LONDON (ShareCast) - Deutsche Bank downgraded BHP Billiton to 'hold' from 'buy' and cut the price target to 1,660p from 1,800p, noting that the company is at peak oil production.
"With the demerger of South32 complete and cost cutting ongoing we think BHP's focus now turns to growing its oil and copper divisions. But there is a problem," said DB, as it reckons BHP's oil production has peaked at 256m barrels of oil equivalent in full-year 2015.

Deutsche forecasts a drop in production to below 230mboe by full-year 2018 due to a fall in US onshore volumes and conventional volumes.

It said that if commodity prices fall below current levels, BHP would be free cash flow negative in full-year 2016 after capex and the dividend. "We cannot see BHP cutting its dividend or changing its policy," said DB.

The brokerage said that BHP's current share price reflects an iron ore price of $70 per tonne, which it believes to be broadly in line with market expectations for the next 12 months, suggesting limited potential for material price appreciation.

At 1550 BST, BHP shares were up 2.2% at 1,389.50p.

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