Australian Markets Fall, BHP Billiton Writes Down Shale Gas Assets

Marcus Jacob
03 Aug, 2012
New York City

Australian markets declined following worldwide market selloff after central bank in Europe failed to offer immediate specific steps. BHP Billiton finally faced the expensive shale gas acquisition in the U.S. and wrote down assets by $2.5 billion.

[R]7:30 PM Sydney – Australian markets declined following worldwide market selloff after central bank in Europe failed to offer immediate specific steps. BHP Billiton finally faced the expensive shale gas acquisition in the U.S. and wrote down assets by $2.5 billion and its Australian nickel operations by $450 million.[/R]

Australian markets closed lower following sharp swings in the European and U.S. markets. Commodities were lower and resource linked stocks were among the most active.

The ASX 200 index slipped 42.40 to 4,227.10 and All Ordinaries index slid 47.15 to 4,243. For the week, the ASX 200 index rose 0.3%.

The Australian dollar closed higher at US$1.055, fetched 82.3 yen, 85.65 euro cents and 67.5 pence.

BHP Writes Down Shale Gas Assets

BHP Billiton said it will write down its American shale gas assets by US$2.84 billion and also take a charge of US$450 million on its Australian nickel assets.

The largest mining company acquired the shale assets in Arkansas from Chesapeake Energy for $20 billion in February 2011 at the peak of natural gas price cycle. The acquisition was deemed expensive by 123jump.com’s research team at the time of the purchase. The management could have either delayed or avoided the purchase.

The company has still to write down its shale gas assets in Texas and Louisiana acquired through the acquisition of Petrohawk Energy in August 2011.

Chairman Jacque Nasser defended the expensive acquisitions and said Petrohawk’s assets are of high quality however, 123jump.com’s research team has estimated a write-down of $1.8 billion is likely in these assets as early as next quarter.

BHP Billiton repeated today that it is committed to its capital expenditure plan of between $4 billion and $5 billion at Arkansas shale gas fields and shift most of its production to liquid natural gas from dry gas generation.

Stock Movers

BHP Billiton Limited declined 72 cents to $31.30 and, Rio Tinto Limited plummeted $2.40 to $52.01 and Fortescue Metals Group slumped 19 cents to $4.18.

BHP said it is still reviewing its expansion plan at Port Hedland harbor after a leaked internal email showed details of iron ore expansion plans.

Sundance Resources was in a trading halt and last traded at 33.5 cents and reports suggested China based Hanlong Mining had lowered its $1.65 billion takeover offer.

Iluka Resources plunged 51 cents or 5.5% to $8.74, Lynas Corporation Limited fell 4 cents to 78.5 cents, Newcrest Mining dropped 44 cents to $23.08 and Kingsgate decreased 13 cents to $3.96. Whitehaven Coal closed unchanged at $3.55.

Aquarius Platinum added 0.5 cent to 50 cents after three people died and at least 20 were injured in an accident at its production location in South Africa.

Oil Search Limited slipped 7 cents to $7, Santos Limited slumped 16 cents to $10.64 and Woodside Petroleum declined 32 cents to $33.93. Sundance Energy closed unchanged at 39.5 cents.

Ten Network fell 3 cents to 44 cents and Fairfax Media increased 0.5 cents to 51.5 cents.

Consolidated Media Holdings closed unchanged at $3.44 after competition authority approved the offer from News Corporation.

Metcash rose 3 cents to $3.40, Harvey Norman Holdings down 3 cents to $1.97 and Woolworths decreased 10 cents to $28.65. Kathmandu added 4 cents to $1.25.

Commonwealth Bank of Australia slumped 61 cents to $55.98 and Bank of Queensland slid 1 cent to $7.59. ANZ slipped 16 cents to $23.34. National Australia Bank declined 16 cents at $24.99 and Westpac Banking Corporation decreased 23 cents to $23.30.

Macquarie Group slipped 15 cents to $24.76 and Perpetual Limited dropped 51 cents to $23.88.

David Jones Limited fell 2 cents to $2.38 and Wesfarmers slumped 35 cents to $32.06. Billabong International Limited rose 1 cent to $1.39. Breville Group added 4 cents to close at $4.89.

Leighton plunged 85 cents or 5% to $16, Stockland rose 1 cent to $3.38 and Toll Holdings slipped 5 cents to $4.07.

Qantas fell 3 cents to $1.10, Flight Centre slid 21 cents to $21.67 and Virgin Australia down 1 cent 40.5 cents.

QR National fell 2 cents to $3.22.