Barclays: BHP Billiton upbeat on Eagle Ford shale

BHP Billiton reported strong rates of return in the Eagle Ford shale in South Texas where the Australian firm is aggressively pursuing development, Chief Executive Officer J. Michael Yeager told the Barclays Capital CEO Energy & Power Conference in New York on Sept. 4.

Many individual Eagle Ford wells are exceeding 100% rate of return, and the average single well payback is under 1 year, Yeager said. He sees potential for higher recovery factors over time through reduced well spacing and improved technologies.

BHP has holdings in the Eagle Ford, Fayetteville, and Haynesville shale plays and the Permian basin. The company envisions continued long-term growth in shale liquids.

For fiscal 2012, BHP’s petroleum division plans a $6.5 billion capital program with shale liquids representing the largest share. Yeager expects 40 rigs operating onshore US during 2013 with over 85% directed toward the Eagle Ford and Permian.

Yeager said BHP will ramp up its shale dry gas operations when US natural gas prices recover.

“Shale dry gas resources remain strong and are valuable to the long term,” Yeager said. He believes BHP can grow its overall production 10%/year for the next 10 years.

Earlier this year, BHP announced a $2.84 billion writedown of its US shale assets, saying a short-term over supply of gas resulted in a before-tax impairment charge against the value of the Fayetteville shale assets acquired from Chesapeake Energy Corp. in February 2011 (OGJ Online, Aug. 3, 2012).

No writedown was needed on shale assets obtained through BHP’s acquisition of Petrohawk Energy Corp., Houston, for $12.1 billion (OGJ Online, July 25, 2011).

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