BHP Sheds Oil Field Deutsche Bank Values at $450 Million

A decision by BHP Billiton Ltd. (BHP), the worlds biggest mining company, to give up its stake in a U.S. oil field in the Gulf of Mexico has puzzled analysts at Deutsche Bank AG who valued it at $450 million.

Stampede was a good enough project for BHP and we were surprised to learn that BHP walked away from its 20 percent stake, analysts led by Anna Mulholland and Paul Young wrote yesterday in a report. The analysts said they only realized the asset had been shed after BHPs former partners -- Chevron Corp. (CVX), Statoil ASA (STL), Nexen Inc. and the operator Hess Corp. (HES) -- last week announced a $6 billion plan to develop it.

BHPs withdrawal in April was disclosed on page 76 of the Melbourne-based companys annual report on Sept. 25. We decided not to proceed with the Stampede development project as we are focused on the higher-return opportunities within our portfolio, BHP said in an e-mailed response to questions.

The worlds three-biggest mining companies BHP, Rio Tinto Group and Glencore Plc are cutting spending on new projects as commodities prices tumble and as pressure mounts from some shareholders to return cash.

The withdrawal from Stampede, combined with BHPs announcement last month that its seeking to sell its Fayetteville shale-gas assets in Arkansas, appears to be based on the drive to reduce group capex, with value now being sacrificed to maximize free cash flow, Deutsche Bank said.

Chevron, Statoil, Nexen and Hess each own 25 percent of the field after BHPs holding was split among them. Stampede is projected to produce 80,000 barrels of oil a day from 2018 with recoverable resources of more than 300 million barrels of oil equivalent.

BHP had held the stake since the discovery in 2005, which at the time was the deepest well drilled in the Gulf of Mexico at more than 34,000 feet (10,363 meters).

Chevron, the second-largest U.S. oil and gas producer, last week described Stampede as a long-term development opportunity that will deliver value to shareholders.

We also had the same opinion of the project, Deutsche Bank said.

BHP spent $20 billion in 2011 on shale assets in the U.S., getting its foothold in U.S. plays in Arkansas, Louisiana and Texas. It operates two fields in the Gulf of Mexico, Shenzi and Neptune, and has interests in three others. Production from those fields was the equivalent of 36.1 million barrels of oil in fiscal 2014.

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BHP Sheds Oil Field Deutsche Bank Values at $450 Million