Bhp Billiton (NYSE:BHP)
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BHP Billiton Ltd. (BHP) Monday highlighted the quick payback shale production offers, although the head of the company's petroleum arm said the number of rigs operating on its recently acquired acreage in the U.S. will be reduced until gas prices rebound.
BHP will hold its leases and opportunities on U.S. shale, even as it shifts its focus away from gas toward drilling for liquids, according to a slide presentation that accompanied a speech given in Adelaide by J. Michael Yeager, the chief executive of petroleum operations.
The company is targeting the recovery of about 1.5 billion barrels of liquids, about 500 million barrels more than it reported last November, Mr. Yeager told an industry conference. Early estimates for BHP's Eagle Ford and Permian acreages indicates several billion barrels of liquids are in place, he said.
BHP has more than 1.6 million acres across Texas, Louisiana and Arkansas after it last year bought Petrohawk Energy Corp. for more than US$12 billion in cash and paid US$4.75 billion for Chesapeake Energy Corp.'s (CHK) Fayetteville shale acreage. However, some analysts have forecast the company will be forced to write down the book value of the assets due to the sharp fall in U.S. gas prices since the acquisitions.
Mr. Yeager said in his presentation that shale production offers a payback in months, rather than the years in offshore production.
"Eagle Ford liquids-rich wells are among the highest return and fastest payback of any BHP Billiton investment," Mr. Yeager said.
The company's Eagle Ford assets are expected to reach 300 million barrels of oil equivalent a day, half of which as liquids, with the potential for "higher recovery factors over time through reduced well spacing or improved technology." The goal with the Permian acreage, where net production is about 80% liquids, is to build a second 100 million boe business, he said.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; firstname.lastname@example.org