BP. to buy BHP Billiton shale assets.

[idpickering]

•BP agrees to acquire nearly all of BHP Billiton's (NYSE:BHP) U.S. onshore shale assets for $10.5B.

•The sale includes BHP's entire interests in the Eagle Ford, Haynesville, Permian and Fayetteville onshore assets, which have underperformed for the company.

https://seekingalpha.com/news/3374737-b ... 5b-deal-bp

[idpickering]

Further to this;

BP to buy world-class oil and gas assets from BHP

· Upgrades and repositions BP's US onshore business

- Brings advantaged oil and gas assets in world-class basins

- Adds 190,000 boe/d production and 4.6 billion boe discovered resources

- Boosts liquids share of BP's US onshore production and resources

- Offers growth into the next decade



· Creates significant value

- Accretive to earnings and cash flow on a per share basis

- Increases Upstream free cash flow target by $1 billion to $14-15 billion in 2021

- Generates estimated pre-tax synergies of over $350 million a year



· Fully accommodated within existing financial frame

- Total cash consideration of $10.5 billion - 50% on completion, 50% deferred

over six months

- Up to $5-6 billion of additional divestments planned to fund share buybacks

of up to $5-6 billion over time

- Unchanged financial frame of $15-17 billion annual organic capital expenditure to 2021,

and gearing of 20-30%



· Strong free cashflow outlook supports dividend rise for second quarter 2018

- 2.5% rise to 10.25c per ordinary share is first dividend increase since third quarter 2014 (my bold)

https://www.investegate.co.uk/bp-plc--b ... 00039448V/

And;

Sale of Onshore US Assets

BHP today announced that it has entered into agreements for the sale of its entire interests in the Eagle Ford, Haynesville, Permian and Fayetteville Onshore US oil and gas assets for a combined base consideration of US$10.8 billion, payable in cash.

BP American Production Company, a wholly owned subsidiary of BP Plc, has agreed to acquire 100% of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which holds the Eagle Ford, Haynesville and Permian assets, for a consideration of US$10.5 billion (less customary completion adjustments). One-half of the consideration is payable at completion, with the balance (deferred consideration) being payable in six equal instalments over a six month period, the first instalment to be paid one month after completion. Payment of the deferred consideration is not subject to any conditions.

https://www.investegate.co.uk/bhp-billi ... 00039447V/

[daveh]

and announces increased dividend:

Growing distributions for shareholders

BP has today announced a second quarter 2018 dividend of 10.25 cents per ordinary share, an increase of 2.5%. This dividend is expected to be paid on 21 September 2018 to ordinary shareholders and American Depositary Share (ADS) holders on the register on 10 August 2018. Holders of ADSs are expected to receive $0.615 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs.

[mike]

And from BHP Billiton's point of view

https://www.investegate.co.uk/bhp-billiton-plc--blt-/rns/sale-of-onshore-us-assets/201807270700039447V/

"With net debt currently toward the lower end of our target range of US$10 to US$15 billion, and consistent with our Capital Allocation Framework, we expect to return the net proceeds from the transactions to shareholders. We will confirm how, and when, at the time of completion of the transactions." [my bold]

From the RNS, completion is expected by the end of October 2018.

[idpickering]

BP CFO Brian Gilvary sees huge upside in this video; Volumes up please.

https://finance.yahoo.com/video/bp-cfo- ... 58597.html

[onslow]

Another poor result for BHP - $40b spent on these assets over the last 7 years, original purchase price + capital investment. BP picking them up for a steal.

This coming on top of the 75% dividend cut in 2016, which everybody could foresee except BHP management apparently.

Investments made nearly 30+ years ago are throwing off cash - the Oil and Iron Ore mines - everything since has been poor.

Poor management. Cyclical industry. Cant see why it should be in a HYP portfolio.

[IanTHughes]

Cant see why it should be in a HYP portfolio.

High Yield? That is why I bought them in 2015 and they have delivered. They have also risen over 30% in value (inclusive of S32 spin off)


Ian

[onslow]

3.8% considered high yield ?

For a cyclical stock, which doesn't have any pricing power and is subject the vagaries of the commodity markets I'd want more yield than that.

[IanTHughes]

3.8% considered high yield ?

No. But then I bought at 5.5% historical yield.

Despite the slip in 2016, ,the dividend has picked up with the share price rise and I am showing a CAGR of over 11%, more if I include S32 which I still hold. Sure, I have better returns in my HYP but BHP Billiton (BLT) has not disappointed.

Of course, the current yield of 4.25% is not high enough for a top-up


Ian

[onslow]

CAGR is all good if capital mattered. Which it doesnt apparently in a HYP!

Regardless if you bought in 2015 then you would have immediately faced a 75% cut in dividend soon after. Not exactly the sort of investment we want in our HYP.

A mining company is incapable of having slow, steady dividend growth. Its the wrong industry. Despite the "progressive" dividend policy BHP thought it could implement a few years ago. They forgot about the cycle. Bit concerning.

[IanTHughes]

Regardless if you bought in 2015 then you would have immediately faced a 75% cut in dividend soon after.

Yes, I took a risk and the initial returns were not good. All I am saying is that, 3 and a bit years later, things have turned out OK

Not exactly the sort of investment we want in our HYP.

I do not claim to be infallible, that is why I diversify


Ian

[onslow]

"I do not claim to be infallible, that is why I diversify"

Of course, None of us are. My point is why diversify into a mining company which will have its dividend up and down like a yo yo ? Lots of other companies which would better fit the nature of HYP I would have thought?

Anyway, your cash. Your decision.

[IanTHughes]

Of course, None of us are. My point is why diversify into a mining company which will have its dividend up and down like a yo yo ?

High Yield. Have we been here before?

My holding in BHP Billiton (BLT) is currently 2.72% of the whole HYP. And the overall dividend from the HYP marches upwards, not a yo yo at all. That is what is important to me.


Ian

[Arborbridge]

We've been here before, and last time, I decided to cover this sector buy buying ITs rather than single shares. I still have BHP but have added natural resources to my ITs basket at a good yield.

Arb.

[monabri]

Anyone buy BLT at 650p? ( Per share, per share!). Not too shabby a yield at the moment. There is an element of timing to HYP or so it appears. The same was true of RDSB which held the dividend but could be bought for half its current price.

[pyad]

3.8% considered high yield ?

For a cyclical stock, which doesn't have any pricing power and is subject the vagaries of the commodity markets I'd want more yield than that.

And the forecast is that you'd get it. My source predicts a US 119¢ payout for both the years to 30 June 18 and 19 (the interim actual for 18 is already 55¢).At the current rate that is 90.8p so at 1,707p the forward yield is 5.3%. Only a forecast so not certain but that's how it looks at present which is well into HYP territory.

I'd agree that mining dividends can be subject to sudden big fluctuations but nevertheless I believe companies like BLT are well worth having in an HYP if bought on a high yield.

[vrdiver]

Anyone buy BLT at 650p? ( Per share, per share!). Not too shabby a yield at the moment. There is an element of timing to HYP or so it appears. The same was true of RDSB which held the dividend but could be bought for half its current price.

Not quite. Bought in Nov 2008 at £7.48, then trimmed in April 2010 at £22.34, before topping up again in 2013, 14 and 15. A XIRR of 17.7% excluding the South32 shares, which I topped up in May 2017, and are showing a XIRR of 26.3% (based on an assumed first purchase price of £1.16, as I think that's what I saw them being traded for in the market just after issue).

VRD

[Gengulphus]

My point is why diversify into a mining company which will have its dividend up and down like a yo yo ?

Before even asking myself that question, I'll ask myself whether I have good reason to believe that BHP Billiton's dividend will go up and down like a yo yo.

And my answer is "no". I know the theory that mining companies are cyclical and overly exposed to commodity cycles - but I also know the fact that BHP Billiton's cut in 2016 is the only one in the last 20 years (see its dividend record), and that it is being quickly recovered from. If that's like a yo yo, it's a very slow one!

When theory appears to conflict with fact, one or other must give way. In this case, the facts of BHP Billiton's dividend record are beyond doubt, so the theory at best needs to be looked at more carefully to see how it actually is compatible with the facts and at worst is just plain wrong! I can see possibilities why it might be compatible with the facts, notably (a) that the company is good at tightening its belt and riding out periods when the commodity 'cycle' is against it and (b) that it's actually dependent on a number of different commodity 'cycles' and only does really badly when several turn strongly against it at the same time, so I'm not saying that the theory is just plain wrong.

But whether the explanation is that a more sophisticated understanding of the theory is needed or that it's plain wrong, the factual evidence is that the 'dividend up and down like a yo yo' issue has not been a major problem for BHP Billiton over the last couple of decades - it's only 'recent event syndrome' about 2016 that suggests to me that it is one. It has for other mining companies that have been in my HYP - Rio Tinto somewhat closer to being major than BHP Billiton but still a very acceptable record overall, Anglo American quite a major one, Lonmin a really major one that makes me very glad I tinkered it out of my HYP back in 2005!

So I'm not denying that cyclicality can be a problem with mining companies in HYPs. But the evidence seems to me to say that they shouldn't all be tarred with the same brush.

Gengulphus