NEW YORK: The largest foreign investor in U.S. shale is writing down $2.8 billion in its Texas shale assets in what analysts see as a growing trend for the rest of the year.
Australia-based BHP Billiton said the pretax impairment stems from the gas-focused Hawkville field, which is in McMullen and La Salle counties south of San Antonio, within the Eagle Ford Shale.
BHP said it can be profitable in the U.S. with $60 oil in 2016. Benchmark domestic oil closed at $51.41 Wednesday.
A series of big write-downs are expected from companies in the second half of this year, said Ed Hirs, a University of Houston energy economist and an oil and gas executive.
Everybody is taking the opportunity to fix their balance sheets because they overpaid for these things,” Hirs said, adding that in this case BP paid too much for the assets in question.
Andrew Coleman, Raymond James managing director of exploration and production energy research, emphasized that analysts are more focused on cash flow and underlying cost improvements because large companies with many assets can survive big impairments.
“The lower oil goes, the lower gas goes, the greater the opportunity to pull off the Band-Aid and write down the asset,” Coleman said. “Industry is learning to live in a sub-$60 (oil) world. The question is will they have to live in sub-$50.”
