Related Articles
Forward article link
Share PDF with colleagues

BHP agrees $12.1 bn for US shale gas firm Petrohawk

BHP Billiton has agreed to buy US shale-gas producer Petrohawk Energy for $12.1 billion, with the Anglo-Australian mining group taking a second big step into the unconventional energy sector

The deal gives BHP around 1 million acres in Texas and Louisiana, and positions in the highly productive Eagle Ford and Haynesville shales, and the Permian basin. Petrohawk is expected to produce 950 million cubic feet of gas equivalent a day (cfe/d) in 2011 from its assets and has an estimated proved resource of 3.4 trillion cfe.

World-class assets

“Petrohawk has a focused portfolio of three world-class onshore natural gas and liquids-rich shale assets,” BHP Billiton petroleum chief executive J Michael Yeager said. “With over a decade of significant investment and volume growth ahead, this transaction would build on our recent acquisition of the Fayetteville shale in Arkansas and provides the potential to more than double our existing resource base.”

BHP bought Arkansas assets from Chesapeake Energy in February for $4.7 billion, gaining 2.4 trillion cf proved reserves in the process. The deal with Petrohawk is seen as an attempt by the world’s largest miner to diversify away from its primary markets of iron ore, copper and coal. Shale gas and oil are seen as an alternative market after BHP failed to buy Canada’s Potash Corporation and UK-Australian mining company Rio Tinto.

Analysts said that while BHP was paying a lot for the proved reserves, the company would be eyeing Petrohawk’s non-proved resources base of 32 trillion cfe and total risked resource base of 35 trillion cfe.

“BHP Billiton would pay around $27 per barrel of oil equivalent for the proved reserves, which is relatively expensive. But this ignores the sizeable potential of the non-proved resources, which are probably viewed as low-risk exploration, so easier to convert to the proved catagory,” said  Evo Securities analyst Charles Kernot.

Controversy

North America's shales remain busy for global upstream mergers and acquisitions activity, as more energy firms look to capitalise on the booming, but environmentally controversial unconventional gas and oil sector.

The BHP acquisition of Petrohawk is one of the industry's biggest after ExxonMobil bought shale-gas producer XTO Energy for more than $30 billion and Suncor acquired oil-sands rival Petro-Canada for $15 billion. Analysts said the investment in shales may boost production, but could raise questions regarding US energy security and ownership.

“While this will help the US getting resources out of the ground in the short- to medium-term, these deals could potentially weigh on the country’s energy security if foreign companies gain control over significant volumes of unconventional oil and gas production in the US,” said Claudia Mahn, North America energy analyst at IHS.

Asian companies are also looking at North American unconventional assets, with an eye on hydraulic fracturing (fracking) technology, as well as acquiring reserves, but not all discussions have born fruit.

The process of fracking – pumping wells with toxic chemicals to release tiny pockets of gas and oil – has been controversial because of claims of water contamination. Processing oil sands is also carbon intensive, leading lobby groups to call for petroleum derived from those sources to be banned from entering Europe.  

Also in this section
Novatek targets huge Arctic gas resources
7 May 2019
The firm intends to become one of the world's largest LNG producers by 2030 via projects in the inhospitable Arctic environment
Petronas on an upward trajectory
29 April 2019
The company is balancing its upstream ambitions with government debt obligations, while finalising a key domestic downstream project
Petrobras breathes easy
3 April 2019
Brazilian company posts best financial results since bribery scandal