BHP Faces Music on Shale Spurring Speculation Dividend Is Next

(Bloomberg) -- BHP Billiton Ltd. said it expects to take a write down of $4.9 billion on the value of its U.S. shale assets due to the tumble in oil prices. Its next safeguard against the commodities collapse may be to abandon its decade-old pledge to maintain or raise its dividend.

The Melbourne-based producer, the biggest overseas investor in U.S. shale, is cutting capital expenditure and seeking other savings as it grapples with the slide in prices of metals and energy, and the costs of November’s deadly dam breach at its iron ore venture in Brazil. Iron ore, the company’s top earner, has slumped more than three-quarters since its 2011 peak, while oil this month plunged below $30 a barrel for the first time in 12 years.

BHP’s post-tax charge against its U.S. onshore assets, acquired for $20 billion in 2011, is part of a rolling response to the slump in raw materials, which this week has seen rival miner Rio Tinto Group freeze wages for 2016 and Japanese trading house Sumitomo Corp. take a charge of around $650 million against its nickel project in Madagascar.

“In what’s probably a protracted period of lower commodity prices, there’s this writedown and probably other writedowns to come elsewhere in the portfolio,” Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., said by phone. “They are getting close to having to come clean on the progressive dividend.” Schroeders helps oversee about $1 billion in equities, including BHP shares.

BHP will cut its dividend payment by half to 31 U.S. cents in the six months to Dec. 31, according to Bloomberg Dividend Forecasts.

“At the moment, the biggest concern they have is can they fund their dividend, can they fund their capex plans?” Citigroup Inc. analyst Clarke Wilkins said by phone from Sydney. BHP is likely to trim both its dividend and project spending when it announces half-year results next month, he said.

BHP will balance its commitment to a strong balance sheet and maintaining its credit rating as it considers the dividend payout, Chairman Jac Nasser told investors at an annual meeting in Perth in November. The company declined to comment Friday on the prospect of any change to its dividend.