Expectations are growing that BHP Group Ltd (BHP.AX), (BHPB.L) will deliver a verdict on the future of its petroleum business at its results next week, as it comes under increasing pressure to cut its fossil fuel footprint.
will deliver a verdict on the future of its petroleum business at its results next week, as it comes under increasing pressure to cut its fossil fuel footprint.
"It's clear something is brewing," said Simon Mawhinney, Chief Investment Officer at Allan Gray Australia.Analysts value BHP's petroleum business, made up of assets in Australia, the Gulf of Mexico, Trinidad and Tobago and Algeria, at $10 billion to $17 billion. The division contributed 5% of BHP's underlying earnings of $14.7 billion in the first half to end-December, compared with 70% for iron ore.
An exit from petroleum would constitute "a major shift" in BHP's environmental, social and governance credentials and overall strategy towards fossil fuels, Morgan Stanley analyst Rahul Anand said in a recent note.BHP's late-life, mainly low-return energy assets in Australia are seen as particularly ripe for a sale amid high oil and gas prices.
Credit Suisse and Citi value the Australian energy assets - including the Bass Strait, Northwest Shelf LNG and the Scarborough gas field - at $3 billion to $5 billion.is seen as the most logical buyer as they would boost its free cash flow and increase its stakes in key projects, although not all investors favour such a tie-up given the asset mix and likely need for an equity raising.
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