BHP Billiton puts US shale assets on the block

BHP Billiton gave into pressure from shareholders, putting its US onshore oil assets on the block and deferring plans to move forward in potash.

The announcement came even as the Australia-focused miner reported that rising commodity prices drove a more than fourfold jump in its full-year attributable profits and second-strongest level of free cash flows ever.

Outgoing chairman Jac Nasser highlighted the company's efforts to reshape its portfolio towards low-cost and long-life assets and its focus on capital discipline at the top of cycles.

"Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year," he said.

For the financial year ended on 30 June, the mining group posted a 454% increase in attributable profits to $6.73bn, alongside $12.6bn of free cash flow which the company used to lower debt and hike its dividend payout by 177% to $0.83 for the full-year.

Meanwhile, BHP's return on capital on after tax basis grew to 10%, while its debt pile was cut down by 37% to $16.32bn.

Yet what most caught the market's attention was management's decision to exit its US shale oil assets, possibly including via an IPO - following recent meetings between its new chairman, Ken Mackenzie and dozens of investors including activitist hedge fund Elliot Management.

In April, Elliot launched a drive to force BHP's board to divest units that did not meet strict criteria for capital returns, alleging that missteps by management had destroyed roughly $40bn of shareholder value.

Regarding the Jansen potash project in Canada, BHP said it would not go forward in the 2018 calendar year because it now anticipates "a later market window". BHP also held out the possibility that it might bring in a partner.

"Board approval will be sought for the project only if it passes our strict capital allocation framework tests."

As of 0851 BST, shares of BHP were 2.67% ahead to 1,405.0p.