BHP Billiton CEO Says Company Tapping Backlog of Drilled Oil Wells in Texas
June 21 2016 - 3:55PM
Dow Jones News
By Nicole Friedman
NEW YORK -- Energy and mining giant BHP Billiton Ltd. has
started tapping into its backlog of drilled oil wells in Texas and
could profitably drill new wells if oil prices hold above $50 a
barrel, Chief Executive Andrew Mackenzie said.
The move to bring new production online is the latest sign that
the recent rally in oil prices from less than $30 a barrel to above
$50 could encourage U.S. producers to keep output high, which could
keep a global oversupply of crude from easing.
BHP is bringing online "some" of its drilled but uncompleted
wells in the Black Hawk field in South Texas, Mr. Mackenzie said in
an interview on Tuesday.
The company also has about 1,400 wells that would be profitable
with prices below $60 a barrel, the company said in a presentation
in May.
But "we're pretty gun-shy about what we want to invest," Mr.
Mackenzie said, noting that the company is more focused on
improving its balance sheet and paying its dividend. BHP slashed
its dividend in February.
Booming U.S. shale-oil production was a key driver behind the
monthslong drop in oil prices that started in mid-2014. U.S. oil
prices were down 1.1% on Tuesday at $48.81 a barrel on the New York
Mercantile Exchange.
Oil producers, including BHP, slashed spending on new drilling
in response to falling oil prices. But U.S. oil output has declined
more slowly than most investors expected, as producers were able to
cut costs and increase efficiency.
Many producers in the past two years opted to leave thousands of
wells untapped and wait until prices improved to bring them online.
As prices have climbed in recent months, some companies have talked
about plans to bring those wells online. In addition, the number of
rigs drilling for oil in the U.S. has increased for three straight
weeks, according to Baker Hughes Inc.
BHP has struggled in the U.S. oil patch and has announced
several write-downs against its U.S. onshore energy business. When
BHP acquired U.S. shale assets in 2011, "we were probably moving
faster than we had the sufficient geological knowledge to focus on
the sweet spots," Mr. Mackenzie said.
Mr. Mackenzie also tamped down talk of acquisitions, saying that
BHP is more likely to succeed developing its own assets than buying
others.
"You could see it's possible we've got to a point where
(commodity) prices have recovered and we've done no deals. And I
won't feel I'm at any loss for having done that," he said. He would
feel chagrin, he added, if a competitor ending up getting a good
deal.
Timothy Puko contributed to this article.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
June 21, 2016 15:40 ET (19:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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