BHP Billiton, the world's largest mining company and Australia's biggest petroleum producer, has made its second major acquisition for this year with an agreement to buy US shale gas producer Petrohawk Energy for $15.1 billion (A$14.15 billion) -- a deal which puts it on track to become a 1 million b/d business within five years, the company said Friday.
The deal is unlikely to be BHP Billiton's last in the rapidly consolidating US shale sector, CEO Marius Kloppers told journalists.
A number of oil industry majors, including ExxonMobil, Shell, Statoil, and CNOOC, have taken positions in US shale over recent years, since they "started understanding that this technology was real, that it was going to continue to develop and that it was going to play a material part of supply," Kloppers said.
The heavyweights have been picking up acreage and resources from the smaller players as they sold it off to fund the transition from exploration to development, Kloppers said.
"As these acreages get consolidated [companies] exchange positions ... and clearly you're going to see that continue to happen as the various majors and others consolidate their positions to get scale, synergy and so on," Kloppers added. "And it is very highly likely that you are going to continue to see us participate in that."
EAGLE FORD, HAYNSEVILLE SHALES
In this latest deal, the companies have signed a definitive agreement under which BHP Billiton would pay $38.75/share cash for Petrohawk. The deal represents an equity value of $12.1 billion, with assumed debt totaling $3 billion, and has been unanimously recommended by Petrohawk's board.
The acquisition delivers BHP Billiton operated positions in the resource plays of the Eagle Ford and Haynesville shales, and the Permian Basin. Petrohawk's assets cover around 1 million net acres in Texas and Louisiana, with estimated 2011 production of about 950,000 Mcf/day of gas equivalent, or 158,000 b/d of oil equivalent.
At the end of 2010, Petrohawk had proved reserves of 3.4 Tcf of natural gas equivalent and a non-proved resources base of 32 Tcfe, giving it a total risked resource base of 35 Tcfe.
The acquisition more than doubles BHP Petroleum's existing resource base to 11 billion boe and increases its proved reserves by around 30%. According to the company, it leaves BHP Billiton as one of the 10 largest independent upstream oil and gas companies in the world based on total resources, and keeps it on track to deliver compound annual petroleum production growth of more than 10% for the remainder of this decade.
"The proposed acquisition of Petrohawk ... provides us with even greater exposure to the world's largest energy market, while also broadening our geographic and customer spread," Kloppers said in a statement.
"With over a decade of significant investment and volume growth ahead, this transaction would build on our recent acquisition of the Fayetteville shale in Arkansas and provides the potential to more than double our existing resource base," added BHP Billiton Petroleum Chief Executive J. Michael Yeager.
"We believe these premium oil and natural gas assets would benefit significantly by residing within a larger entity that can employ more capital intensity to accelerate their realized value," said Petrohawk CEO Floyd Wilson. The company has announced plans for capital spending of $2.85 billion in 2011.
EARLIER DEAL WITH CHESAPEAKE
The tender offer for Petrohawk's shares is expected to begin by July 25, with the acquisition subject to certain conditions, including a majority of Petrohawk shares being tendered. The acquisition is expected to close in the third quarter of calendar 2011.
BHP Billiton in February this year agreed to pay $4.75 billion for Chesapeake Energy's Fayetteville Shale assets in central Arkansas. That deal, which included existing net production of about 415,000 Mcf/day of natural gas equivalent and 2.4 Tcf of proved gas reserves, raised BHP Billiton Petroleum's total production from around 430,000 boe/d to about 500,000 boe/d.
At that time, BHP Billiton said it planned to nearly triple Fayetteville's output which, along with development of its other core assets in Western Australia, the Gulf of Mexico and Australia's Bass Strait, would lift its total output to 600,000 boe/d in five years and 700,000 boe/d by the end of this decade.
Petrohawk's gross assets were $8.2 billion as at March 31, 2011 and it posted profit before tax of $390 million for the year ended December 31, 2010.
