BHP OPERATIONAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER 2017.

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Overig advies 20/02/2018 08:04
· Full year production and unit cost guidance(1) maintained for Petroleum, Copper, Iron Ore and Energy Coal. At Western Australia Iron Ore (WAIO), a record annualised production rate of 284 Mt (100 per cent
basis) was achieved for the December 2017 quarter.
· Production guidance for Metallurgical Coal reduced to between 41 and 43 Mt as a result of challenging roof conditions at Broadmeadow, which are expected to continue through the March 2018 quarter, and geotechnical issues triggered by wet weather impacts at Blackwater. Unit cost guidance is also
expected to be negatively impacted and is currently under review.
· We continue to release latent capacity across our portfolio, with the Los Colorados Extension project successfully ramped up during the December 2017 quarter.
· In Onshore US, our operated rig count remained at nine during the December 2017 quarter but is expected to fall as we tailor plans to maximise value in the exit process. We continue to progress a number of alternatives to divest our Onshore US assets for value.
· All major projects under development are tracking to plan.
· Underlying EBIT(2) in the December 2017 half year is expected to include impairment charges, predominately related to conveyors at Escondida, in a range of US$250 million to US$350 million.

Production Dec H17 vs Dec H16
Petroleum (MMboe) 99 (7%) Lower volumes reflect the impact of Hurricane Harvey and Hurricane Nate on US petroleum assets and natural field decline.
Copper (kt) 833 17% Increased volumes at Escondida supported by the ramp-up of the Los Colorados Extension project.
Iron ore(3) (Mt) 117 0% Record production at Jimblebar and Mining Area C offset by planned maintenance and lower opening stockpile levels following the Mt Whaleback
fire in June 2017.
Metallurgical coal(3) (Mt) 20 (4%) Record production at four Queensland Coal mines offset by the lower volumes at Broadmeadow (roof conditions) and Blackwater (geotechnical issues).
Energy coal(3) (Mt) 14 4% Strong performance at New South Wales Energy Coal offset by the impacts of unfavourable wet weather at Cerrejón.

BHP Chief Executive Officer, Andrew Mackenzie, said: “A strong operating performance in the first half allowed us to capture the benefit of higher prices. The successful Los Colorados Extension project ramp-up contributed to a 17 per cent increase in copper output and production records were achieved at a number of Western Australia Iron Ore and Queensland Coal mines. We have revised down our metallurgical coal production forecast for the full year as a result of geotechnical issues at both Broadmeadow and Blackwater. The momentum we’ve built across the wider portfolio during the second quarter will flow through to an expected stronger second half operating performance.
Together with incremental production from latent capacity projects in iron ore and copper, we expect volume growth of six per cent for the full year.”

Operational performance
Production for the December 2017 half year and guidance for the 2018 financial year are summarised in the table
below.
Production Dec H17 Dec Q17
Dec H17 vs Dec H16 Dec Q17 vs Dec Q16 Dec Q17 vs Sep Q17 Previous FY18 guidance Current FY18 guidance
Petroleum (MMboe) 99 48 (7%) (6%) (4%) 180 -190 180 -190
Onshore US (MMboe) 35 18 (13%) (10%) 1% 61 - 67 61 - 67
Conventional (MMboe) 64 31 (3%) (3%) (6%) 119 - 123 119 - 123
Copper (kt) 833 429 17% 20% 6% 1,655 - 1,790 1,655 - 1,790
Escondida (kt) 583 315 29% 34% 17% 1,130 - 1,230 1,130 - 1,230
Other copper(i) (kt) 250 114 (4%) (7%) (16%) 525 - 560 525 - 560
Iron ore(ii) (Mt) 117 62 0% 3% 11% 239 - 243 239 - 243
WAIO (100% basis) (Mt) 136 72 0% 3% 11% 275 - 280(iii) 275 - 280(iii)
Metallurgical coal(ii) (Mt) 20 10 (4%) (9%) (8%) 44 - 46 41 - 43
Energy coal(ii) (Mt) 14 7 4% 10% 8% 29 - 30 29 - 30

(i) Other copper comprises Pampa Norte, Olympic Dam and Antamina.
(ii) Excludes production from Samarco, Haju (IndoMet Coal) and New Mexico Coal.
(iii) Subject to regulatory approvals to increase capacity above 270 Mt.

Major development projects
During the December 2017 half year, the BHP Board approved an investment of US$2.5 billion for the development of the Spence Growth Option.
BHP has four major projects under development in Petroleum, Copper and Potash, with a combined budget of US$7.5 billion over the life of the projects. All projects remain on time and on budget.

Corporate update
BHP expects Underlying EBIT in the December 2017 half year to include impairment charges (predominately related to conveyors at Escondida that are no longer planned to be utilised due to the successful completion of the Los Colorados Extension project) in a range of US$250 million to US$350 million.
The Group’s adjusted effective tax rate(4) for the December 2017 half year is currently being finalised and is expected to be below the full year guidance range of 32 to 37 per cent.
As previously highlighted, during the December 2017 half year we made final corporate income tax cash payments in Australia of approximately US$1.3 billion relating to the prior year. We also successfully concluded a US$2.9 billion
multi-currency bond repurchase plan, with total costs in relation to the repurchase program of approximately US$100 million to be reported in net finance costs in the December 2017 half year financial results.

On 16 November 2017, Samarco and its shareholders, Vale S.A. and BHP Billiton Brasil, entered into an agreement with the Federal Prosecutors’ Office in Brazil and the Minas Gerais State Prosecutors Office (Amendment Agreement). The Amendment Agreement, subject to ratification by the 12th Federal Court of Minas Gerais, amends the Preliminary Agreement(5) entered into on 18 January 2017 in relation to the Samarco dam failure (Preliminary Agreement). The Amendment Agreement provides for the State Prosecutors to become a party to the Preliminary Agreement and provides for additional community consultation.
Samarco, Vale S.A., BHP Billiton Brasil and the Federal Prosecutors also jointly requested, and the 12th Federal Court has approved, an additional 150 days, ending on 20 April 2018, for the parties to continue negotiations for the settlement of the Public Civil Claims.
On 22 December 2017, BHP announced a total of US$181 million in further financial support for the Renova Foundation and Samarco until 30 June 2018. This comprises US$133 million to fund the Renova Foundation which will be offset against the Group’s provision for the Samarco dam failure, US$6 million of fees payable to experts appointed in connection with remediation and compensation programs and a short-term facility of up to US$42 million to be made available to Samarco.
As at the date of this Operational Review, we are not in a position to provide an update, for the purpose of the December 2017 half year financial results, on the ongoing potential financial impacts on BHP Billiton Brasil of the Samarco dam failure. Any financial impacts will continue to be classified as an exceptional item.
On 22 December 2017, the US President signed a new US tax law (H.R. 1). BHP is currently working through the financial impacts of the tax reform, which will include a non-cash revaluation of the Group’s US net deferred taks assets. The financial impact is expected to give rise to an exceptional item in the December 2017 half year financial results. Longer term, we expect US attributable profits to be positively impacted by the lower US corporate income
tax rate.

Marketing update
The average realised prices achieved for our major commodities are summarised in the table below. The majority of
iron ore shipments were linked to the index price for the month of shipment, with price differentials predominantly a
reflection of product quality and market fundamentals. The majority of metallurgical coal and energy coal exports
were linked to the index price for the month of shipment or sold on the spot market at fixed or index-linked prices,
with price differentials reflecting product quality.
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