June 27, 2017

Elliott Responds To BHP's Approach

17 May 2017, 02:20 | Chelsea Rogers

BHP (BHP +1.2%) CEO Andrew Mackenzie says the company is considering further sales of its USA shale gas assets, as BHP copes with renewed attacks from activist hedge fund Elliott Management over the future of its energy business.

Elliott on Tuesday called for an independent review of the mining giant's petroleum business and seemingly backed down on the restructure, saying it was open to a unified company that would retain its full share market listing in Australia and London.

On Monday, BHP launched a rebranding that drops Billiton from its logo and removes the three stylized blobs that have featured for years, in an advertising campaign that highlights its Australian heritage.

"We recognise that there are a number of obvious possible solutions to unlock the latent value of BHP's petroleum business, including a sale or demerger of the United States petroleum business and a sale or ASX listing for the Australian and other remaining petroleum assets", said Elliott.

"As we progress this project we continue to optimize the development path as to how we might add a mine to those shafts so we can reduce risk and unlock value", Mackenzie said.

Speaking at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Spain, chief executive Andrew Mackenzie said BHP had made consistent progress in the past year on its plans to improve shareholder value.

BHP Billiton plc with EPIC/TICKER (LON:BLT) had its stock rating noted as "Reiterates" with the recommendation being set at "OUTPERFORM" today by analysts at Macquarie.

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Asked whether shale oil and gas would stay in the portfolio, Mackenzie in a webcast reply said he could not give a simple yes or no answer. "If there's a natural owner out there.we're more than happy to talk turkey with them", he said. BHP also has technology programmes in place to improve safety, lower costs and unlock resource with an unrisked value of up to US$12bn. It said there are a number of options that would unlock value-including selling or spinning off the USA business, and a sale or Sydney listing of the Australian and other oil and gas assets.

Analysts at Deutsche Bank and Citi have said BHP could unleash billions of dollars by selling part or all of its petroleum business, although Citi cautioned this would bring only a one-off benefit to shareholders and the company should focus on how to grow value for investors.

"Management's claims of illusory benefits of the DLC structure and phantom costs of unification are not the way to deal with a value-distorting and obsolete group structure", said Elliott.

Its share price has fallen since Elliott announced its overhaul proposals last month and the London stock is down almost 9 percent since the start of the year. About 7,920 shares traded.

ILLEGAL ACTIVITY NOTICE: "BHP Billiton plc (BLT) Receives Overweight Rating from Morgan Stanley" was published by BBNS and is the property of of BBNS.

Mackenzie said technology programs to improve safety, lower costs and unlock resource with an unrisked value of up to U.S. $12 billion were among the most capital efficient options in the portfolio.

Elliott wants to dissolve the company's costly dual-listed structure, with assets transferred to a new company to be incorporated and listed in Britain.

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