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U.S. Onshore Helps Lift BHP to Record Petroleum Production

Australia's BHP Billiton said its petroleum production increased 4% to a record 246 million boe during fiscal year (FY) 2014, thanks in large part to strong onshore production in the United States, where liquids volumes increased by 73%.

Meanwhile, BHP said it doubled production from its stakes in BP plc’s Atlantis project in the deepwater Gulf of Mexico (GOM) during FY2014, which ended on June 30. But natural gas production overall declined by 4% to 839.3 Bcf, in part due to lower production in the Haynesville and Fayetteville shales.

In a 46-page operational review released Wednesday, BHP said petroleum production is forecast to increase another 5% in FY2015, to 255 million boe. The company said continued growth in the onshore U.S. would contribute to an increase of 16 million boe in total liquids production.

"We expect to maintain strong momentum and remain on track to generate group production growth of 16% over the two years to the end of [FY2015]," said CEO Andrew Mackenzie. "In petroleum, we are investing in our highest-return acreage while a broader improvement in productivity is expected to underpin stronger iron ore, copper and metallurgical coal volumes.

"We will remain focused on value over volume as we prioritize our brownfield development options and consider the next phase of portfolio simplification."

Crude oil, condensate and natural gas liquids (NGL) production totaled 106.1 million boe, an 18% increase from the year prior. U.S. onshore liquids production rose 23% during fiscal 4Q2014.

"We expect to carry strong momentum into the 2015 financial year as shale liquids volumes are forecast to increase by over 17 million boe in the period," the company said. "We remain confident that onshore U.S. will be strongly EBIT [earnings before interest and tax] positive in FY2015 as the liquids contribution is forecast to rise to approximately 40% of total shale production."

In the GOM, the company said its conventional business saw "a near doubling of production at Atlantis, [which] was achieved ahead of prior guidance as the early completion of two production wells brought forward volumes into FY2014." Atlantis is one of BP’s priority projects (see Daily GPI, Feb. 4).

BHP said during FY2014 it allocated $4.2 billion toward capital expenditures (capex) in the onshore United States, a 12.5% decrease from the $4.8 billion it spent in FY2013. Of that $4.2 billion, it spent 85.7% ($3.6 billion) in liquids-rich areas of the Eagle Ford Shale and the Permian Basin, and the remaining 14.3% ($600 million) in gas-focused shale plays -- specifically, the Haynesville and Fayetteville shales.

The company reduced its capex in the Eagle Ford and Permian by 7.7% and in the Haynesville and Fayetteville by one-third. In FY2013, it spent $3.9 billion and $900 million in those operating areas, respectively.

Production in the Eagle Ford and Permian rose 55.4% -- from 33.4 million boe in FY2013 to 51.9 million boe in FY 2014 -- with 42% weighted toward crude oil and condensate, 36% natural gas and 22% NGL. During the same time frame, production in the Haynesville and Fayetteville fell 14.6%, from 65.8 million boe to 56.2 million boe, with production 100% natural gas.

BHP spent about 75% of its capex in the Eagle Ford, "with the majority focused on our Black Hawk acreage," (see Shale DailyAug. 22, 2011).

Last December, the company's U.S. shale business said it planned to grow both its liquids production and its onshore U.S. production by FY2017, to 200,000 b/d and 500,000 boe/d, respectively (see Shale DailyDec. 11, 2013).

In 2011, BHP bought its Fayetteville assets from Chesapeake Energy Corp. for $4.75 billion. The company also bought out Eagle Ford pioneer Petrohawk Energy Corp. for $12.1 billion (see Shale DailyJuly 18, 2011Feb. 23, 2011).

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