BHP Billiton Ltd. on Wednesday detailed a sweeping plan to accelerate some U.S. activity onshore and offshore, highlighting plans to raise more natural gas rigs in the Haynesville Shale, swap land in the Permian Basin, complete more wells in the Eagle Ford Shale and sell off the Fayetteville Shale portfolio.
The Australia-based mining conglomerate, one of the largest foreign investors in the United States, has had its share of ups and downs in the onshore of late, and early last year recorded a $7.2 billion pre-tax charge against its unconventional land holdings. However, despite pressure from some shareholders, U.S. investments will continue, CEO Andrew Mackenzie said in an operational update covering a nine-month period through March 31.
"This quarter we have added value to the portfolio across each of our six focus areas," he said. "We continued our targeted high-return investment in shale with the approval of two more rigs in the Haynesville, supported by our hedging strategy. Plans to monetize a portion of our noncore acreage for value, such as parts of the southern Hawkville, are underway.
"In the Eagle Ford, we are increasing recoveries by testing staggered wells and larger fracture jobs. In the Permian, we are exploring opportunities to consolidate and optimize our acreage position so that we can drill longer lateral wells to lower costs."
Over the nine-month period, BHP estimated it spent $440 million for U.S. onshore activity. With gas prices hedged and supply contracts secured, the Haynesville alone should "deliver attractive rates of return," with increased activity set to get underway during the third quarter.
Meanwhile, plans also are accelerating to reduce the drilled but uncompleted, or DUC, well inventory in the Eagle Ford, where BHP works some of its acreage with Devon Energy Corp. Accelerating completions of DUCs in the Black Hawk field led to higher oil volumes during the first quarter.
"Tests continue on the potential for staggered wells to increase recovery, larger fracture jobs to improve productivity and the potential of the Upper Eagle Ford horizon," management said, with results expected during the third quarter. "Planning for enhanced oil recovery trials is also ongoing to drive the improvement of liquids recovery in the Eagle Ford."
Meanwhile, optimizing the Permian Shale acreage is progressing through "trades and swaps" in the Delaware sub-basin, with "further potential...being evaluated through a series of completions trials." BHP is one of the biggest operators in the the West Texas portion of the Delaware, with overall permit activity soaring in Reeves County.
BHP also is assessing the potential of its Moorefield horizon in the long-held Fayetteville portfolio in Arkansas.
Still, asset sales in the U.S. onshore are continuing, with sale of 50,000 acres in the southern Hawkville field in the Eagle Ford "well advanced, with bids received and under evaluation."
And the Fayetteville Shale is back on the market. BHP, which bought into the Arkansas play in 2011 in a high-profile deal with Chesapeake Energy Corp., put the portfolio up for sale in late 2014, but it withdrew the offer a few months later, claiming it wanted to maximize its value.
At the end of 2016, BHP valued its Fayetteville portfolio at $919 million.
"Our Fayetteville acreage is currently under review and we are considering all options, including divestment," management said.
"Since our entry into onshore U.S., we have made significant advances in our operating capability and capital productivity, which underpin the development of these fields at the optimal pace as prices recover. Having initially invested for growth, we have learned from experience, and our value over volume strategy, combined with strict adherence to our capital allocation framework and use of a hedging strategy to mitigate downside risks, ensures that every decision is focused on generating shareholder value."
Besides its holdings in U.S. land, BHP is one of the biggest operators in the GOM deepwater. During the first quarter the company approved its share of costs to participate in the BP plc-led $9 billion Mad Dog Phase 2 project, Mackenzie said.
BHP also has executed a contract with Mexico's state-owned Petroleos Mexicanos (Pemex) after winning a 60% stake and operations last December of the Trion discovery in the prolific Perdido Fold, which extends into U.S. maritime waters. When Trion was discovered by Pemex in 2012, it was considered one of the top 10 discoveries ever in the GOM.
The Pemex agreement "includes a commitment to deliver a minimum work program consisting of one appraisal well, one exploration well and the acquisition of additional seismic data," BHP said.
In Trinidad and Tobago, appraisal work also continues following the first phase of a deepwater drilling campaign to assess the commercial potential of a natural gas discovery at LeClerc and to prepare for oil exploration in the second phase. The second phase of exploration is set to begin in the second half of 2018.