BHP cuts Fayetteville Shale value by $2.84 billion

BHP Billiton Ltd., the world’s biggest mining company, will book one-time charges totaling $3.3 billion on the value of its U.S. shale gas assets and nickel operations in Australia because of falling prices.

The value of its Fayetteville shale gas assets in Arkansas will be cut by $2.84 billion and its nickel assets in Western Australia by $450 million, the Melbourne-based company said today (Aug. 2) in a statement. CEO Marius Kloppers and Petroleum CEO Mike Yaeger won’t get paid a bonus for fiscal 2012 at their request, Chairman Jac Nasser said.

BHP, which last year spent $20 billion buying shale assets in the U.S., joins BG Group Plc and Encana Corp. in booking charges as natural gas prices fell to a 10-year low. BHP’s writedown is less than expected, with Citigroup Inc. analysts forecasting a $3 billion to $5 billion cut.

“The Fayetteville charge reflects the fall in United States domestic gas prices and the company’s decision to adjust its development plans by shifting drilling from dry gas to the more liquids rich fields,” Kloppers said. “While we have responded appropriately to the changed market conditions today’s impairment is clearly disappointing.”

BHP fell 1.8% at 10:27 a.m. to A$31.43 in Sydney trading, while the key S&P/ASX 200 Index declined 1.3%. BHP is due to report earnings on Aug. 22.

The company bought Chesapeake Energy Corp.’s Fayetteville assets for $4.75 billion in March and spent $14.9 billion buying Petrohawk Energy Corp.

“This is largely what the market was expecting,” said Phillip Chippindale, a Sydney-based analyst at the Royal Bank of Scotland Group Plc. “Hopefully, what they can do now is continue to focus on the liquids component of these assets in order to maximize the returns on this investment.”

Chippindale said he expected BHP to take a writedown of about $3 billion.