BHP Billiton (NYSE:BHP), shale Gas has faster payback than offshore operations

BHP Billiton Ltd. on Monday highlighted the quick payback shale production offers, although the head of the company's petroleum unit said the number of rigs operating on its recently acquired acreage in the US will be reduced until Nat Gas prices rebound.

BHP will hold its leases and opportunities on US shale, even as it shifts its focus away from Nat Gas toward drilling for liquids, according to a slide presentation that accompanied a speech given in Adelaide by J. Michael Yeager, the Chief of Petroleum Operations.

The company is targeting the recovery of about 1.5-B bbls of liquids, about 500-M bbls more than it reported last November, Mr. Yeager told an industry conference.

Early estimates for BHP's Eagle Ford and Permian acreage indicates several billion barrels of liquids are in place, he said.

BHP has more than 1.6-M acres across Texas, Louisiana and Arkansas after it last year bought Petrohawk Energy Corp. for more than US$12-B in cash and paid US$4.75-B for Chesapeake Energy Corp.'s (NYSE:CHK) Fayetteville shale acreage. But, some analysts have forecast the company will be forced to write down the book value of the assets due to the sharp fall in US Nat Gas prices since the acquisitions.

Mr. Yeager said in his presentation that shale production offers a payback in months, rather than the years in offshore production.

Eagle Ford liquids-rich wells are among the highest return and fastest payback of any BHP Billiton investment, Mr. Yeager said.

The company's Eagle Ford assets are expected to reach 300-M bbls of Oil equivalent a day, 50% of which as liquids, with the potential for higher recovery factors over time through reduced well spacing or improved technology.

The goal with the Permian acreage, where net production is about 80% liquids, is to build a 2nd 100-B bbls of Oil equivalent business, he said.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.