(MENAFN- ProactiveInvestors) (NYSE:BHP) the biggest overseas investor in U.S. shale will cut the number of its rigs there by about 40 percent as plunging petroleum prices add to concerns about lower iron ore earnings.
The Melbourne Australia-based company said in a statement today that it would reduce the number of rigs to 16 from 26 by the end of June in response to weaker oil prices.
However shale volumes are still forecast to grow by 50 percent during the period.
has promised not to reduce dividends to shareholders despite dramatic price falls in all its main commodities - iron ore copper and oil.
“In petroleum we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40% by the end of this financial year” chief executive Andrew Mackenzie said.
“The revised drilling programme will benefit from significant improvements in drilling and completions efficiency.”
Drilling and development spending on U.S. onshore oil and gas fell to $1.9 billion in the six months to December 31 from $2.1 billion a year ago BHP said.
U.S. drillers have cut the number of rigs in service by 209 since December 5 the steepest six-week decline since Inc. began tracking the data in July 1987. The count was down 55 to 1366 in the week to January 16 Bloomberg reported.
Oil fell almost 50 percent last year the most since the 2008 financial crisis as the U.S. pumped crude at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to reduce supply.
West Texas Intermediate for March delivery gained as much as 66 cents to $47.13 a barrel in electronic trading on the New York Mercantile Exchange today. Brent for March settlement climbed as much as 2 percent to $48.97 a barrel on the London-based ICE Futures Europe exchange.
In 2011 BHP spent $20 billion breaking into the shale oil and gas market buying Petrohawk Energy and in Louisiana and Texas.
ADRs of BHP gained 1.3 percent to $46.26 at 9:54 a.m. in New York paring losses over the past six months to 36 percent.
The world’s biggest miner also flagged an after-tax impairment of as much as $350 million on its West unit in Australia after it said in November it failed to attract a suitable bid for the unit from potential buyers.
It will book a charge of as much as $250 million on the sale of petroleum assets in North Louisiana and shale gas operations in the Permian basin in North America.
It will also book a tax charge of $809 million tied to Australia's now-repealed mining profits tax.
BHP said it was sticking to its plan to spin off its aluminium manganese silver and some and coal assets into a new company South32 even as some of these assets are enjoying improving prices.
BHP is also the world's third biggest miner of iron ore where price falls have been equally dramatic.
Over 2014 iron ore prices fell some 47 percent and today hit their weakest level since 2009. The price has tumbled as demand from Chinese steel producers has slumped while supply continues to rise.
Even so BHP said that iron ore output rose 16 percent in the October-to-December period hitting 56.4 million tonnes and it aims to boost annual production by 11 percent in 2015.
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