US Edition BHP Billiton
£19.70½ -21½p
Questor says Hold
In terms of what it digs up out of the earth, the company breaks it down at four-tenths iron ore, two tenths oil and gas, another two copper, one-tenth coke and coal and the last tenth is made up of diamonds and anything else.
Yesterday, the focus was on gas as BHP released a presentation showing off its US shale gas portfolio. Its message was that it now has key positions in four US shale fields with some of the best returns in the industry.
Shale gas is simply natural gas trapped in shale rock - and a grand hope for those hoping to turn the US, traditionally an importer of gas, into an exporter of the stuff. But it is not without its detractors. France has banned "fracking", or hydraulic fracturing, where water is pumped into rock at high pressure to release the gas. In the UK, Cuadrilla Resources earlier this month said its shale gas exploration had likely triggered small earthquakes near Blackpool in northwest England earlier this year, adding to concerns about the safety of fracking.
Nonetheless, BHP says shale gas makes sense in the US, because of a combination of factors which include low population density in development areas, supportive regulators and the large US gas market.
The miner, which moved into US shale gas this year, said its assets are large, long-life and low-cost, with the potential for significant future developments.
Production of natural gas and liquids trapped in shale rock is forecast to surge to an average of 1m barrels of oil equivalent per day by the end of the decade from 250,000 barrels a day this year, it said.
With a price-earnings ratio of 9.9 this year, falling to 7.1 next year, BHP is on a par with its sector peers of Anglo American and Rio Tinto. Although concerns over demand for resources have been heightened by the current threat of a new recession, BHP's long-term fundamentals look strong. Hold for now.