For scale, it spits out more oil equivalent per day than Australia’s total oil output, yet it is massively cash flow negative. After capital spending, but before notional cost to service debt or any sort of return to shareholders, the business consumed a net amount of $US1.96 billion in 2014 and $US1.65 billion last year.
While cash operating costs come in at $US17/boe, the price it received for a mix of oil, natural gas liquids and gas averaged just $US33.20/boe. Natural gas trades below $US17/boe in the USA and gas liquids suffer a massive discount because of an artificial oversupply. BHP’s total costs after depreciation, including capital spending, but not notional interest or corporate overheads, amount to ~$US73.60/boe!
BHP Billiton estimates that its US onshore LTO operations could be cash flow neutral this year with oil an oil price of $US60/bbl and gas at $US3.50/mmBTU, so with WTI crude trading at around $US45/bbl and gas at around $US2.72/mmBtu, BHP’s shareholders are still pouring funds into this costly enterprise.