BHP Is Said to Get Shale Bids Valuing Unit Up to $9 Billion

(Bloomberg) -- BHP Billiton Ltd. has received first-round bids for its U.S. shale portfolio from oil majors including BP Plc and Chevron Corp., valuing the unit at $7 billion to $9 billion, people familiar with the matter said.

Royal Dutch Shell Plc, partnering with private equity firm Blackstone Group LP, also submitted a bid for the entire unit late in May, said the people, asking not to be identified because the information is private. Chevron has teamed up with another private equity firm, while BP is pursuing them alone, the people said.

Multiple parties, including private equity firms such as Apollo Global Management LLC as well as energy companies, have bid separately for individual packages of shale real estate being sold by the Melbourne, Australia-based commodities giant, the people said.

BHP expects to receive about $10 billion or more as bidding for the entire unit proceeds to a second round and as much as $13 billion if it sells the assets piecemeal, the people said. The company prefers to sell the unit to a single party and expects to invite second-round bids as early as July, the people said.

Representatives for BHP, BP, Chevron, Shell, Blackstone and Apollo declined to comment.

BHP advanced 1.8 percent by 12:52 p.m. in Sydney trading on Wednesday, outpacing a 0.3 percent gain for an index of Australia’s top 100 listed companies.

A sale of the shale assets for $10 billion or more appears a realistic prospect with oil majors in competition for the unit, Peter O’Connor, a Sydney-based analyst at Shaw and Partners Ltd., said by phone. “It’s serious people that are contesting, people with the balance sheets and industry experience,” he said. “They won’t pay too much -- but they won’t pay too little, because they want the assets.”

BHP disclosed plans to sell its onshore U.S. division last summer after activist investor Elliott Management Corp. said its foray into shale, along with other decisions, had wiped out $40 billion in shareholder value. The company, which spent $20 billion on two U.S. oil and gas acquisitions in 2011, is selling 800,000 net acres in the Eagle Ford, Permian, Haynseville and Fayetteville Basins it’s said to value at $10 billion or more. It’s preparing to sell those assets in as many as seven packages, including three in the highly-prized Permian of West Texas and New Mexico, people familiar with the matter said in April.

Potential Interest

Shell is potentially interested in BHP’s Permian basin assets, Andy Brown, its upstream director, said in an interview in February. Drilling in the Permian, the main source of the current surge in U.S. output, can cost explorers as little as $15 a barrel.

Reuters, citing people familiar with the matter, reported earlier that Shell had bid with Blackstone and Chevron with the private equity firm Warburg Pincus.

BP is working with Morgan Stanley as it weighs an acquisition of BHP’s energy assets to expand in U.S. shale, people familiar with the matter said in April. London-based BP held Permian properties until 2010, when it sold assets to raise cash for expenses tied to its Gulf of Mexico oil spill. It has since considered various options for the area, “but it’s been really hard” in the past three to four years to find deals that add to earnings, Chief Financial Officer Brian Gilvary said in April.

BHP’s U.S. asset sale is “progressing to plan” with bids expected by June, Chief Executive Officer Andrew Mackenzie said in April. Transactions could be announced by the end of the year, though BHP continues to assess options to swap assets or to carry out an IPO or de-merger, the company has said.

--With assistance from Matthew Monks, Thomas Biesheuvel, Kelly Gilblom, Melissa Mittelman, Kevin Crowley and David Stringer.

To contact the reporters on this story: Kiel Porter in New York at kporter17@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, ;Elizabeth Fournier at efournier5@bloomberg.net, Matthew Monks, Michael Hytha

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