Australian Investment Blog

ASX:BHP 27/07/2018

BHP to get big windfall for US shale assets

Stock

BHP Billiton (BHP) $34.40 as at 27/07/2018

Event

This morning BHP announced the sale of US shale assets to BP and Merit Energy for an all cash total of $US 10.8bil. It’s a great result for BHP, with the market expecting a number closer to the $US 10bil mark. Half of the cash will be paid in October, with the remaining coming in 6 equal monthly instalments. BP picked up the bulk – paying $US 10.5bil for the Petrohawk Energy Company while Merit paid $US 300mil for the Fayetteville assets. Management had previously flagged that the proceeds for this transaction would go straight to shareholders, so we can expect special dividends and/or buybacks to occur, although the timeframe for this will now depend on whether BHP will wait until all cash has been received. View our afternoon report covering AMP as well - 'Market cruises into the weekend after a solid week' BHP Billiton (BHP) Chart bhp chart

Market Matters Take/Outlook

This transaction comes as a surprise as it was a little earlier than we expected. It is a great result for the times, although worth mentioning that they lost a fortune on them since buying them a few years ago. Shareholders can expect the full benefit of the proceeds, we expect mostly through buy-backs as BHP will be able to utilize its large franking credit balance it has struggled to pass on to shareholders in the past. While commodity companies do well in an inflationary environment, we remain keen buyers of weakness, but not strength

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