BHP Billiton has become the latest company to report it would write off the value of U.S. and Canadian-based assets due to weak North American natural gas prices.
The Australia-based company reported Friday that low U.S. gas prices due to an abundance of shale gas would result in a $2.84 billion impairment before tax against the carrying value of its Fayetteville shale gas assets.
BHP Billiton acquired the assets from Chesapeake Energy in February 2011.
"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 more liquids rich fields," said BHP Billiton CEO Marius Kloppers in a statement.
"While we have responded appropriately to the changed market conditions, today's impairment is clearly disappointing."
BHP Billiton has concluded that the value of its U.S. onshore shale liquids and gas assets, which it acquired through its purchase of Petrohawk Energy in August 2011, is not affected.
Despite the write-down of its Fayetteville assets, the company's board of directors is maintaining its view that the investment in U.S. shale assets is the right decision for BHP Billiton shareholders, said BHP Billiton Chairman Jac Nasser in a statement.
"The assets we acquired, in particular the substantial Petrohawk business, are of high quality and will generate good returns for shareholders," Nasser said.
The board also supports Kloppers and Petroleum CEO Mike Yeager's plans to shift from dry gas drilling in the Fayetteville and Haynesville fields to liquids-rich fields in the Permian and Eagle Ford.
Kloppers said the company's decision to enter the North American shale hydrocarbon business about 18 months ago was taken after "extensive deliberation and due diligence."
"We believe that our dry gas assets are well positioned for the future given their competitive position on the industry cost curve," Kloppers commented.
"In the short term, the accelerated development of our liquids rich shales will continue to complement investment in our traditional project pipeline given the high rates of return on offer and the rapid payback on incremental investment."
Due to the writedown, Kloppers and Yeager have both told the Remuneration Committee that they do not wish to be considered for a bonus for the 2012 financial year. The Remuneration Committee and the Board both agree with that decision, Nasser said.
Houston-based Apache Corp. on Thursday reported lower second quarter 2012 earnings due in part to weak North American gas prices.
UK-based BG Group on July 26 reported it would incur a $1.3 billion non-cash post-tax impairment charge for its U.S. shale gas operations due to weak U.S. natural gas prices.
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