Wednesday 22 January 2014

Bhp Billiton six months operational review





A diversified natural resources company and among the world’s largest producers of major commodities, including aluminium, coal, copper, iron ore, manganese, nickel, silver and uranium, and has substantial interests in oil and gas.  I have a holding in my income portfolio (epic code: BLT).



Bhp Billiton released their six months operations review today and it reinforced the strong start they had to the year in quarter 1 see here.


They have continued with a strong operating performance, with the December 2013 half year delivering a 10% increase in production and CEO Andrew Mackenzie stating that volumes are expected to grow by 16% over the two years to the end of the 2015 financial year.


By major resources:


Iron ore production has been raised by 19% in the December 2013 half year to a record 98m tonnes. Total iron ore production guidance for the 2014 financial year remains unchanged at 192m tonnes (+13% on 2013)


Total petroleum production for the half year was 120.4m barrels of oil equivalent (boe) a decline of 1% (natural gas declining by 7%, but crude oil up by 9%). Guidance for the financial year remains unchanged at approximately 250m boe (+6% on 2013)


Total copper production increased by 6% in the December 2013 half year to 843k tonnes. Copper production guidance for the financial year remains unchanged at 1.7m tonnes (+41% on 2013), although the Group's equity interest is 1.2m tonnes.


Metallurgical coal production was up by 22% in the December 2013 half year to a record 22m tonnes.  Metallurgical coal production guidance remains at 41m tonnes (+9% on 2013)


Energy coal production was 1% below last year at 37m tonnes. Energy coal production guidance for the financial year remains unchanged at 73m tonnes (no change on 2013)


Another good operational review from BLT it is worth repeating here the comments from Mackenzie, the bold highlighting is mine: 


"...During the period, six of our major projects delivered first production and our 10 remaining projects, which are largely low risk, brownfield expansions, are tracking to plan. By maintaining strict financial discipline and increasing internal competition for capital we intend to further differentiate ourselves by achieving a superior rate of return on incremental investment. We also remain committed to actively managing our portfolio for value. This strategy leaves us well positioned to deliver a substantial increase in free cash flow and higher returns to shareholders...". 


This reinforces the expectation of superior income returns for investors over the coming years. 

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