BHP Ditch Oil, Go Into Canadian Potash As Part Of CEO Henry Overhaul – .

BHP Ditch Oil, Go Into Canadian Potash As Part Of CEO Henry Overhaul – .

BHP Group has unveiled the most radical change to its business since the creation of the world’s largest miner two decades ago, as it plans to move away from fossil fuels to what it calls “forward-looking” commodities and clarifies some long-standing issues facing investors.
BHP will sell its oil and gas operations to Woodside Petroleum Ltd. in exchange for shares that it will distribute to its own investors, she announced Tuesday. The company also approved spending of US $ 5.7 billion to build a massive new fertilizer mine in Canada and said it will unify its dual-listing structure and move to one primary listing in Australia. . Shares in London jumped 9.8% after the wave of announcements.

Mike Henry, CEO of BHP Group Ltd poses for a photo at company headquarters
Melbourne, Australia, Tuesday February 18, 2020.

These decisions – which come with record free cash flow for the year through June and a final dividend of $ 10.1 billion – represent a pivotal moment for CEO Mike Henry, who took the bar in January of last year. Investors have been waiting for years for a decision on Jansen, as the company has previously said its double listing was under discussion after coming under pressure from activist investor Elliott Management Corp., who also pushed for an exit from oil and some gas.

Since his appointment, Henry has sought to steer the company towards metals and minerals that will benefit from global efforts to reduce emissions, electrify cities and feed a growing global population. A Canadian-born executive who joined BHP in 2003 from Mitsubishi Corp., he inherited a business that had been broken up and downsized under his predecessor, which sold shale and ceded unwanted assets, but still faced huge decisions about potash, pricing and the future of fossil fuels.

“These are radical changes,” said Ben Davis, analyst at Liberum Capital. “The new improved BHP, not so boring. The change in the structure of the list means “they can be more agile going forward,” he said. “It’s not just change today, but it means there will be more change to come tomorrow. “

The dual listing dates back to 2001, following the merger of Australia-listed BHP with UK-listed Billiton, and saw the companies run and managed as a single entity with shareholders having the same economic rights and to vote. Elliott argued in 2018 that a one-company reorganization in Australia would add more than US $ 22 billion in shareholder value.

BHP derives most of its profits from iron ore and copper – a metal essential to the green energy transition – and has benefited from soaring prices for both commodities over the past year. The company is also trying to sell its thermal coal business and is expanding into nickel, a key material in rechargeable batteries.

The commodities giant is pulling out of oil and gas as the fossil fuel industry grapples with global pressure from investors and governments on climate action, prompting some big oil rivals to cut base production and to add renewable energy assets. While BHP has said it expects demand to remain strong for at least another decade, the company wants to avoid ending up with assets that will become more difficult to sell.

BHP also finally approved the first stage of construction of the Jansen potash mine in Saskatchewan, Canada, after years of hesitation over the huge price tag. The operation, which is scheduled to start production in 2027, will make it one of the world’s leading producers of crop nutrients.

“Potash provides BHP with increased leverage on key global megatrends, including population growth, changing diets, decarbonization and improving environmental stewardship,” said the society.

It’s also the latest sign that the biggest miners are ready to open their wallets to invest in new mines after years of austerity. The industry has focused on shareholder returns and debt reduction after being penalized by investors.

BHP has already spent around US $ 4.5 billion on Jansen and dug two wells 1,000 meters (3,300 feet) deep, but delayed the final development decision because it weighed the risks of the large investment. Potash prices have jumped this year amid strong demand and supply concerns after Belarus, one of the few producing countries, was hit with sanctions.

Like its biggest rivals, BHP has recorded exceptional profits and dividends. Commodity prices have surged in the past year as governments around the world release billions of dollars in stimulus packages to help the global economy emerge from the pandemic, increasing demand for commodities.


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