Shale asset values continue to plummet as the once highly sought plays in the Lower 48 find their value shrinking amid bad and worse commodity prices.
BHP Billiton Ltd. (NYSE: BHP) said Jan. 15 it expects to write down US$7.2 billion in pre-tax value of its onshore U.S. assets, the latest impairment by companies gutted by low commodity prices. After tax adjustments, the write down is about US$4.9 billion.
Across all shale plays, companies have extensive re-evaluations of their assets. In 2015, impairments were more than $140 billion of book value for 61 companies in Bloomberg’s North American Independent E&P Index.
“We expect to see additional impairments with fourth-quarter 2015 results,” said David Tameron, managing director of E&P equity research at Wells Fargo.
In July, BHP wrote off US$2.8 billion in pre-tax value for its U.S. holdings as commodity prices continued to fall and drastically reduced drilling operations in the U.S. At the time, the impairment put BHP’s U.S. assets worth at US$24 billion.
Since the January write-off, BHP’s value of U.S. net operating assets has fallen to about US$16 billion including a deferred tax liability of about US$4 billion.
BHP, largely known for its massive mining operations, has slashed its capex for U.S. assets in the Eagle Ford, Permian, Haynesville and Fayetteville plays.
The company slashed its onshore U.S. drilling and development expenditures in 2015.
The charge will be recognized as an exceptional item in the financial results for the half-year ending in December. The company reviews bi-annually its asset values, which recognize price assumptions, discount rates and development plans which have more than offset substantial productivity improvements.
The company made its largest forays into shale in 2011, when it spent about $17 billion on acquisitions. However, the company is one of many cutting its shale losses to more accurately reflect market conditions due to market volatility and much weaker prices.
On Jan. 5, for instance, Pioneer Natural Resources Co. (NYSE: PXD) said it may recognize a noncash impairment charges related to reducing the carrying value of its proved oil and gas properties by $800 million to $1 billion—principally related to the carrying value of its Eagle Ford Shale assets. The company said it may also write off up to $70 million on pipe inventor because it is not expected to be used primarily as a result of eliminating vertical well drilling.
In September, EOG Resources Inc. (NYSE: EOG) said it would take an asset impairment of $6.3 billion, including $6.1 billion for U.S. assets related to legacy natural gas assets and marginal liquids plays.
Factset reported Jan. 13 that 102 energy companies hit 52-week lows, including EOG, Apache Corp. (NYSE: APA), Anadarko Petroleum Corp. (NYSE: APC), Baker Hughes Inc. (NYSE: BHI), ConocoPhillips (NYSE: COP), Devon Energy Corp. (NYSE: DVN) and Noble Energy Inc. (NYSE: NBL).
Darren Barbee can be reached at dbarbee@hartenergy.com.
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