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BHP Billiton Limited (BHP) Just Got A US$10.8 Billion Paypacket

BHP Billiton Limited (ASX: BHP) announced this morning it’s going to sell its US onshore gas and oil assets for a huge US$10.8 billion in cash!

BHP Billiton is Australia’s largest resources business and it has a global presence with iron ore, oil, coal and copper.

However, BHP’s oil and gas presence is about to become a lot smaller because it has entered into agreements to sell its interests in Eagle Ford, Haynesville, Permian and Fayetteville. Interestingly, oil was the only one of BHP’s core commodities which it produced less of during 2018.

A BP Plc (LON: BP) subsidiary will be spending US$10.5 billion on Eagle Ford, Haynesville and Permian assets. Half of the payment is upfront with a further six payments over a six-month period. A Merit Energy subsidiary will buy the Fayetteville assets for US$0.3 billion.

Both deals will need to satisfy regulatory conditions to be approved.

BHP CEO Andrew Mackenzie said: “The sale of our Onshore US assets is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come.”

Mr Mackenzie also announced that with BHP’s net debt being at the low end of its US$10 billion to US$15 billion range, the company will return the net proceeds to shareholders.

BHP will recognise an impairment charge of around US$2.8 billion against the carrying value of its Onshore US assets. Essentially, the assets had been recorded as worth more on BHP’s balance sheet than what it is selling them for.

After utilising some tax losses, BHP estimates that tax payable will be less than US$0.1 billion.

BHP said that over the last six years it has divested more than US$18 billion worth of assets, including the South32 Ltd (ASX: S32) demerger.

Shareholders of BHP will be hoping that this deal adds to share price gains, with the BHP share price doubling since the start of 2016.

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