

Looking ahead the trend is clearer: continued production growth across all major commodities they are involved with:

We all know however that it is about much more than just production growth - BHP's share price decline (shown in a 3 year chart below) can be almost exclusively attributed to sales price declines.

We will get the full balance sheet from BHP Billiton in a few weeks time but I liked the sound today of the 40% capex cut in the shale gas developments as frankly this reflects a sensible reality...and you would much rather have a large mining company reflect this. 

As I noted back in October (admittedly at a clearly higher share price) the BHP Billiton story is all about cost cutting, simplification and maintenance of the headline attractive 5%+ dividend at the moment.  These shale gas cutbacks reflect this...and that's why I still believe the company's shares are good value today looking forward on any reasonable basis. 

(above chart from the October 2014 CMD)

1 comment:

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