A BHP Billiton Ltd., logo sits on stage ahead of the company’s annual general meeting (AGM) in London. (Photographer: Simon Dawson/Bloomberg)

BHP to Return $10.4 Billion to Shareholders After Shale Sale

(Bloomberg) -- BHP Billiton Ltd. will return $10.4 billion to shareholders through a buyback and special dividend after completing the sale of its onshore U.S. shale assets. The stock rose the most in six weeks in Sydney trading.

The off-market buyback of the Sydney-listed shares will start this month and will return $5.2 billion to holders, while the balance will then be paid out as a special dividend, the company said Thursday in a statement. This latest capital management steps will bring the total cash returned to shareholders to $21 billion over the past two years, the company said.

The announcement will boost earnings BHP’s earnings per share by about 5 percent, UBS Group AG analysts led by Glyn Lawcock said in a note. The bank expects the company to notify shareholders of an on-market buyback of its London-traded stock at its half-year results in February.

BHP reaped a total of $10.8 billion in sales of the U.S. assets, including a $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 $20 billion on two U.S. 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.

“We made a commitment that all the net proceeds from the disposal of our onshore U.S. assets would be returned to shareholders and we are honoring that commitment now that the sale transactions have been completed,” Chief Executive Officer Andrew Mackenzie said.

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