BHP CEO Says in Regular Talks on Future of U.S. Shale Assets

(Bloomberg) -- BHP Billiton Ltd. is holding discussions with competitors on the future of parts of its U.S. shale business amid heightened scrutiny of the unit from shareholders, including activist investor Elliott Management Corp.

The company recognizes it needs alternative strategies for some of the assets, particularly gas-focused operations, Chief Executive Officer Andrew Mackenzie told reporters Monday in Tokyo. The were multiple potential owners of the assets spread across the states of Texas, Arkansas and Louisiana, he said.

“We are in regular dialogue with those natural owners as to whether or not we can form more collaboration to allow us to share facilities, to drill longer wells and therefore have higher-productivity wells,” Mackenzie said. “However, they may have a value of what we hold that’s significantly in excess of our estimates based on what we know we can do.”

Melbourne-based BHP would be prepared to discuss potential sales of U.S. shale assets, which were acquired in about $20 billion of deals in 2011 and were too costly and poorly timed, Mackenzie said last month. The producer has previously flagged its intention to sell parts of a Texas gas field and a potential exit from its Fayetteville shale gas assets in Arkansas.

Assets in the Delaware Basin would appear to be a “strong strategic fit” for Anadarko Petroleum Corp., JPMorgan Chase & Co. analysts wrote in a note last month. Tom Ward, co-founder of Chesapeake Energy Corp., said in an April interview he may be interested in reviewing the Fayetteville operations with new company Mach Resources.

“We are reducing our footprint and long-term aspirations for our shale business and moving back to creating more options for growth in our conventional business,” Mackenzie told reporters.

BHP’s entry into shale is among decisions that’ve drawn criticism from billionaire Paul Singer’s Elliott Management, which has also attacked BHP over failed exploration and poorly timed share buybacks, which the fund contends have destroyed $40 billion in value. Elliott has proposed a spin-off of all U.S. oil and gas assets and last month called for an independent review of BHP’s $22.5 billion petroleum division.

“We are continually reviewing the fit, the shape and the strategy of our petroleum business at board level and in regular discussion with our major shareholders,” Mackenzie said in Tokyo. BHP, the world’s biggest miner, examines all parts of its portfolio, and goes “way beyond what has been brought to our attention by Elliott,” he said.

Mackenzie, who met with Elliott representatives in Barcelona last month, declined to say whether he plans to hold further talks in future with the fund.

To contact the reporters on this story: Stephen Stapczynski in Tokyo at sstapczynsk1@bloomberg.net, David Stringer in Melbourne at dstringer3@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Keith Gosman, Jake Lloyd-Smith