Dallas, Texas 07/16/2015 (Financialstrend) – BHP Billiton Limited (ADR) (NYSE:BHP) expects to write down the value of its onshore assets by about $2.8 billion before tax after its gas field development in Texas turned out to be more complex and costly. The latest write-down is another disappointment for the world’s largest miner in terms of market capitalization having grappled with increased impairment charges in the recent past as well as weakened pricing environment.
Change of Plans
A good chunk of the $2.8 billion tax charge relates to BHP Billiton Limited (ADR) (NYSE:BHP) operations at the gas-focused Hawk Ville field that came with the $12 billion acquisition of Petrohawk in 2011. It is only in February that the company incurred a $328 million impairment charge on the sale of oil and gas assets in Texas and Louisiana.
The write down comes on the heels of BHP Billiton Limited (ADR) (NYSE:BHP) initiating new plans for its petroleum business that is its second biggest division in terms of revenue returns. The new changes involve slashing the number of rigs in operation by 35% as well as revising the drilling program with more focus being paid on its liquid rich Black Hawk acreage in Texas.
Impairment Charges Concerns
A plunge in oil and gas prices compounded by oversupply in the market has more than worsened the company’s prospects in the industry. The plunge came on BHP Billiton Limited (ADR) (NYSE:BHP) spending billions of dollars in building its energy business in the US and Australia. It is unlikely that the company will be able to recoup expected returns from its past investments.
The latest $2 billion write down means BHP Billiton Limited (ADR) (NYSE:BHP) oil and gas business has incurred more than $4 billion in write-downs since 2011. The company has also come under immense pressure in its iron-ore and coal business that continues to struggle amidst a weakened pricing environment following a sharp decline in prices. In May, the company was forced to spin off some of the unwanted assets mostly made of nickel and manganese business.