(AFP) – The world’s biggest miner BHP Billiton is cutting back its operating US shale oil rigs by 40% amid slumping prices.
BHP said on Wednesday it would reduce the number of rigs from 26 to 16 by the end of the June in response to weaker oil prices. However, shale volumes were still forecast to grow by approximately 50 percent during the period.
“In petroleum, we have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40% by the end of this financial year,” chief executive Andrew Mackenzie said.
“The revised drilling programme will benefit from significant improvements in drilling and completions efficiency.”
Mackenzie said while the firm’s drilling operations would focus on its Black Hawk field in Texas, “we will keep this activity under review and make further changes if we believe deferring development will create more value than near-term production”.
Shares in BHP, which is listed in Australia and the UK, were trading higher, up 1.49% to A$27.89 in afternoon trade.
Oil prices slid again Tuesday after the International Monetary Fund slashed its forecast for world economic growth and revived concerns about the strength of crude demand.
US benchmark West Texas Intermediate for February sank US$2.30, or 4.7%, to US$46.39 a barrel, not far from its lowest level since March 2009.
“The announcement that BHP will reduce the number of US onshore oil rigs it operates by the end of this financial year is a pointer to the industry-wide supply response on lower oil prices that is yet to come,” CMC Markets’ chief market analyst Ric Spooner said in a note.
BHP added that its iron ore output had risen by 16% for the three months to December compared to a year earlier, hitting 56.4m tonnes.
Prices in iron ore, one of BHP’s core commodities, slumped 47% in 2014 amid a global supply glut and softening demand from China.
The Anglo-Australian miner also booked a charge of up to US$250m for the sale of petroleum and gas assets in the United States, and up to US$350m in after-tax charges for the Nickel West mine in western Australia.
BHP said in November it had called a halt to the planned sale of Nickel West as no bidder had offered the right price.
Mackenzie said BHP’s operational performance over the past six months was strong and the firm was cutting costs and lifting productivity faster than it had planned.
He added that the company remained committed to its planned demerger, due to be completed by the end of the financial year, which will see a new independent company called South32 created by spinning-off non-core assets including aluminium, manganese, silver and selected coal and nickel operations.