BHP name change not intended as riposte to Elliott Group

Posted May 18, 2017

The rebranding comes at a sensitive time for the company, with US-based hedge fund Elliott Advisors, a significant shareholder, pushing for a restructure and arguing that as much as 50% more value in the stock could be unlocked.

"If there is a natural owner out there who believes more upside can be achieved within this shale business than we do, then we will be more than happy to talk to them", he said.

While a 4.1% stake is quite impressive to the rest of us not in the three-comma club, the reality is that it is quite hard to influence what is far more than a $100 billion company when you combined the debt and equity for an enterprise value.

The producer acknowledges its USA shale acquisitions "were poorly timed, that we paid a too high price, and that the rapid pace of early development was not optimal", Mackenzie said Tuesday in a speech to a conference in Barcelona. Investors have long criticized the timing of the deals, which preceded a slump in the oil price. "Our path is deliberate, with value and returns at the centre of everything we do", Mackenzie said. "We've had to move heaven and Earth to try and ensure that we were absolutely best in class in the shale assets that we've chosen to retain".

BHP is however divesting non-core parts of its US shale assets. The company has pivoted back toward conventional oil-and-gas production and while the shale business now expected competitive returns, BHP was open to discussing a sale of the assets, he said.

Morgan Stanley reiterated their overweight rating on shares of BHP Billiton plc (LON:BLT) in a research report sent to investors on Tuesday, April 11th. Still, in the short term, a spinoff of the oil division delivers the most value, they said.

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Activist investor Elliott Associates has claimed "extremely broad and deep-rooted" support for BHP Billiton to review its petroleum arm, as it ramps up its public campaign to force change.

In his speech on Tuesday, Mr. Mackenzie said the petroleum business was core to BHP's growth plans but he acknowledged the company had overpaid and invested aggressively to build a position in the US onshore shale sector.

BHP has said the costs of scrapping its dual-listed structure significantly outweigh the benefits.

BHP chief executive Andrew Mackenzie will pitch his defence against activist investor Elliott directly to Australian shareholders next week, as the company seeks to maximise the value of its U.S. shale assets before any potential sale or demerger.

PNC Financial Services Group Inc. increased its position in shares of BHP Billiton plc by 538.6% in the third quarter.

BT Investment Management portfolio manager Brenton Saunders said there was little new in Elliott's proposal but the process had been healthy for BHP regardless.