The four pillars for BHP - iron ore, petroleum, copper and met coal - all beat forecasts; replicating the strong operational performance.
What is also very impressive is both iron ore and met coal full-year guidance was raised while petroleum was lowered slightly as the company diverse Liverpool Bay and lower US onshore guidance. The numbers do illustrate the company’s drive for productivity.
Saw better headline production reads and significantly better mix in the production output. Almost 1mmboe more than forecast of higher margin liquids production was found over the last quarter. Petroleum production guidance has been lowered from 250mmboe to 245mmboe, but given the higher margin liquids being produced, it won’t be met with concern.
The ramp up in the WAIO project is considerably strong, with Jimblebar the stand out, and unlike RIO, BHP has managed to dodge impact from the wet season. Guidance has jumped by five million tonnes (Mt) to 217Mt in FY14 (100% basis) as operational performance excels and the March quarter produced a record read of 49.56Mt. However, coupled with the read from RIO, the suppressed capacity chain of iron ore illustrates the potential for over-supply which most analysts are predicting.
Copper and met coal
Copper numbers were in-line with expectations as a 28% increase in resource from Escondida continued, which allowed BHP to re-affirm copper guidance and reflects the long life nature of the operation. Met coal saw volumes being churned out to offset the very poor prices hitting 11.4Mt, a 28% increase year-on-year, and saw guidance increasing by 2.5Mt to 43.5Mt.
The company re-affirmed that it is on track for a 25% reduction in capex over FY14 and a further 18% in FY15. It also cut its Potash capax budget by 25% and pushed back development expectations to 2020. This suggests that the so-called fifth pillar may actually be a 2020 dream rather than a 2010 decade dream, and saw that consolidation remains a key part of the company’s mantra.