US Shale Oil Write-Downs Sees BHP Profits Come Down By 37%

The lingering impact of its Brazilian dam collapse Donald Trump’s corporate tax cuts and a huge write-down against the US onshore oil and gas assets of the company impacted the profits for BHP which fell by 37 per cent, announced the company on Tuesday.

An “exceptional loss” of $US5.2 billion ($7.1 billion), after tax, ate into its profits which came at net $US3.7 billion ($5 billion) against a profit of profit of $US5.9 billion last fiscal year which that also accounted for an $US842 million “exceptional loss”, BHP said.

The company said that it had earlier flagged about the write-down in the value of its onshore US shale oil and gas assets. The company has now sold those loss-making US on shore assets to BP in a deal worth $US10.8 billion. other factors that impacted the profits of the company included company tax changes in the US and the costs and compensation that the company is still having ot incur for the collapse of the Samarco dam in Brazil.

An underlying profit of $US8.9 billion, a 33 per cent increase compared to $US6.7 billion the year before, was reported by the company once those write-downs and one-off costs are excluded.

The company managed to score higher in its underlying earnings primarily because of increased prices of many of its key commodities and record levels of production at nine of the mines for iron ore, coal, copper and petroleum.

The company has also managed to maintained a strict discipline with respect to its exploration and capital expenditure and it had reported a total expenditure on those heads at $US6.8 billion last fiscal year and the company expects that the next two fiscal that figure would remain below that $US8 billion mark.

BHP has said that after receiving the payments from the sell-off of its US onshore oil and gas it plans to return the money to the shareholders after it receives it while announcing a final dividend of 63 US cents per share.

The net debt of the company has also been reduced by $US15 billion over the past two years and it now stands at $US10.9 billion.

“We have announced a record final dividend for shareholders which reflects strong operating performance, solid prices and capital discipline,” BHP chief executive Andrew Mackenzie noted in the profit report.

“Our relentless focus on safety and productivity has released additional volumes across our supply chain, with 8 per cent volume growth for the year.

“Our balance sheet is strong, with net debt at the lower end of our target range, and our investment plans on track across iron ore, copper, coal and petroleum.”

However, concerns of a its growth and profits being impacted negatively by increasing protectionism were also expressed by Mackenzie.

“We’re very clear that that protectionism will ultimately, if it eventuates in its most severe forms, have a very depressing effect on the world’s economy, and the growth of the world economy is what drives, ultimately, the ability of BHP to grow in a way so that we can actually pay record dividends to our shareholders,” he said.

“I do think that that that China will move to stimulate domestic demand and find new outputs for exports that will be significantly mitigate the first effect.”

(Adapted form ABC.net.au)

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