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BHP Billiton to take a $2.8 billion write-down on US assets

BHP Billiton to take a $2.8 billion write-down on US assets

Fayetteville Shale, Arkansas, U.S. (Image courtesy of BHP)

BHP Billiton (ASX, NYSE:BHP) (LON:BLT), the world’s No. 1 miner by market value, said Wednesday it expects to record a pre-tax impairment charge of approximately $2.8 billion this year against the carrying value of its onshore U.S. assets.

The fresh disappointment from the company’s $20 billion foray into the U.S. shale gas industry comes as the development of a major gas field in Texas — Hawkville — proved to be more complex and costly than anticipated.

The rest of the write-down, said BHP, will be taken on goodwill over the $12.1 billion Petrohawk Energy acquisition, made in 2011.

Only five months ago, the Melbourne, Australia-based company logged a $328 million impairment charge associated with the sale of oil-and-gas assets in North Louisiana and Texas.

BHP also raised doubts about its commitment to swing the U.S. onshore oil and gas division into cash flow positive territory this financial year, saying it required an average crude oil price of $60 and national benchmark gas price of $3 — both well above current prices.

Today’s announcement means that, by the end of its current financial year, BHP will have written down its oil and gas business by more than $4 billion since 2011.

“While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore U.S. business,” BHP Petroleum President Tim Cutt said in a statement.

The company, the biggest overseas investor in U.S. oil and shale gas, had warned in January it planned to cut the number of rigs by about 40% to reduce costs.

In October last year it even said it would sell its Fayetteville venture, but has since officially taken it off the market.

Prices for U.S. natural gas have fallen over 30% since the start of 2014, after four years of record supply owed to a fracking boom that opened up shale reserves from Texas to North Dakota.