Santa comes early for BHP shareholders: Mining giant to return US$10.4b from sale of US shale assets

BHP chief executive Andrew Mackenzie. The mining company reaped a total of US$10.8 billion in sales of the US assets.
BHP chief executive Andrew Mackenzie. The mining company reaped a total of US$10.8 billion in sales of the US assets.PHOTO: AFP

BENGALURU (REUTERS) - Mining giant BHP plans to return the US$10.4 billion (S$14.4 billion) proceeds of the recent sale of its onshore US gas assets to shareholders through an off-market share buyback and a special dividend, it announced on Thursday (Nov 1).

Across the mining sector, a trend to hand money back to shareholders has gathered steam following a recovery from the mining and commodity crash of 2015-16 and pressure from investors not to waste growing piles of cash on buying up assets that may never deliver returns.

"Returning this US$10.4 billion will bring the total cash returned to shareholders to US$21 billion over the last two years," BHP chief executive officer Andrew Mackenzie said.

The off-market buyback of the Sydney-listed shares will start this month and will return US$5.2 billion to holders, while the balance will then be paid out as a special dividend, the company said.

"We made a commitment that all the net proceeds from the disposal of our onshore US assets would be returned to shareholders and we are honoring that commitment now that the sale transactions have been completed," Mackenzie said.

BHP reaped a total of US$10.8 billion in sales of the US assets, including a US$10.5 billion pact with BP Plc for its interests in the Eagle Ford, Haynesville and Permian basins. The sales followed pressure from activists including New York-based Elliott Management Corp to divest under-performing assets and to restructure the organization.

"We had outlined a list of items that we thought BHP needed to do to get the company focused and back on the rails - and they've successfully achieved them," said Craig Evans, a co-portfolio manager at Tribeca Investment Partners Pty, which called in May 2017 for the producer to make changes including an exit from shale. "We are a happy shareholder and look for better returns from this company from here."

BHP now has "a good portfolio that can be operated successfully to achieve greater shareholder returns without the constant drag" of diverting capital into the shale unit, Evans said.

BHP spent US$20 billion on two US oil and gas acquisitions in 2011 to build the shale unit, and invested additional sums in development of the assets. "This also closes a very sad chapter in BHP's history - a super-cycle, spending binge that came to almost naught," Peter O'Connor, a Sydney-based analyst at Shaw and Partners Ltd, said in a note.