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Shale Sale – How do BHP’s Assets Stack Up?

BHP Billiton recently announced that they plan to sell their US onshore shale assets, which include assets in the Permian, Eagle Ford, Haynesville, and Fayetteville. More than 800,000 acres of unconventional oil and gas is on the table with initial valuation estimates approaching $10 Billion according to some banking sources. As potential acquirers evaluate the opportunity to pick up significant positions in some of the best onshore shale plays, it’s a good time to look at historical results on and near BHP’s acreage.

Looking at wellhead breakeven prices for BHP’s individual wells across their operated acreage and the regional averages for all operators shows that in general BHP’s acreage is competitive, particularly their Delaware and Haynesville assets. BHP’s average oil breakeven in the Delaware is $44 WTI, over $10 lower than the all-operator average. In the Haynesville, BHP’s average breakeven is $0.35/MMBtu less than the basin average. Only their results in the Eagle Ford are currently above the all-operator average.

As part of BTU Analytics’ E&P Positioning report, BTU generates acreage breakeven maps (shown below for the Eagle Ford and Haynesville). This analysis calculates half cycle breakeven prices on an individual well basis and aggregates the results into 3 mile by 3 mile grids to show larger trends across producers and basins. The sample below includes wells from 2013 to current for the counties BHP is in.

In the Permian, BHP’s assets are located primarily in the northern portion of Reeves county. Compared to other areas in Reeves and Culberson counties, this acreage looks to be as good or better with the majority of breakevens at sub $50 WTI.  As the Permian continues to be one of the main drivers in US production growth, it seems likely that this acreage will receive the most interest from companies and investors as they look to establish a Permian position or expand their current one.

In the Eagle Ford, there is a larger mix of well results driving the variability from BHP’s assets. While the acreage in Karnes and DeWitt counties looks strong with $40-$50 WTI average breakevens, La Salle and McMullen counties seem to be out of the sweet spot resulting in higher breakeven estimates. Note that BHP has announced the expected sale of a portion of the western acreage later this quarter. However, is important to also note that the economics below were run for oil sensitives on a Henry Hub gas price averaging ~$3.00/MMbtu, and the Western portion of the Eagle Ford is significantly gassier than the Eastern Eagle Ford.

Moving to some of BHP’s gas focused assets, BHP’s Haynesville assets are in the core of the play and have some of the lowest wellhead breakeven prices amongst all dry gas shale activity.

For a more detailed analysis on the economics of BHP’s US onshore portfolio, or to see details on other major plays and operators in the US, please request a sample of the E&P Positioning Report.

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