Melbourne-based producer BHP Billiton Ltd's Petroleum President Tim Cutt has left the company amid the implementation of a ‘simplified operating model’, which is designed to “accelerate productivity and value creation”.

As a result of the new operating model the role of petroleum president will change to become “more closely focused on operations”, according to a company statement, and will no longer include “direct oversight of functional and business administration”. BHP revealed that Steve Pastor will become the new president of petroleum operations at the company, with responsibility for the firm’s petroleum interests in the Gulf of Mexico, onshore United States, Australia and Trinidad and Tobago. The new president will also oversee the company's ongoing petroleum exploration program. Jimmy Wilson, BHP’s Iron Ore President, also left the company following the structural changes.

Commenting on the departure of Cutt and Wilson, BHP Billiton CEO Andrew Mackenzie said in a company statement:

"I sincerely thank Jimmy and Tim for their exceptional leadership and service to BHP Billiton over many years.

"As President Petroleum, Tim Cutt has led the US onshore industry in achieving productivity gains that were unheard of just a few years ago. His leadership has seen BHP Billiton's Petroleum Business gain global recognition for its operational excellence.

"On behalf of all at BHP Billiton, I wish Jimmy and Tim every success and thank them for all they have done for the company.

“I congratulate Steve Pastor on his appointment as President Operations, Petroleum and welcome him to the company’s executive leadership team.”

In a separate statement, BHP posted a half year loss of $5.6 billion, which marked a sharp drop from a registered half year profit of $4.2 billion in 2014. The company’s loss at the EBIT level reached $7 billion dollars last year (2014: $7.9 billion profit) and capital and exploration expenditure decreased by 40 percent to $3.6 billion, although this this figure is expected to increase to $7 billion in 2016. BHP also announced that it will reduce its dividend payment to shareholders to 16 cents per share as it prepares for a prolonged period of weaker prices and higher volatility.

Total petroleum production for BHP for the half year to December 31, 2015, reduced by five percent to 124.7 million barrels of oil equivalent. Liquids production decreased by three per cent to 60.5 MMboe as higher onshore US liquids volumes were offset by lower conventional liquids production due to industrial action at Bass Strait and natural field decline across the company’s portfolio. Natural gas production declined by seven percent to 386 billion cubic feet. Total petroleum production guidance for the 2016 financial year remains unchanged at 237 MMboe.

BHP Billiton Chairman, Jac Nasser, commented in a company statement:

“Our purpose is to deliver consistent and sustainable shareholder value. Since the merger of BHP and Billiton in 2001, we have returned a total of $77 billion in cash to shareholders, more than any other company in this sector.

“At the same time, BHP Billiton understands the fundamental importance of maintaining a strong balance sheet. The changes to the dividend policy announced today reflect the board’s assessment of the outlook for commodities and the increased financial flexibility this demands. While the continued development of emerging economies will underpin longer-term demand growth for commodities, we now believe the period of weaker prices and higher volatility will be prolonged. The adoption of a dividend payout ratio will further support BHP Billiton’s financial strength, while providing flexibility at the bottom of the cycle and ensuring discipline at the top.

“We have not made these changes lightly. They are a determined response to changing markets that will also help us take advantage of the significant opportunities ahead. We remain strongly committed to returning cash to our shareholders and in every reporting period, the board will assess the possibility of returning additional cash over that implied by the 50 percent payout ratio, as we have done this period.”

BHP Billiton Chief Executive Officer, Andrew Mackenzie, commented in a company statement:

“Slower growth in China and the disruption of OPEC have resulted in lower prices than expected. However, our company remains resilient with assets that generate free cash flow through the cycle and a strong balance sheet.

“Our new dividend policy and transparent capital allocation framework are part of a broader strategy to help BHP Billiton manage volatility. We have already responded decisively to the changed conditions. The divestment of $7 billion of assets and the demerger of South32 leaves us with a focused portfolio of large, low-cost, long-life assets in a set of favoured commodities. We are operating our assets more productively with $10 billion of gains achieved since 2012. We expect to realise a further $2.1 billion of gains in the 2016 financial year, when adjusted for the impact of lower grades at Escondida. We will also reduce capital expenditure in the 2016 and 2017 financial years by a total of $3.5 billion, while retaining a suite of high-return, value-enhancing projects.

“With improved financial flexibility and a portfolio of high-return growth options, we are well positioned to grow shareholder value and cash returns over the long term.”

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