Mining giant BHP Billiton in $2.8bn US shale writedown

Mining giant BHP Billiton has said it will write down its US oil and gas assets by $2.8bn (£1.8bn, €2.5bn) in its 2015 financial year results.

The company noted that most of the impairment charge, which is $2bn after tax, is related to the shale gas-focused Hawkville field in South Texas, taking into account geological complexity, product mix, acreage relinquishments and amended development plans.

The remainder relates to the impairment of goodwill associated with the Petrohawk acquisition in 2011, the company said.

Following this impairment, the company's US onshore business will have net operating assets of about $24bn.

BHP added that its ongoing cost reductions and improving well performance will help offset increased commodity price volatility and lower near term capital expenditure.

From the Permian basin, the company currently expects output of more than 150,000 barrels of oil equivalent per day (boe/d), compared to previous estimates of 100 boe/d.

"While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore US business," BHP Billiton Petroleum President, Tim Cutt, said in a statement.

"The Black Hawk continues to exceed expectations, the Permian offers significant upside across multiple zones and the Haynesville, one of the industry's premier dry gas positions, provides an excellent development option as market conditions improve."

"With industry-leading drilling costs and recoveries, we are well positioned to realise significant value for shareholders as we develop our high-quality resource base."

The company also plans to invest $1.5bn in the US onshore operations in the 2016 financial year, including in the development of 10 operated rigs.

It expects its US onshore business to be cash flow positive in the 2016 financial year at an oil price of $60 per barrel and a gas price of $3 per thousand standard cubic feet. West Texas crude is trading down 0.55% at $52.75 as at 4.58 am ET.

In January, the company said it would cut its shale operations by 40% because of falling oil prices.

BHP shares closed down 1.07% in Australia, while they are trading up 0.40% at 10.20 am GMT in London.