Petroleum briefing

RNS Number : 8864S

BHP Group PLC

10 November 2019

 

Issued by:	BHP Group Plc
Date:	11 November 2019
To:	London Stock Exchange JSE Limited
For Release:	Immediately
Contact:	Helen Ratsey [phone]
Petroleum briefing

UK Listing Authority Submissions

The following document has today been submitted to the National Storage Mechanism and will shortly be available for inspection at:  www.morningstar.co.uk/uk/NSM

-     Petroleum briefing

The document will also shortly be available via BHP's website: bhp.com

The meeting will be webcast at: https://edge.media-server.com/mmc/p/362g83wf

Further information on BHP can be found at bhp.com.

BHP Group plc Registration number 3196209

LEI 549300C116EOWV835768

Registered in England and Wales

Registered Office: Nova South, 160 Victoria Street

London SW1E 5LB United Kingdom

                    

A member of the BHP Group which is headquartered in Australia

NEWS RELEASE

Release Time	IMMEDIATE
Date	11 November 2019
Release Number	21/19

Petroleum briefing

BHP President Operations Petroleum, Geraldine Slattery, today said Petroleum is set to deliver strong returns and contribute significant value for BHP through the 2020s and beyond, built on a foundation of quality assets, and attractive growth options.

Speaking to investors and analysts at a briefing in Sydney, Ms Slattery said Petroleum is a great business with competitive growth potential and is aligned with BHP's strategy of being in the best commodities, with the best assets, enabled by the best culture and capabilities. Petroleum has delivered strong financial performance over many years and this is set to continue.

"In a decarbonising world, deepwater oil and advantaged gas close to established infrastructure can offer competitive returns for decades to come." 

Ms Slattery outlined a scenario¹ that could potentially:

-     Generate robust EBITDA margins of more than 60 per cent and an average Return on Capital Employed of more than 15 per cent over the next decade;

-     Deliver average Internal Rates of Return of around 25 per cent for major projects, which are resilient through cycles; and

-     Support an average annual volume growth of up to 3 per cent between the 2020 and 2030 financial years.

"Our portfolio of quality assets and pipeline of competitive growth options are expected to generate strong free cash flow and returns through the 2020s and beyond", Ms Slattery said.

Petroleum's growth options currently include Scarborough, Wildling Phase I, Trion and Trinidad & Tobago North. While these remain subject to our strict Capital Allocation Framework, they are well placed to compete with other options in the Group's portfolio.

"Our capabilities in safety, exploration and deepwater operations, coupled with a high-performance culture give us confidence that we can deliver on our plans into the future," Ms Slattery said.

Presentations will be webcast live at https://edge.media-server.com/mmc/p/362g83wf and all materials be available on our website at bhp.com.

A summary of guidance and project details contained in the presentation is included below.

1. Represents an unconstrained scenario based on execution of all unsanctioned projects at current equity interests and does not constitute guidance. Based on Wood Mackenzie's most recent long-term oil and gas price forecasts as follows: Brent oil price assumption (2020-2030 average: US$74.34/bbl, real 2019); Japan LNG DES price assumption (2020-2030 average: US$7.86/MMBtu, real 2019).

Guidance

Asset	FY20e		Medium term
	Production	Unit costs1		Production	Unit costs1
Conventional Petroleum	110-116 MMboe	US$10.5-11.5/boe		~110 MMboe average	<US$13/boe

Future options

Options	Operator	BHP Ownership	Potential execution timing	Capex BHP share (US$m)	Tollgate	Potential first production2	Description
North West Shelf Other Resource Owner	Woodside	16.67%	<5 years	>250	Pre-feasibility	FY26	Low risk investment opportunity to maximise Karratha Gas Plant value through processing other resource owner gas; benefits through tolling fees, cost recovery and life extension.
Pyrenees Phase 4	BHP	71.43%	<5 years	>250	Opportunity Assessment	FY22	Combination of well re-entries and new subsea wells which aim to optimise incremental value using the existing infrastructure.
Scarborough3	Woodside	26.5%	1 year	1,400-1,900	Pre-feasibility	FY24	Large resource of 13 subsea wells connected to a semisubmersible floating production unit from which gas is exported via pipeline to Pluto LNG facility for onshore processing.
Atlantis Phase 4	BP	44%	<5 years	>250	Opportunity Assessment	FY24	Additional development opportunities for infill producing wells. Data obtained from Phase 3 project de-risks further development of multiple hydrocarbon bearing zones.
Mad Dog Northwest Water Injection	BP	23.9%	<5 years	>250	Pre-feasibility	FY24	Two water injector wells providing water from Mad Dog Phase 2 facility to increase production at existing A Spar facility.
Mad Dog opportunities	BP	23.9%	<5 years	>250	Opportunity Assessment	FY25	Additional opportunities to increase the Mad Dog Phase 2 production beyond the initial investment scope with new wells tied back to existing facility, results in highly economic opportunities.
Shenzi Growth opportunities	BHP	44%	1 year	<250	Pre-feasibility	FY23	Shenzi Subsea Multi-Phase Pumping (SSMPP); Subsea pumping opportunities to increase production rates from existing wells.

 

Options	Operator	BHP Ownership	Potential execution timing	Capex BHP share (US$m)	Tollgate	Potential first production2	Description
Wildling Phase 1	BHP	44%-72%	1-2 years	~500	Pre-feasibility	FY23	Two Shenzi North wells tied-back to the Shenzi platform, provides the opportunity to accelerate production and unlock additional recoverable reserves. Phased development accelerates first oil, minimizes appraisal cost and reduces risk.
Trion	BHP	60%	2-3 years	>5,000	Conceptual	FY25	Large greenfield development in the deepwater Mexico GoM. Resource uncertainty reduced with recent successful appraisal drilling of 2DEL and 3DEL wells.
Trinidad & Tobago North	BHP	70%	<5 years	Under study	Opportunity Assessment	FY27	Completed successful exploration program on our Northern licenses. Potential material gas play in deepwater Trinidad & Tobago, well positioned to the Atlantic LNG plant onshore Trinidad & Tobago.

Note: This represents an unconstrained scenario based on execution of all unsanctioned projects at current equity interests and does not constitute guidance.

Exploration

Options	Location	Ownership	Maturity	Earliest first production	Description
Western GoM	US - Gulf of Mexico	100% Operator	Frontier	Early 2030s	Acquired a significant acreage position in historically underexplored Western Gulf of Mexico
Mexico	Mexico - Gulf of Mexico	60% Operator	Exploration	Late 2020s	Opportunity to tie back prospects to future Trion hub. Included in Trion Minimum Work Program
T&T Southern Gas (Magellan)	Trinidad & Tobago	65% Operator	Exploration	Mid 2020s	Discovered gas play in deepwater Trinidad & Tobago
T&T Southern Deep Potential	Trinidad & Tobago	65% Operator	Frontier	Late 2020s	Evaluating multiple play types to test deeper potential in deepwater Trinidad & Tobago based on deep oil shows from Le Clerc exploration
Eastern Canada	Orphan Basin	100% Operator	Frontier	Early 2030s	Recent bid success for blocks with large liquids resource potential in the offshore Orphan Basin in Eastern Canada
Significant remaining project potential with unrisked NPV of up to US$14 billion4

1. Based on an exchange rate of AUD/USD 0.70. Unit costs are in nominal terms.

2. Potential first production data is an estimate and does not constitute guidance.

3. Based on information provided by operator. Represents BHP's current equity position as 25% in WA-1-R and 50% in 

    WA-62-R.

4. Exploration unrisked value at BHP prices.

Further information on BHP can be found at: bhp.com

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