Wrap Text
BHP Results for Half Year Ended 31 December 2017
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Share code: BIL
ISIN: GB0000566504
20 February 2018
For Announcement to the Market
Name of Companies: BHP Billiton Limited (ABN 49 004 028 077) and
BHP Billiton Plc (Registration No. 3196209)
Report for the half year ended 31 December 2017
This statement includes the consolidated results of BHP for the half year ended
31 December 2017 compared with the half year ended 31 December 2016 and the year
ended 30 June 2017.
The results are prepared in accordance with IFRS and are presented in US dollars.
Headline Earnings
In accordance with the JSE Listing Requirements, Headline earnings is presented below.
Half year ended Half year ended Year ended
31 December 2017 31 December 2016 30 June 2017
US$M US$M US$M
---------------- ---------------- ------------
Earnings attributable to ordinary shareholders............... 2,015 3,204 5,890
Adjusted for:
Gain on sale of PP&E, Investments and Operations............. (4) (359) (356)
Impairments.................................................. 211 111 186
Tax effect of above adjustments.............................. (56) (2) (25)
------ ------ ------
Subtotal of Adjustments...................................... 151 (250) (195)
Headline earnings............................................ 2,166 2,954 5,695
------ ------ ------
Diluted Headline earnings.................................... 2,166 2,954 5,695
------ ------ ------
Basic earnings per share denominator (millions).............. 5,323 5,322 5,323
Diluted earnings per share denominator (millions)............ 5,338 5,336 5,336
Headline earnings per share (US cents)....................... 40.7 55.5 107.0
Diluted Headline earnings per share (US cents)............... 40.6 55.4 106.7
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NEWS RELEASE LOGO
Release Time IMMEDIATE
Date 20 February 2018
Number 3/18
BHP RESULTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2017
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Safety: We are committed to making our workplaces safer, as we achieve nothing
unless we achieve it safely
. Tragically, we had two fatalities during the period, one at our Permian
operations and one at Goonyella Riverside.
Maximise cash flow: Strong free cash generation underpinned by higher prices
. Attributable profit of US$2.0 billion (includes an exceptional loss of
US$2.0 billion predominantly related to the US tax reform) and Underlying
attributable profit of US$4.1 billion.
. Underlying EBITDA/(ii)/ of US$11.2 billion and Underlying EBITDA
margin/(iii)/ of 53% reflect higher commodity prices and a solid operating
performance.
. Net operating cash flow of US$7.3 billion and free cash flow/(i)/ of US$4.9
billion.
. A negative productivity movement of US$496 million was largely due to
anticipated factors. We remain on track to deliver productivity gains of
US$2 billion over the two years to the end of the 2019 financial year,
weighted to the second year.
Capital discipline: Delivering debt reduction and value accretive investments
. Net debt/(i)/ down by US$0.9 billion from 30 June 2017 to US$15.4 billion
reflecting strong free cash flow generation.
. Capital and exploration expenditure/(v)/ increased by 6% to US$2.9 billion.
Guidance unchanged at US$6.9 billion for the 2018 financial year and
expected to remain below US$8 billion per annum for the 2019 and 2020
financial years.
Value and returns: Detailed asset-level plans to increase shareholder value and
returns
. The Board has determined to pay an interim dividend of 55 US cents per share
which includes an additional amount of 17 US cents per share above the 50%
minimum payout policy (equivalent to US$0.9 billion).
. Underlying return on capital employed/(iii)/ of 12.8% (after tax) with
further improvement expected.
. Onshore US exit for value progressing to plan, with initial bids expected to
be received in the June 2018 quarter.
2017 2016 Change
Half year ended 31 December/(1)/ US$M US$M %
-------------------------------- ---------- ---------- --------
Profit from operations........................................ 6,736 6,057 11%
Attributable profit........................................... 2,015 3,204 (37%)
Basic earnings per share (cents).............................. 37.9 60.2 (37%)
Dividend per share (cents).................................... 55.0 40.0 38%
Net operating cash flow....................................... 7,343 7,697 (5%)
Capital and exploration expenditure/(v)/...................... 2,877 2,727 6%
Net debt/(i)/................................................. 15,411 20,057 (23%)
------ ------ -----
Underlying EBITDA/(ii)/....................................... 11,238 9,896 14%
Underlying EBIT/(ii)/......................................... 6,902 5,982 15%
Underlying attributable profit/(ii)/.......................... 4,053 3,244 25%
Underlying basic earnings per share (cents)/(iii)/............ 76.1 61.0 25%
------ ------ -----
(1) Where we have used alternate performance measures they are identified by a
footnote, and definitions can be found on pages 23 and 24.
BHP Chief Executive Officer, Andrew Mackenzie:
"Higher commodity prices and a solid operating performance delivered free cash
flow of US$4.9 billion. We used this cash to further reduce net debt and
increase returns to shareholders through higher dividends. We are on track to
deliver further productivity gains of US$2 billion by the end of the 2019
financial year as we secure improvements in both operating and capital
productivity, aided by smarter technology application across our value chain.
Our capital expenditure program remains focused on high-return, low-risk
development opportunities in commodities where we see greatest potential. We
remain firm in our resolve to maximise cash flow, maintain discipline and
increase shareholder value and returns."
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1
Results for the half year ended 31 December 2017
Safety is our highest priority
The health and safety of our employees and contractors, and that of the broader
communities in which we operate, are central to the success of our organisation.
Tragically, two of our colleagues died during the period, one at our Permian
Basin operations in November 2017 and one at Goonyella Riverside in August 2017.
Our Total Recordable Injury Frequency (TRIF) was 4.1 per million hours worked in
the December 2017 half year, a two per cent decrease from 30 June 2017. We are
committed to becoming safer through how we design our facilities and how we plan
and execute our work, with an increasing application of technology to remove
people from harms' way.
Making significant progress on the social and environmental remediation programs
in Brazil
BHP remains committed to supporting the Renova Foundation with the recovery of
communities and ecosystems affected by the Samarco tragedy.
The Renova Foundation's compensation program is making good progress. Over
260,000 claims for temporary interruption to water supplies immediately
following the dam failure have been resolved. The focus of the program is now
shifting to compensating for other damages including loss of property, equipment
and loss of income. The resettlement of the most impacted communities is
progressing, however, at a pace slower than planned due to regulatory and
licensing challenges. The river remediation programs continue to stabilise the
tailings material, resulting in improvements to water quality and aquatic
ecology.
Restart of Samarco's operations remains a focus but is subject to separate
negotiations with relevant parties and will occur only if it is safe,
economically viable and has the support of the community. Resuming operations
requires the granting of licences by state and federal authorities, community
hearings and an appropriate restructure of Samarco's debt.
In the December 2017 half year, BHP reported an exceptional loss of US$210
million (after tax) in relation to the Samarco dam failure. This includes
funding of US$50 million, direct costs of US$29 million, discount unwinding of
US$44 million and other movements in the provision, including foreign exchange,
of US$87 million. Additional commentary is included on page 42.
Financial performance
Earnings and margins
. Attributable profit of US$2.0 billion includes an exceptional loss of US$2.0
billion (after tax), compared to an attributable profit of US$3.2 billion,
including an exceptional loss of US$40 million (after tax), in the prior
period. The December 2017 half year exceptional loss is related to the US
tax reform and Samarco dam failure. The December 2016 half year exceptional
loss was related to the Samarco dam failure, partially offset by the
reimbursement received on cancellation of the Caroona exploration licence.
. Underlying attributable profit of US$4.1 billion, compared to US$3.2 billion
in the prior period.
. Profit from operations of US$6.7 billion, compared to US$6.1 billion in the
prior period, has increased as a result of higher prices and volumes,
partially offset by higher costs.
. Underlying EBITDA of US$11.2 billion, with higher prices and volume
productivity (in total US$2.6 billion) more than offsetting the impacts of
higher costs, unfavourable exchange rate movements, inflation and other net
movements (in total US$1.3 billion).
. Underlying EBITDA margin of 53 per cent, compared with 54 per cent in the
prior period.
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News Release 2
Productivity and costs
. A negative movement in productivity of US$496 million was recorded
reflecting: lower volumes and unfavourable fixed cost dilution at Olympic
Dam as a result of the smelter maintenance campaign (US$202 million); the
impact of reduced volumes at Queensland Coal and Petroleum (US$225 million);
and a favourable change in estimated recoverable copper in the Escondida
sulphide leach pad in the prior period (US$206 million); partially offset by
an increase in Escondida copper volumes and lower labour and contractor
costs at Western Australia Iron Ore (WAIO).
. Productivity guidance remains unchanged, with US$2 billion of gains expected
to be delivered over the two years to the end of the 2019 financial year,
weighted to the second year.
. Full year unit cost guidance(vi) remains unchanged for Petroleum, Copper,
Iron Ore and Energy Coal (based on an exchange rate of AUD/USD 0.75 and
USD/CLP 663).
. Queensland Coal unit costs for the 2018 financial year are now expected to
be US$66 per tonne (based on an exchange rate of AUD/USD 0.75), an increase
from previous guidance of US$59 per tonne, as a result of reduced low-cost
Broadmeadow and Blackwater volumes, production from higher cost pits and
rising inflationary pressures. Unit costs for the second half of the 2018
financial year are expected to be US$63 per tonne with challenging roof
conditions at Broadmeadow expected to continue through the March 2018
quarter.
. Historical costs and guidance are summarised below:
FY18 guidance at FY18e/(1)/
AUD/USD 0.75; AUD/USD 0.78; vs
H1 FY18 H1 FY17 FY17 USD/CLP 663/(1)/ USD/CLP 638/(2)/ FY17
--------- --------- -------- ---------------- ---------------- ----------
Conventional petroleum unit cost (US$ per boe)......... 10.38 8.42 8.82 ~10 ~11 13%
Escondida unit cost (US$ per pound).................... 1.06 0.91 0.93 ~1 1.02 8%
Western Australia Iron Ore unit cost (US$ per tonne)... 14.90 15.05 14.60 <14 14.57 (4%)
Queensland Coal unit cost (US$ per tonne).............. 71.21 56.43 59.67 66 69 11%
(1) Current FY18 guidance is based on exchange rates of AUD/USD 0.75 and USD/CLP 663.
(2) Average exchange rates for H1 FY18 of AUD/USD 0.78 and USD/CLP 638.
. Production and guidance are summarised below:
H1 FY18
vs FY18
Production H1 FY18 H1 FY17 FY17 guidance
-------------------------------------------------------------------------
Petroleum (MMboe)............ 99 (7%) 208 180 -190 FY18 guidance unchanged.
Onshore US (MMboe)......... 35 (13%) 80 61 - 67 FY18 guidance unchanged, with volumes expected
to be towards upper end of range.
Conventional (MMboe)....... 64 (3%) 128 119 - 123 FY18 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------------------
Copper (kt).................. 833 17% 1,326 1,655 - 1,790 FY18 guidance unchanged.
Escondida (kt)............. 583 29% 772 1,130 - 1,230 FY18 guidance unchanged, with volumes weighted to the
second half of the financial year reflecting
full utilisation of the three concentrators.
Other copper/(1)/(kt)...... 250 (4%) 554 525 - 560 FY18 guidance unchanged, with Olympic Dam expected
to ramp-up to full capacity in the March 2018 quarter.
---------------------------------------------------------------------------------------------------------------------------------
Iron ore/(2)/(Mt)............ 117 0% 231 239 - 243 FY18 guidance unchanged, with volumes weighted
to the second half of the financial year.
WAIO (100% basis) (Mt).... 136 0% 268 275 - 280 FY18 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------------------
Metallurgical coal/(2)/(Mt).. 20 (4%) 40 41 - 43 FY18 guidance reduced from 44 - 46 Mt and
reflects lower volumes now expected at
Broadmeadow and Blackwater.
Energy coal/(2)/ (Mt)........ 14 4% 29 29 - 30 FY18 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------------------
(1) Other copper comprises Pampa Norte, Olympic Dam and Antamina.
(2) Excludes production from Samarco, Haju (IndoMet Coal) and New Mexico Coal.
. We expect Group copper equivalent volume growth(vii) of six per cent for the
2018 financial year, down from previous guidance of seven per cent, due to
lower volumes now expected at Broadmeadow and Blackwater.
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BHP Results for the half year 3
ended 31 December 2017
Cash flow and balance sheet
. Net operating cash flows of US$7.3 billion reflect higher commodity prices,
a solid operating performance and a final corporate income tax payment in
Australia of US$1.3 billion related to the prior year.
. Free cash flow of US$4.9 billion. Our Onshore US assets remain free cash
flow positive/(iii)/.
. We continued to strengthen our balance sheet with a reduction in net debt of
US$0.9 billion, to finish the period at US$15.4 billion (30 June 2017:
US$16.3 billion; 31 December 2016: US$20.1 billion). This reduction reflects
strong free cash generation during the period, offset by an increase in
dividends to shareholders, record dividends paid to non-controlling
interests of US$0.9 billion and a non-cash fair value adjustment of US$0.7
billion related to interest rate and exchange rate movements/(viii)/.
. Gearing ratio/(i)/ of 19.9 per cent (30 June 2017: 20.6 per cent;
31 December 2016: 24.3 per cent).
. We are on track to reach our net debt range of US$10 to US$15 billion before
year-end and will maintain a strong balance sheet through the commodity
price cycle. We are targeting the lower half of the net debt range while
commodity prices remain elevated.
Dividends
. The dividend policy provides for a minimum 50 per cent payout of Underlying
attributable profit at every reporting period. The minimum dividend payment
for the period is 38 US cents per share.
. Recognising the importance of cash returns to shareholders, the Board has
determined to pay an additional amount of 17 US cents per share or US$0.9
billion, taking the interim dividend to 55 US cents per share or US$2.9
billion. This is equivalent to a 72 per cent payout ratio.
Capital and exploration
. Capital and exploration expenditure of US$2.9 billion, up six per cent in
the December 2017 half year, included maintenance spend/(ix)/ of US$1.0
billion and exploration of US$0.5 billion.
. Capital and exploration expenditure guidance is unchanged at US$6.9 billion
for the 2018 financial year, as a decrease in Onshore US capital expenditure
of US$100 million is offset by unfavourable exchange rate movements.
. A US$0.9 billion exploration program is planned for the 2018 financial year
and includes petroleum exploration expenditure of US$715 million.
. We expect capital and exploration expenditure to remain below US$8 billion
per annum in the 2019 and 2020 financial years, subject to exchange rate
movements.
. Historical capital and exploration expenditure and guidance are summarised
below:
FY18e H1 FY18 H1 FY17 FY17
US$M US$M US$M US$M
------- ------- ------- -------
Maintenance/(1)(2)/................................. 2,000 993 590 1,220
Development
Minerals.......................................... 2,200 859 921 1,677
Conventional petroleum/(2)/....................... 700 225 504 801
Onshore US........................................ 1,100 336 273 554
----- ----- ----- -----
Capital expenditure (purchases of property,
plant and equipment).............................. 6,000 2,413 2,288 4,252
Add: exploration expenditure........................ 900 464 439 968
----- ----- ----- -----
Capital and exploration expenditure................. 6,900 2,877 2,727 5,220
----- ----- ----- -----
(1) Includes capitalised deferred stripping of US$433 million for H1 FY18;
US$903 million for FY18e (H1 FY17: US$200 million; FY17: US$416 million).
(2) Conventional petroleum capital expenditure for FY18e includes US$700 million
of development and US$100 million of maintenance.
. Average annual sustaining capital expenditure over the medium term is
unchanged from previous guidance and forecast to be approximately:
. US$4 per tonne for WAIO, including the capital cost for South Flank;
. US$8 per tonne for Queensland Coal; and
. US$5 per tonne for New South Wales Energy Coal (NSWEC).
. During the December 2017 half year, the BHP Board approved an investment of
US$2.5 billion for the development of the Spence Growth Option.
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News Release 4
. At the end of the December 2017 half year, BHP had four major projects under
development in Petroleum, Copper and Potash, with a combined budget of
US$7.5 billion over the life of the projects. All four major projects remain
on time and on budget.
Major projects are summarised below:
Capital
Project and expenditure/(1)/ Date of initial
Business ownership Capacity/(1)/ US$M production Progress
------------- ------------------- ----------------------------------------- ---------------- --------------- ------------
Budget Target
-------------------------------------------------------------------------------------------------------------------------
Projects in execution at 31 December 2017
-------------------------------------------------------------------------------------------------------------------------
Copper Spence Growth New 95 ktpd concentrator is expected to 2,460 FY21 4% complete
Option increase Spence's payable copper in
(Chile) concentrate production by approximately
100% 185 ktpa in the first 10 years of
operation and extend the mining
operations by more than 50 years.
-------------------------------------------------------------------------------------------------------------------------
Petroleum North West Shelf To maintain LNG plant throughput from the 314 CY19 66% complete
Greater Western North West Shelf operations.
Flank-B (Australia)
16.67%
(non-operator)
-------------------------------------------------------------------------------------------------------------------------
Petroleum Mad Dog Phase 2 New floating production facility with the 2,154 CY22 10% complete
(US Gulf of Mexico) capacity to produce up to 140,000 gross
23.9% barrels of crude oil per day.
(non-operator)
-------------------------------------------------------------------------------------------------------------------------
Other projects in progress at 31 December 2017
-------------------------------------------------------------------------------------------------------------------------
Potash/(2)/ Jansen Potash Investment to finish the excavation and 2,600 75% complete
(Canada) lining of the production and service
100% shafts, and to continue the installation
of essential surface infrastructure and
utilities.
-------------------------------------------------------------------------------------------------------------------------
(1) Unless noted otherwise, references to capacity are on a 100 per cent basis,
references to capital expenditure from subsidiaries are reported on a 100
per cent basis and references to capital expenditure from joint operations
reflects BHP's share.
(2) Potash capital expenditure of approximately US$220 million is expected for
FY18.
Capital allocation framework
Adherence to our capital allocation framework aims to balance value creation,
cash returns to shareholders and balance sheet strength in a transparent and
consistent manner, and is embedded in every capital decision we make. Our
balance sheet is strong and remains a fundamental enabler of our strategy. This
will protect the Group through periods of heightened volatility and support
counter cyclical investments as we move through the cycle.
H1 FY18 H1 FY17 FY17
US$B US$B US$B
--------- --------- --------
Net operating cash flow/(1)/.......................... 7.3 7.7 16.8
----- ----- -----
Our priorities for capital
Maintenance capital................................. 1.0 0.6 1.2
Strong balance sheet................................ X X X
Minimum 50% payout ratio dividend................... 1.8 0.4 2.0
----- ----- -----
Excess cash......................................... 3.6 6.4 13.0
----- ----- -----
Balance sheet..................................... 1.3 4.7 8.8
Additional dividends.............................. 0.5 0.3 0.9
Organic development............................... 1.9 2.1 4.0
Acquisitions/(Divestments)........................ (0.1) (0.7) (0.7)
----- ----- -----
(1) Less dividends to non-controlling interests of US$0.9 billion for H1 FY18
(H1 FY17: US$0.3 billion; FY17 US$0.6 billion).
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BHP Results for the half year 5
ended 31 December 2017
Outlook
Economic outlook
World economic growth was in the range of three and a half to three and three
quarters per cent in the 2017 calendar year. A similar outcome is expected in
the 2018 calendar year.
China's economic growth is expected to slow modestly in the 2018 calendar year,
close to the lower end of the official GDP target range of six and a half to
seven per cent, as continued strength in infrastructure and resilience in
external trade is offset by a cooling of growth rates in the housing and
automobile markets.
The US economy should see a near-term boost to growth with the passing of the US
Tax Cuts and Jobs Act (the TCJA). In Europe and Japan, where the limits of
monetary policy effectiveness may have been reached, any upside on growth in the
medium term will have to come from external demand sources. India's economy is
on a healthy growth trajectory, supported by positive reform signposts.
Commodities outlook
Crude oil prices trended higher during the December 2017 half year. Production
discipline by OPEC members and non-OPEC participants (the 'Vienna Group') and
strong demand growth contributed to a substantial reduction in the inventory
overhang. The tighter market, rising geopolitical tensions, unplanned supply
outages, plateauing of the US rig count and extension of Vienna Group production
cuts aided market sentiment. A roughly balanced market is forecast for the 2018
calendar year.
The US domestic gas price was relatively stable as growth in exports, strong
power demand over summer and delays to North East pipeline projects helped
eliminate the storage surplus relative to the five-year average. We anticipate
that the market will return to surplus in the 2018 calendar year, as record US
production is facilitated by the start-up of major North East pipelines.
Copper prices rose over the December 2017 half year. Solid global consumption
was underpinned by continued strength in China, in particular from consumer
durables. On the supply side, the announcement that China would ban lower-grade
copper scrap imports and the potential for supply disruptions due to the large
number of upcoming labour negotiations in South America drove sentiment. Over
the next few years, the global copper market is expected to remain finely
balanced and vulnerable to supply shocks, particularly in the concentrate
segment.
The global steel industry continued its recovery in the December 2017 half year,
with production growth led by emerging markets. China's steel supply-side
reforms have resulted in a structural improvement in industry profitability.
China's steel production growth is expected to moderate in the 2018 calendar
year due to a cooling in the housing and automobile sectors. However, the
recovery in the rest of the world is likely to continue, with solid demand
conditions and lower Chinese steel exports.
Iron ore prices improved over the December 2017 half year. Demand for high-grade
products remained firm on the back of high steel margins, which benefitted from
Chinese steel supply-side reforms and winter production restrictions. This has
resulted in an elevated price differential between high and low-grade ore price
indexes. In the medium to longer term, ongoing Chinese supply-side reforms, the
shift of steel capacity to coastal regions and more stringent environmental
policies are expected to underpin demand for high-quality seaborne iron ore.
Metallurgical coal prices strengthened in the December 2017 half year. Chinese
demand for higher quality metallurgical coal remained firm throughout the period
despite the onset of winter emission restrictions. Additionally, domestic supply
was constrained due to safety and environmental concerns. High prices have
incentivised additional seaborne supply from the US and Mozambique. In the
medium term, China's coal supply-side reforms and environmental considerations
will support demand for higher quality metallurgical coal.
Further information on BHP's economic and commodity outlook can be found at:
bhp.com/prospects
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News Release 6
Income statement
Underlying attributable profit and Underlying EBITDA are presented below.
2017 2016
Half year ended 31 December US$M US$M
--------------------------- -------- --------
Underlying attributable profit.................................. 4,053 3,244
Exceptional items (after taxation) - refer to pages 10 and 34... (2,038) (40)
------ ------
Attributable profit............................................. 2,015 3,204
------ ------
Profit attributable to non-controlling interests................ 559 248
------ ------
Profit after taxation........................................... 2,574 3,452
------ ------
2017 2016
Half year ended 31 December US$M US$M
--------------------------- -------- --------
Underlying EBITDA............................................... 11,238 9,896
Depreciation and amortisation................................... (4,037) (3,800)
Impairments of property, plant and equipment, financial
assets and intangibles........................................ (299) (114)
Exceptional items (before net finance costs and taxation)/(1)/
- refer to pages 10 and 34.................................... (166) 75
------ ------
Profit from operations.......................................... 6,736 6,057
------ ------
Net finance costs............................................... (670) (577)
------ ------
Total taxation expense.......................................... (3,492) (2,028)
------ ------
Profit after taxation........................................... 2,574 3,452
------ ------
(1) Exceptional items of US$(166) million excludes net finance costs of US$(44)
million included in the total US$(210) million related to the Samarco dam
failure.
Profit from operations has increased as a result of favourable realised price
movements across all major commodities and higher volumes, partially offset by
higher costs, impairment charges predominantly related to conveyors at Escondida
and higher depreciation charges following the commissioning of the Escondida
Water Supply project.
--------------------------------------------------------------------------------
BHP Results for the half year 7
ended 31 December 2017
Underlying EBITDA
The following table and commentary describes the impact of the principal
factors/(iii)/ that affected Underlying EBITDA for the December 2017 half year
compared with the December 2016 half year:
US$M
--------
Half year ended 31 December 2016......... 9,896
--------
Net price impact:
Change in sales prices............... 2,227 Higher average realised prices for all our major commodities.
Price-linked costs................... (21) Increased royalties reflect higher realised prices.
-------
2,206
-------
Change in volumes:
Productivity......................... 419 Release of latent capacity at Escondida (ramp-up of Los Colorados
Extension project) partially offset by lower volumes from Olympic
Dam (smelter maintenance campaign) and Queensland Coal (challenging
roof conditions at Broadmeadow and geotechnical issues triggered by
wet weather impacts at Blackwater).
Growth............................... (170) Lower petroleum volumes due to Hurricane Harvey and Hurricane Nate,
and expected natural field decline, more than offset additional
wells put on line in the Eagle Ford, Permian and Haynesville.
-------
249
-------
Change in controllable cash costs/(iv)/:
Operating cash costs................. (854) Higher costs reflect: unfavourable fixed cost dilution at Olympic
Dam as a result of the smelter maintenance campaign; impact of
reduced volumes at Queensland Coal and Petroleum; and a favourable
change in estimated recoverable copper in the Escondida sulphide
leach pad in the prior period, partially offset by lower labour and
contractor costs at WAIO.
Exploration and business development. 64 Lower petroleum exploration expense reflects expensing of the
Burrokeet wells in the prior year.
-------
(790)
-------
Change in other costs:
Exchange rates....................... (353) Impact of the stronger Australian dollar and Chilean peso against
the US dollar.
Inflation............................ (223) Impact of inflation on the Group's cost base.
Fuel and energy...................... (16) Predominantly higher diesel prices at minerals assets.
Non-Cash............................. 229 Higher capitalisation of deferred stripping at Escondida and
increased underground mine development capitalisation at Olympic Dam
as development extends into the Southern Mine Area.
One-off items........................ 105 Reflects the power outage at Olympic Dam in the prior year.
-------
(258)
-------
Asset sales.............................. (201) Reflects divestment of 50 per cent interest in Scarborough and
Onshore US acreage in the prior year.
Ceased and sold operations............... 2
Other items.............................. 134 Higher average realised prices received by our equity accounted
investments and higher sales volumes from Antamina.
-------
Half year ended 31 December 2017 11,238
-------
The following table reconciles relevant factors with changes in the Group's
productivity:
Half year ended 31 December 2017 US$M
-------------------------------- -------
Change in controllable cash costs (790)
Change in volumes attributed to productivity 419
-----
Change in productivity in Underlying EBITDA (371)
Change in capitalised exploration (125)
-----
Change attributable to productivity measures (496)
-----
--------------------------------------------------------------------------------
News Release 8
Prices and exchange rates
The average realised prices achieved for our major commodities are summarised in
the following table:
H1 FY18 H1 FY18 H1 FY18
vs vs vs
Average realised prices/(1)/ H1 FY18 H1 FY17 H2 FY17 FY17 H1 FY17 H2 FY17 FY17
--------------------------------------- ------- ------- ------- ------- ------- ------- -------
Oil (crude and condensate) (US$/bbl)... 54 45 50 48 20% 8% 13%
Natural gas (US$/Mscf)/(2)/............ 3.54 3.21 3.48 3.34 10% 2% 6%
US natural gas (US$/Mscf).............. 2.84 2.79 2.98 2.88 2% (5%) (1%)
LNG (US$/Mscf)......................... 7.48 6.35 7.37 6.84 18% 1% 9%
Copper (US$/lb)........................ 3.20 2.41 2.70 2.54 33% 19% 26%
Iron ore (US$/wmt, FOB)................ 57 55 62 58 4% (8%) (2%)
Hard coking coal (HCC) (US$/t)......... 182 179 180 180 2% 1% 1%
Weak coking coal (WCC) (US$/t)......... 121 122 121 121 (1%) 0% 0%
Thermal coal (US$/t)/(3)/.............. 87 74 75 75 18% 16% 16%
Nickel metal (US$/t)................... 11,083 10,581 9,799 10,184 5% 13% 9%
(1) Based on provisional, unaudited estimates. Prices exclude third party
product and internal sales, and represent the weighted average of various
sales terms (for example: FOB, CIF and CFR), unless otherwise noted.
Includes the impact of provisional pricing and finalisation adjustments.
(2) Includes internal sales.
(3) Export sales only; excludes Cerrejon. Includes thermal coal sales from
metallurgical coal mines.
In Copper, the provisional pricing and finalisation adjustments increased
Underlying EBITDA by US$246 million in the December 2017 half year.
The following exchange rates relative to the US dollar have been applied in the
financial information:
Average Average
Half year ended Half year ended As at As at As at
31 December 2017 31 December 2016 31 December 2017 31 December 2016 30 June 2017
---------------- ---------------- ---------------- ---------------- ------------
Australian dollar/(1)/............ 0.78 0.75 0.78 0.72 0.77
Chilean peso...................... 638 663 615 667 663
(1) Displayed as US$ to A$1 based on common convention.
Depreciation, amortisation and impairments
Depreciation, amortisation and impairments increased by US$422 million to US$4.3
billion, reflecting impairment charges predominantly related to conveyors at
Escondida and higher depreciation following the commissioning of the Escondida
Water Supply project in June 2017.
Net finance costs
Net finance costs increased by US$93 million to US$670 million due to costs
related to the September 2017 bond repurchase program and higher benchmark
interest rates in the period. This was partially offset by a lower average debt
balance following the repayment on maturity of Group debt and the bond
repurchase program.
Taxation expense
Half year ended 31 December 2017 2016
----------------------------------- -----------------------------------
Profit Income Profit Income
before taxation tax expense before taxation tax expense
US$M US$M % US$M US$M %
---------------------------------- --------------- ----------- ------- --------------- ----------- -------
Statutory effective tax rate...... 6,066 (3,492) 57.6 5,480 (2,028) 37.0
Adjusted for:
Exchange rate movements........... -- (98) -- 82
Exceptional items................. 210 1,828 (9) 49
------- ------- ---- ------ ------- ----
Adjusted effective tax rate....... 6,276 (1,762) 28.1 5,471 (1,897) 34.7
------- ------- ---- ------ ------- ----
The Group's adjusted effective tax rate/(iii)/, which excludes the influence of
exchange rate movements and exceptional items, was 28.1 per cent (31 December
2016: 34.7 per cent). The adjusted effective tax rate reflects the impact of
higher profits from equity accounted investments and depletion allowances
claimed in the United States. As a result, the adjusted effective tax rate is
now expected to be in the range of 30 to 35 per cent for the 2018 financial
year.
Other royalty and excise arrangements which are not profit based are recognised
as operating costs within Profit before taxation. These amounted to US$986
million during the period (31 December 2016: US$963 million).
--------------------------------------------------------------------------------
BHP Results for the half year 9
ended 31 December 2017
On 22 December 2017, the US President signed the TCJA into law. The TCJA
(effective 1 January 2018) includes a broad range of tax reforms affecting the
Group, including, but not limited to, a reduction of the US corporate tax rate
from 35 per cent to 21 per cent and changes to international tax provisions. As
a result of the TCJA, the Group has recognised an exceptional income tax charge
of US$1,828 million (refer exceptional items footnote (2) below for further
details). Longer term, we expect US attributable profits to be positively
impacted by the lower US corporate tax rate.
Exceptional items
The following table sets out the exceptional items for the December 2017 half
year. Additional commentary is included on page 34.
Gross Tax Net
Half year ended 31 December 2017 US$M US$M US$M
-------------------------------- ------- -------- --------
Exceptional items by category
Samarco dam failure/(1)/......................... (210) -- (210)
US tax reform/(2)/............................... -- (1,828) (1,828)
---- ------ ------
Total ........................................... (210) (1,828) (2,038)
---- ------ ------
Attributable to non-controlling interests........ -- -- --
Attributable to BHP shareholders ................ (210) (1,828) (2,038)
(1) Financial impact of US$(210) million from the Samarco dam failure relates to
US$(50) million share of loss from US$(50) million funding provided during
the period, US$(29) million direct costs incurred by BHP Billiton Brasil
Ltda and other BHP entities, US$(44) million amortisation of discounting
impacting net finance costs and US$(87) million other movements in the
Samarco dam failure provision including foreign exchange. Refer to note 2
Exceptional items and note 10 Significant events - Samarco dam failure of
the Financial Report for further information.
(2) Financial impact of US$(1,828) million from US tax reform relates to
US$(898) million re-measurement of the Group's deferred tax position as a
result of the reduced US corporate income tax rate, US$(834) million
impairment of foreign tax credits due to reduced forecast utilisation,
US$(194) million net impact of tax charges on the deemed repatriation of
accumulated earnings of non-US subsidiaries, US$95 million recognition of
Alternative Minimum Tax Credits and US$3 million other impacts. Refer to
note 2 Exceptional items and note 5 Income tax expense of the Financial
Report for further information.
Dividend
Our Board today determined to pay an interim dividend of 55 US cents per share.
The interim dividend to be paid by BHP Billiton Limited will be fully franked
for Australian taxation purposes.
Events in respect of the interim dividend Date
----------------------------------------- -------------
Currency conversion into rand................................................... 2 March 2018
Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE) .... 6 March 2018
Ex-dividend Date JSE............................................................ 7 March 2018
Ex-dividend Date Australian Securities Exchange (ASX), London Stock
Exchange (LSE) and New York Stock Exchange (NYSE)............................. 8 March 2018
Record Date (including currency conversion and currency election
dates for ASX and LSE)........................................................ 9 March 2018
Payment Date.................................................................... 27 March 2018
BHP Billiton Plc shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their shareholdings
between the dates of 7 March and 9 March 2018 (inclusive), nor will transfers
between the UK register and the South African register be permitted between the
dates of 2 March and 9 March 2018 (inclusive). American Depositary Shares (ADSs)
each represent two fully paid ordinary shares and receive dividends accordingly.
Details of the currency exchange rates applicable for the dividend will be
announced to the relevant stock exchanges following conversion and will appear
on the Group's website.
Our Board has approved the establishment of a Dividend Reinvestment Plan
(involving on-market purchase) for implementation for the final dividend in the
2018 financial year. Subject to the terms and conditions of the Plan,
shareholders will be able to elect to use their cash dividend for the purchase
of BHP shares.
--------------------------------------------------------------------------------
News Release 10
Debt management and liquidity
During the December 2017 half year, the Group continued to focus on debt
reduction, with no new debt issued and an A$1.0 billion Australian bond repaid
at maturity. In addition, a bond repurchase program of US$2.9 billion was
completed on 22 September 2017. The total cost in relation to the repurchase
program was US$71 million, which has been reported in net finance costs. The
program was funded by BHP's strong cash position and targeted short-dated US
dollar, Euro and GBP bonds. The early repayment of the bonds has extended BHP's
average debt maturity profile. The repayment of maturing debt and the bond
repurchase program, partially offset by fair value adjustments, contributed to a
US$2.8 billion overall decrease in the Group's gross debt, from US$30.5 billion
at 30 June 2017 to US$27.7 billion at 31 December 2017.
At the subsidiary level, Escondida issued US$0.5 billion of new long-term debt
to fund capital expenditure and for general corporate purposes.
The Group has a US$6.0 billion commercial paper program backed by a US$6.0
billion revolving credit facility which expires in May 2021. As at 31 December
2017, the Group had no outstanding US commercial paper, no drawn amount under
the revolving credit facility and US$12.3 billion in cash and cash equivalents.
Corporate governance
On 23 August 2017, we announced the appointment of Terry Bowen and John Mogford
to the BHP Board as independent Non-executive Directors, effective 1 October
2017. We also announced that Grant King decided to not stand for election at the
2017 Annual General Meeting and he would be retiring from the Board on 31 August
2017, and that Malcolm Brinded decided to not stand for re-election at the 2017
Annual General Meeting with 18 October 2017 being his final day on the Board.
The current members of the Board's committees are:
Risk and Audit Nomination and Governance Remuneration Sustainability
Committee Committee Committee Committee
----------------------------- ---------------------------- ---------------------------- ---------------------------
Lindsay Maxsted (Chairman) Ken MacKenzie (Chairman) Carolyn Hewson (Chairman) Malcolm Broomhead (Chairman)
Anita Frew Malcolm Broomhead Shriti Vadera Ken MacKenzie
Wayne Murdy Carolyn Hewson Wayne Murdy John Mogford
Terry Bowen Shriti Vadera
--------------------------------------------------------------------------------------------------------------------
The Board and management regularly review the Dual Listed Company (DLC)
structure and our portfolio of assets so as to optimise long-term value for all
shareholders. We have considered unification of the DLC structure a number of
times over the past years, and will keep it under review. We would change the
DLC structure if it were in the best interests of all shareholders. Our view on
unification of the DLC structure is based on cost and benefit analysis.
Currently, we consider that the costs and risks of collapsing the DLC outweigh
the potential benefits.
--------------------------------------------------------------------------------
BHP Results for the half year 11
ended 31 December 2017
Segment summary/(1)/
A summary of performance for the December 2017 and December 2016 half years is
presented below.
Half year ended Net
31 December 2017 Underlying Underlying Exceptional operating Capital Exploration Exploration
US$M Revenue/(2)/ EBITDA/(3)/ EBIT/(3)/ items/(4)/ assets/(3)/ expenditure gross/(5)/ to profit/(6)/
------------------------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- --------------
Petroleum...................... 3,583 2,035 188 -- 22,290 612 378 208
Copper......................... 6,381 3,195 2,052 -- 23,983 993 19 19
Iron Ore....................... 7,221 4,307 3,430 (153) 19,135 470 41 10
Coal........................... 4,047 1,790 1,436 -- 9,904 185 7 7
Group and unallocated
items/(7)/................... 591 (89) (204) (13) 2,492 153 19 19
Inter-segment adjustment/(8)/.. (44) -- -- -- -- -- -- --
------ ------- ------ ------ ------ ------ ---- ----
Total Group.................... 21,779 11,238 6,902 (166) 77,804 2,413 464 263
------ ------- ------ ------ ------ ------ ---- ----
Half year ended Net
31 December 2016 Underlying Underlying Exceptional operating Capital Exploration Exploration
US$M Revenue/(2)/ EBITDA/(3)/ EBIT/(3)/ items assets/(3)/ expenditure gross/(5)/ to profit/(6)/
------------------------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- --------------
Petroleum...................... 3,302 2,000 360 -- 24,331 845 364 260
Copper......................... 4,209 1,744 914 -- 24,743 830 17 17
Iron Ore....................... 6,930 4,162 3,230 (55) 20,312 415 50 50
Coal........................... 3,927 2,011 1,628 164 10,335 103 3 3
Group and unallocated
items/(7)/................... 482 (21) (150) (34) 2,747 95 5 5
Inter-segment adjustment/(8)/ (54) -- -- -- -- -- -- --
------ ------- ------ ------ ------ ------ ---- ----
Total Group ................... 18,796 9,896 5,982 75 82,468 2,288 439 335
------ ------- ------ ------ ------ ------ ---- ----
(1) Group and segment level information is reported on a statutory basis which,
in relation to Underlying EBITDA, includes depreciation, amortisation and
impairments, net finance costs and taxation expense of US$318 million (2016:
US$267 million) related to equity accounted investments. It excludes
exceptional items of US$137 million (2016: US$48 million) related to share
of loss from equity accounted investments.
Group profit before taxation comprised Underlying EBITDA, exceptional items,
depreciation, amortisation and impairments of US$4,336 million (2016:
US$3,914 million) and net finance costs of US$670 million (2016: US$577
million).
(2) Revenue is based on Group realised prices and includes third party products.
Sale of third party products by the Group contributed revenue of US$774
million and Underlying EBITDA of US$31 million (2016: US$567 million and
US$49 million).
(3) We use various alternate performance measures to reflect our underlying
performance. Refer to page 7 for a reconciliation of Underlying EBITDA to
our statutory results and page 23 for the definitions and calculation
methodology of alternate performance measures used in reporting our
performance.
(4) Exceptional items of US$(166) million excludes net finance costs of US$(44)
million included in the total US$(210) million related to the Samarco dam
failure. Refer to note 2 Exceptional items for further information.
(5) Includes US$272 million capitalised exploration (2016: US$147 million).
(6) Includes US$71 million of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (2016
US$43 million).
(7) Group and unallocated items includes Functions, other unallocated operations
including Potash, Nickel West and consolidation adjustments. Revenue not
attributable to reportable segments comprises the sale of freight and fuel
to third parties. Exploration and technology activities are recognised
within the relevant segments.
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
-------------------------------- ------------ ----------- ---------- ----------- --------- ----------- ----------- --------------
Potash.......................... -- (76) 2 (78) 3,258 117 -- --
Nickel West..................... 577 71 39 32 (296) 27 19 19
Half year ended Net
31 December 2016 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
-------------------------------- ------------ ----------- ---------- ----------- --------- ----------- ----------- --------------
Potash.......................... -- (52) 6 (58) 2,983 68 -- --
Nickel West..................... 472 37 43 (6) (193) 22 5 5
(8) Comprises revenue of US$38 million generated by Petroleum (2016: US$43
million) and US$6 million generated by Iron Ore (2016: US$11 million).
--------------------------------------------------------------------------------
News Release 12
Petroleum
Underlying EBITDA for Petroleum increased by US$35 million to US$2.0 billion in
the December 2017 half year.
US$M
-----
Underlying EBITDA for the half year ended 31 December 2016............... 2,000
Net price impact/(1)/.................................................... 534
Change in volumes: growth................................................ (170)
Change in controllable cash costs........................................ (67)
Profit on sale of assets................................................. (187)
Other/(2)/............................................................... (75)
-----
Underlying EBITDA for the half year ended 31 December 2017............... 2,035
-----
(1) Average realised price: crude and condensate oil US$54/bbl (2016:
US$45/bbl); natural gas US$3.54/Mscf (2016: US$3.21/Mscf); LNG US$7.48/Mscf
(2016: US$6.35/Mscf).
(2) Other includes: exchange rate; inflation; ceased and sold operations; other
items. Other items includes the impact from revaluation of embedded
derivatives in Trinidad and Tobago gas contract of US$97 million loss (2016:
US$46 million loss).
Total petroleum production for the December 2017 half year decreased by seven
per cent to 99 MMboe due to the impact of Hurricane Harvey and Hurricane Nate on
US petroleum assets and natural field decline. Conventional production declined
by three per cent to 64 MMboe and Onshore US production declined by 13 per cent
to 35 MMboe.
Controllable cash costs increased by US$67 million and includes:
. US$91 million - unfavourable fixed cost dilution from declining volumes;
. US$61 million - planned maintenance activity at Atlantis, Macedon and
Pyrenees; and
. US$(81) million - lower exploration expenses due to the Burrokeet wells
write-off in the December 2016 half year.
Profit on sale of assets decreased by US$187 million reflecting the divestment
of a small portion of the Hawkville acreage, completed in the September 2017
quarter, more than offset by the sale of 50 per cent of BHP's interest in the
undeveloped Scarborough area gas fields in the prior period.
Conventional unit costs increased by 23 per cent to US$10.38 per barrel of oil
equivalent during the December 2017 half year, due to the impact of lower
volumes and unfavourable foreign exchange movements. Unit cost guidance for the
2018 financial year remains unchanged at approximately US$10 per barrel (based
on an exchange rate of AUD/USD 0.75).
Conventional petroleum unit costs/(1)/ H1 FY18 H2 FY17 H1 FY17 FY17
--------- --------- --------- ---------
Revenue..................................... 2,581 2,436 2,286 4,722
Underlying EBITDA........................... 1,622 1,552 1,580 3,132
Gross costs................................. 959 884 706 1,590
Less: exploration expense/(2)/.............. 137 256 215 471
Less: freight............................... 68 70 70 140
Less: other/(3)/............................ 90 (15) (135) (150)
Net costs................................... 664 573 556 1,129
Production (MMboe, equity share)............ 64 62 66 128
Cost per boe (US$)/(4)/..................... 10.38 9.24 8.42 8.82
(1) Conventional petroleum assets exclude Eagle Ford, Permian, Haynesville,
Fayetteville and divisional activities reported in Other.
(2) Exploration expense represents Conventional petroleum's share of total
exploration expense.
(3) Other includes non-cash profit on sales of assets, inventory movements,
foreign exchange and the impact from revaluation of embedded, derivatives in
the Trinidad and Tobago gas contract.
(4) H1 FY18 based on exchange rates of AUD/USD 0.78.
Guidance for production and unit costs for the 2018 financial year is also
detailed on page 3. Capital expenditure and project information is detailed on
pages 4 and 5.
--------------------------------------------------------------------------------
BHP Results for the half year 13
ended 31 December 2017
Onshore US development activity
Onshore US drilling and development expenditure for the December 2017 half year
was US$336 million (U$511 million on an activity basis), 23 per cent higher than
the same period last year reflecting an increase from three to nine rigs.
Liquids focused areas Gas focused areas
December 2017 half year --------------------- --------------------------
(December 2016 half year) Eagle Ford Permian Haynesville Fayetteville Total
------------------------- ---------- --------- ----------- ------------- -------------
Capital expenditure/(1)/... US$ billion 0.1 (0.1) 0.1 (0.1) 0.1 (0.0) 0.0 (0.0) 0.3 (0.3)
Rig allocation............. At period end 3 (1) 2 (1) 4 (1) 0 (0) 9 (3)
Net wells drilled and
completed/(2)/........... Period total 9 (43) 10 (15) 10 (0) 0 (2) 29 (60)
Net productive wells....... At period end 931 (942) 136 (118) 405 (394) 1,043 (1,042) 2,515 (2,496)
(1) Includes land acquisition, site preparation, drilling, completions, well
site facilities, mid-stream infrastructure and pipelines.
(2) Can vary between periods based on changes in rig activity and the inventory
of wells drilled but not yet completed at period end.
We continue to drill longer laterals and complete larger frac jobs. By changing
the well design, we enhanced staggered laterals and demonstrated commerciality
of Upper and Lower Eagle Ford co-development and confirmed first year production
improvements associated with larger completions in the Permian. These longer and
more complex laterals are reflected in an overall increase of our Onshore US
drilling and completion costs per well, but are more than offset by the
additional well productivity. During the December 2017 half year, our Onshore US
assets were free cash flow positive/(iii)/.
Cost per well (US$M) H1 FY18 H2 FY17 H1 FY17 FY17
-------------------- ------- ------- ------- ----
Black Hawk: Drilling cost......................... 2.5 2.4 1.8 2.0
Black Hawk: Completion cost....................... 4.3 2.6 2.7 2.7
Permian: Drilling cost............................ 2.9 3.1 2.9 2.9
Permian: Completion cost.......................... 4.2 4.3 2.2 2.8
Haynesville: Drilling cost........................ 3.7 3.1 3.5 3.3
Haynesville: Completion cost...................... 5.8 3.2 2.7 3.0
We expect to lower our rig count during the second half of the 2018 financial
year as rig contracts expire and we adjust our capital plans to optimise value
for our planned exit. Onshore US production volumes for the 2019 financial year
are expected to remain broadly unchanged from previous guidance, as enhanced
well performance offsets lower rig activity.
We continue to progress a number of alternatives to exit our Onshore US assets
for value. We have commenced marketing each of the fields and the data room for
the Fayetteville field has been opened. We continue preparing all appropriate
documentation ahead of data rooms for the remaining fields being opened in March
2018. We expect to receive trade sale bids during the June 2018 quarter,
evaluate and negotiate those bids in the September 2018 quarter and potentially
announce completed transactions in the first half of the 2019 financial year. In
parallel, we continue to explore potential asset swap opportunities and exit via
demerger or Initial Public Offering.
Petroleum exploration
Petroleum exploration expenditure for the December 2017 half year was US$378
million, of which US$137 million was expensed. Activity for the period was
largely focused in the deepwater Gulf of Mexico.
In the Gulf of Mexico, no commercial hydrocarbons were encountered at Scimitar.
The well was plugged and abandoned in February 2018, with the associated
exploration costs to be expensed in the second half of the 2018 financial year.
The Wildling-2 well and side track were successfully completed in the September
2017 quarter and found oil in multiple horizons. Evaluation is ongoing to assess
the scale of the discovery and we are preparing our appraisal plans for Wildling
with the expectation to continue drilling in the 2019 financial year.
In Mexico, the Exploration and Appraisal plan has been endorsed by Pemex and
approval from Mexico's National Hydrocarbon Commission was granted in February
2018. Planning continues for exploration and appraisal wells on Trion which are
expected to be drilled in the 2019 financial year.
In Trinidad and Tobago, we continue appraisal work in the Southern Gas region
(known as Magellan) to assess the potential commercialisation of the gas
discovery at LeClerc and follow-on potential at the Victoria and Concepcion
prospects. Preparations continue for Phase 2 deepwater exploration which is
expected to commence in the June 2018 quarter.
In Australia, the seismic survey in the Exmouth sub-basin is progressing to plan
with processed data to be delivered during the June 2018 quarter.
--------------------------------------------------------------------------------
News Release 14
Financial information for Petroleum for the December 2017 and December 2016 half
years is presented below.
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue/(1)/ EBITDA D&A EBIT assets expenditure gross/(2)/ to profit/(3)/
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- --------------
Australia Production Unit/(4)/.. 291 206 135 71 828 2
Bass Strait..................... 666 512 288 224 2,701 19
North West Shelf................ 663 497 116 381 1,573 80
Atlantis........................ 355 245 198 47 1,361 71
Shenzi.......................... 264 212 94 118 845 5
Mad Dog......................... 118 84 28 56 787 47
Eagle Ford...................... 591 352 580 (228) 5,681 113
Permian......................... 156 77 133 (56) 1,017 135
Haynesville..................... 126 9 81 (72) 2,845 82
Fayetteville.................... 119 29 37 (8) 854 4
Trinidad/Tobago................. 64 (60) 19 (79) 290 6
Algeria......................... 101 78 14 64 18 3
Exploration..................... -- (136) 98 (234) 1,174 --
Other/(5)(6)/................... 57 (59) 28 (87) 3,161 45
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum from Group
production.................... 3,571 2,046 1,849 197 23,135 612 378 208
----- ----- ----- ------ ------ ----- --- ---
Closed mines/(7)/............... -- (11) -- (11) (845) -- -- --
Third party products............ 20 2 -- 2 -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum................. 3,591 2,037 1,849 188 22,290 612 378 208
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(8)/.............. (8) (2) (2) -- -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum statutory
result........................ 3,583 2,035 1,847 188 22,290 612 378 208
----- ----- ----- ------ ------ ----- --- ---
Half year ended Net
31 December 2016 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue/(1)/ EBITDA D&A EBIT assets expenditure gross/(2)/ to profit/(3)/
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- --------------
Australia Production Unit/(4)/.. 308 263 142 121 1,025 15
Bass Strait..................... 543 410 95 315 3,073 85
North West Shelf................ 604 581 102 479 1,529 109
Atlantis........................ 288 230 206 24 1,641 76
Shenzi.......................... 244 183 100 83 1,085 35
Mad Dog......................... 90 70 27 43 685 35
Eagle Ford...................... 562 336 567 (231) 6,820 135
Permian......................... 165 56 155 (99) 1,036 120
Haynesville..................... 148 11 75 (64) 2,889 13
Fayetteville.................... 136 45 37 8 919 5
Trinidad/Tobago................. 46 (21) 13 (34) 432 136
Algeria......................... 104 76 18 58 99 10
Exploration..................... -- (217) 72 (289) 894 --
Other/(5)(6)/................... 57 (32) 33 (65) 3,044 71
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum from Group
production.................... 3,295 1,991 1,642 349 25,171 845 364 260
----- ----- ----- ------ ------ ----- --- ---
Closed mines/(7)/............... -- 8 -- 8 (840) -- -- --
Third party products............ 14 3 -- 3 -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum................. 3,309 2,002 1,642 360 24,331 845 364 260
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(8)/............. (7) (2) (2) -- -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum statutory
result........................ 3,302 2,000 1,640 360 24,331 845 364 260
----- ----- ----- ------ ------ ----- --- ---
(1) Petroleum revenue from Group production includes: crude oil US$1,903 million
(2016: US$1,701 million), natural gas US$920 million (2016: US$892 million),
LNG US$423 million (2016: US$419 million), NGL US$244 million (2016: US$208
million) and other US$73 million (2016: US$68 million).
(2) Includes US$241 million of capitalised exploration (2016: US$147 million).
(3) Includes US$71 million of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (2016:
US$43 million).
(4) Australia Production Unit includes Macedon, Pyrenees and Minerva.
(5) Predominantly divisional activities, business development, UK, Neptune and
Genesis. Also includes the Caesar oil pipeline and the Cleopatra gas
pipeline, which are equity accounted investments. The financial information
for the Caesar oil pipeline and the Cleopatra gas pipeline presented above,
with the exception of net operating assets, reflects BHP's share.
(6) Goodwill associated with Onshore US of US$3,009 million is included in Other
net operating assets (2016: US$3,026 million).
(7) Comprises closed mining and smelting operations in Canada and the United
States. Petroleum manages the closed mines due to their geographic location.
(8) Total Petroleum statutory result Revenue excludes US$8 million (2016: US$7
million) revenue related to the Caesar oil pipeline and the Cleopatra gas
pipeline. Total Petroleum statutory result Underlying EBITDA includes US$2
million (2016: US$2 million) D&A related to the Caesar oil pipeline and the
Cleopatra gas pipeline.
(9) Petroleum net operating assets have been restated for Trinidad and Tobago,
Exploration and Other to reflect the reallocation of exploration sundry
receivable and sundry creditor balance on a consistent basis with the 31
December 2017 half year. There is no change to the overall net operating
asset position.
--------------------------------------------------------------------------------
BHP Results for the half year 15
ended 31 December 2017
Copper
Underlying EBITDA for the December 2017 half year increased by US$1.5 billion to
US$3.2 billion.
US$M
-----
Underlying EBITDA for the half year ended 31 December 2016............... 1,744
Net price impact/(1)/.................................................... 1,348
Change in volumes: productivity.......................................... 453
Change in controllable cash costs........................................ (610)
Change in other costs:
Exchange rates........................................................ (135)
Inflation............................................................. (110)
Non-cash/(2)/......................................................... 253
One-off items/(3)/.................................................... 105
Other/(4)/............................................................... 147
-----
Underlying EBITDA for the half year ended 31 December 2017............... 3,195
-----
(1) Average realised price: copper US$3.20/lb (2016: US$2.41/lb).
(2) Non-cash includes: development stripping capitalisation and depletion.
(3) One-off items reflects the state-wide power outage and resultant shutdown at
Olympic Dam in the December 2016 half year.
(4) Other includes: fuel and energy; other items (including profit from equity
accounted investments).
Total copper production for the December 2017 half year increased by 17 per cent
to 833 kt due to increased volumes at Escondida (ramp-up of the Los Colorados
Extension project), which more than offset reduced volumes at Olympic Dam
(planned smelter maintenance campaign recently completed). Operations at Olympic
Dam continue to ramp-up to full-capacity during the March 2018 quarter, with
production guidance unchanged at 150 kt for the 2018 financial year.
Controllable cash costs increased by US$610 million and includes:
. US$114 million - unfavourable fixed cost dilution at Olympic Dam as a result
of the smelter maintenance campaign;
. US$106 million - increased labour and contractor costs at Olympic Dam,
primarily to support operating stability projects and expansion studies;
. US$206 million - a change in estimated recoverable copper contained in the
Escondida sulphide leach pad which benefited costs in the prior period; and
. US$195 million - ore inventory movements at Escondida and Pampa Norte.
Non-cash costs (including development stripping) decreased by US$253 million
reflecting:
. increased waste movement at Escondida and Pampa Norte reflected in higher
capitalised stripping; and
. increased underground mine capitalisation at Olympic Dam as mining expands
into the Southern Mine Area.
As a result, unit costs at our operated copper assets increased by 17 per cent
to US$1.27 per pound during the December 2017 half year including a 16 per cent
increase at Escondida to US$1.06 per pound partially due to unfavourable
exchange rate movements. Escondida unit cost guidance for the 2018 financial
year remains unchanged at approximately US$1.00 per pound (based on an exchange
rate of USD/CLP 663).
Escondida unit costs (US$M) H1 FY18 H2 FY17 H1 FY17 FY17
--------------------------- ------- ------- ------- ------
Revenue...................................................... 4,322 2,077 2,467 4,544
Underlying EBITDA............................................ 2,518 1,140 1,257 2,397
Gross costs.................................................. 1,804 937 1,210 2,147
Less: by-product credits..................................... 196 91 122 213
Less: freight................................................ 50 29 31 60
Less: treatment and refining charges......................... 210 117 185 302
Net costs.................................................... 1,348 700 872 1,572
Sales (kt, equity share)..................................... 578 330 437 767
Sales (Mlb, equity share).................................... 1,273 728 963 1,691
Cost per pound (US$)/(1)/.................................... 1.06 0.96 0.91 0.93
(1) H1 FY18 based on exchange rates of AUD/USD 0.78 and USD/CLP 638.
Guidance for production and unit costs for the 2018 financial year is also
detailed on page 3. Capital expenditure and project information is detailed on
pages 4 and 5.
--------------------------------------------------------------------------------
News Release 16
Financial information for Copper for the December 2017 and December 2016 half
years is presented below.
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
--------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Escondida/(1)/....................... 4,322 2,518 900 1,618 14,580 466
Pampa Norte/(2)/..................... 860 428 143 285 1,686 191
Antamina/(3)/........................ 746 495 57 438 1,254 103
Olympic Dam.......................... 479 27 97 (70) 6,657 334
Other/(3)(4)/........................ -- (83) 4 (87) (194) 2
------ ----- ----- ----- ------ -----
Total Copper from Group production... 6,407 3,385 1,201 2,184 23,983 1,096
------ ----- ----- ----- ------ -----
Third party products................. 720 23 -- 23 -- --
------ ----- ----- ----- ------ ----- ---- --
Total Copper......................... 7,127 3,408 1,201 2,207 23,983 1,096 19 19
------ ----- ----- ----- ------ ----- ---- --
Adjustment for equity accounted
investments/(5)/.................. (746) (213) (58) (155) -- (103) -- --
------ ----- ----- ----- ------ ----- ---- --
Total Copper statutory result........ 6,381 3,195 1,143 2,052 23,983 993 19 19
------ ----- ----- ----- ------ ----- ---- --
Half year ended Net
31 December 2016 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Escondida/(1)/....................... 2,467 1,257 546 711 15,362 592
Pampa Norte/(2)/..................... 624 255 174 81 1,812 128
Antamina/(3)/........................ 517 296 59 237 1,261 109
Olympic Dam.......................... 611 123 107 16 6,400 110
Other/(3)(4)/........................ -- (61) 4 (65) (92) --
------ ----- ----- ----- ------ -----
Total Copper from Group production... 4,219 1,870 890 980 24,743 939
------ ----- ----- ----- ------ -----
Third party products................. 507 33 -- 33 -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Copper......................... 4,726 1,903 890 1,013 24,743 939 17 17
------ ----- ----- ----- ------ ----- ---- ----
Adjustment for equity accounted
investments/(5)/................... (517) (159) (60) (99) -- (109) -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Copper statutory result........ 4,209 1,744 830 914 24,743 830 17 17
------ ----- ----- ----- ------ ----- ---- ----
(1) Escondida is consolidated under IFRS 10 and reported on a 100 per cent
basis.
(2) Includes Spence and Cerro Colorado.
(3) Antamina and Resolution are equity accounted investments and their financial
information presented above, with the exception of net operating assets,
reflects BHP's share.
(4) Predominantly comprises divisional activities, greenfield exploration and
business development. Includes Resolution.
(5) Total Copper statutory result Revenue excludes US$746 million (2016: US$517
million) revenue related to Antamina. Total Copper statutory result
Underlying EBITDA includes US$58 million (2016: US$60 million) D&A and
US$155 million (2016: US$99 million) net finance costs and taxation expense
related to Antamina and Resolution that are also included in Underlying
EBIT. Total Copper statutory result Capital expenditure excludes US$103
million (2016: US$109 million) related to Antamina.
--------------------------------------------------------------------------------
BHP Results for the half year 17
ended 31 December 2017
Iron Ore
Underlying EBITDA for the December 2017 half year increased by US$145 million to
US$4.3 billion.
US$M
-----
Underlying EBITDA for the half year ended 31 December 2016............... 4,162
Net price impact/(1)/.................................................... 143
Change in volumes: productivity.......................................... (1)
Change in controllable cash costs........................................ 137
Change in other costs:
Exchange rates......................................................... (60)
Inflation.............................................................. (41)
Other/(2)/............................................................... (33)
-----
Underlying EBITDA for the half year ended 31 December 2017............... 4,307
-----
(1) Average realised price: iron ore US$57/wmt, FOB (2016: US$55/wmt, FOB).
(2) Other includes: fuel and energy; non-cash; asset sales.
Total iron ore production for the December 2017 half year was in line with the
prior period at 117 Mt(x), as record production at Jimblebar and Mining Area C
was offset by the impact of lower opening stockpile levels following the Mt
Whaleback fire in June 2017 and planned maintenance.
BHP received regulatory approval to increase capacity at its Port Hedland
operations to 290 Mtpa (100 per cent basis) on 16 February 2018 and expects to
reach this run rate by the end of the 2019 financial year.
Controllable cash costs decreased by US$137 million, primarily due to continued
reductions in labour and contractor costs.
WAIO unit costs declined by one per cent to US$14.90 per tonne during the
December 2017 half year, despite the impact of a stronger Australian dollar. In
local currency terms, WAIO unit costs declined by six per cent.
Unit cost guidance for the 2018 financial year remains unchanged at less than
US$14 per tonne (based on an exchange rate of AUD/USD 0.75). In the medium term,
we expect to lower our unit costs to less than US$13 per tonne.
WAIO unit costs (US$M) H1 FY18 H2 FY17 H1 FY17 FY17
---------------------- ------- ------- ------- -------
Revenue......................................... 7,117 7,587 6,808 14,395
Underlying EBITDA............................... 4,265 4,884 4,117 9,001
Gross costs..................................... 2,852 2,703 2,691 5,394
Less: freight................................... 626 517 466 983
Less: royalties................................. 504 556 479 1,035
Net costs/(1)/.................................. 1,722 1,630 1,746 3,376
Sales (kt, equity share)........................ 115,543 115,200 116,008 231,208
Cost per tonne (US$)/(2)/....................... 14.90 14.15 15.05 14.60
(1) Includes exploration expense of US$0.08 per tonne (December 2016: US$0.41
per tonne) and private royalties of US$0.73 per tonne (December 2016:
US$0.67 per tonne).
(2) H1 FY18 based on exchange rate of AUD/USD 0.78.
South Flank feasibility study is progressing, with the project expected to be
submitted for Board approval in the middle of the 2018 calendar year. The
capital cost for the 80 Mtpa (100 per cent basis) sustaining mine is now
expected to be around US$45 per tonne, reflecting a stronger Australian dollar
and updated estimates as the project planning has progressed. The capital cost
fits within WAIO's previously indicated average sustaining capital expenditure
of US$4 per tonne (plus or minus 50 per cent in any given year) over the medium
term. The South Flank project, which will leverage and expand the existing
Mining Area C hub, will increase WAIO's average Fe grade from 61 per cent to 62
per cent and lump proportion for our overall product mix from approximately 25
per cent to 35 per cent, supporting WAIO's ability to benefit from sustained
higher premiums for lump and higher quality fines.
Guidance for production and unit costs for the 2018 financial year is also
detailed on page 3. Capital expenditure and project information is detailed on
pages 4 and 5.
--------------------------------------------------------------------------------
News Release 18
Financial information for Iron Ore for the December 2017 and December 2016 half
years is presented below.
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Western Australia Iron Ore............ 7,117 4,265 873 3,392 19,959 446
Samarco/(1)/.......................... -- -- -- -- (1,025) --
Other/(2)/............................ 76 36 4 32 201 24
------ ----- ----- ----- ------ -----
Total Iron Ore from Group production.. 7,193 4,301 877 3,424 19,135 470
------ ----- ----- ----- ------ -----
Third party products/(3)/............. 28 6 -- 6 -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore........................ 7,221 4,307 877 3,430 19,135 470 41 10
------ ----- ----- ----- ------ ----- ---- ----
Adjustment for equity accounted
investments......................... -- -- -- -- -- -- -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore statutory result....... 7,221 4,307 877 3,430 19,135 470 41 10
------ ----- ----- ----- ------ ----- ---- ----
Half year ended Net
31 December 2016 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Western Australia Iron Ore............ 6,808 4,117 929 3,188 21,246 357
Samarco/(1)/.......................... -- -- -- -- (1,094) --
Other/(2)/............................ 75 31 3 28 160 58
------ ----- ----- ----- ------ -----
Total Iron Ore from Group production.. 6,883 4,148 932 3,216 20,312 415
------ ----- ----- ----- ------ -----
Third party products/(3)/............. 47 14 -- 14 -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore........................ 6,930 4,162 932 3,230 20,312 415 50 50
------ ----- ----- ----- ------ ----- ---- ----
Adjustment for equity accounted
investments......................... -- -- -- -- -- -- -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore statutory result....... 6,930 4,162 932 3,230 20,312 415 50 50
------ ----- ----- ----- ------ ----- ---- ----
(1) Samarco is an equity accounted investment and its financial information
presented above, with the exception of net operating assets, reflects BHP
Billiton Brasil Ltda's share. All financial impacts following the Samarco
dam failure have been reported as exceptional items in both reporting
periods.
(2) Predominantly comprises divisional activities, towage services, business
development and ceased operations.
(3) Includes inter-segment and external sales of contracted gas purchases.
--------------------------------------------------------------------------------
BHP Results for the half year 19
ended 31 December 2017
Coal
Underlying EBITDA for the December 2017 half year decreased by US$221 million to
US$1.8 billion.
US$M
-----
Underlying EBITDA for the half year ended 31 December 2016............... 2,011
Net price impact/(1)/.................................................... 137
Change in volumes: productivity.......................................... (38)
Change in controllable cash costs........................................ (191)
Change in other costs:
Exchange rates........................................................ (99)
Inflation............................................................. (35)
Other/(2)/............................................................... 5
-----
Underlying EBITDA for the half year ended 31 December 2017............... 1,790
-----
(1) Average realised price: hard coking coal US$182/t (2016: US$179/t); weak
coking coal US$121/t (2016: US$122/t); thermal coal US$87/t (2016: US$74/t).
(2) Other includes: fuel and energy; asset sales; ceased and sold operations;
other items (including profit from equity accounted investments).
Metallurgical coal production decreased by four per cent to 20 Mt(x) as record
production at four Queensland Coal mines was offset by lower volumes at
Broadmeadow (roof conditions; expected to continue through the March 2018
quarter) and Blackwater (geotechnical issues triggered by wet weather). Guidance
for the 2018 financial year has been reduced to between 41 and 43 Mt.
Energy coal production increased by four per cent to 14 Mt(x) as a strong
performance at New South Wales Energy Coal (NSWEC) was offset by the impacts of
wet weather at Cerrejon.
Controllable cash costs increased by US$191 million and includes:
. US$134 million - primarily reflects unfavourable fixed cost dilution from
reduced volumes at Broadmeadow and Blackwater, and compensatory increased
production from higher cost pits, at BHP Billiton Mitsubishi Alliance (BMA);
and
. US$11 million - increased contractor activity partially offset by improved
ultra-class truck productivity at NSWEC.
Queensland Coal unit costs increased by 26 per cent to US$71 per tonne in the
December 2017 half year, including the impact of a stronger Australian dollar.
Unit costs for the 2018 financial year are now expected to be US$66 per tonne
(based on an exchange rate of AUD/USD 0.75), an increase from previous guidance
of US$59 per tonne, reflecting reduced Broadmeadow and Blackwater volumes,
increased production from higher cost pits and rising inflationary pressures.
Unit costs for the second half of the 2018 financial year are expected to be
US$63 per tonne. In the medium term, we expect to lower our unit costs to
approximately US$54 per tonne.
NSWEC unit costs increased by four per cent to US$48 per tonne in the December
2017 half year due to the impact of a stronger Australian dollar. Unit cost
guidance for the 2018 financial year remains unchanged at US$46 per tonne (based
on an exchange rate of AUD/USD 0.75). In the medium term, we expect to lower our
unit costs further to approximately US$40 per tonne.
Queensland Coal unit costs (US$M) H1 FY18 H2 FY17 H1 FY17 FY17
--------------------------------- ------- ------- ------- ------
Revenue........................................... 3,350 2,935 3,381 6,316
Underlying EBITDA................................. 1,504 1,433 1,823 3,256
Gross costs....................................... 1,846 1,502 1,558 3,060
Less: freight..................................... 64 57 54 111
Less: royalties................................... 321 296 335 631
Net costs......................................... 1,461 1,149 1,169 2,318
Sales (kt, equity share).......................... 20,516 18,130 20,716 38,846
Cost per tonne (US$)/(1)/......................... 71.21 63.38 56.43 59.67
(1) H1 FY18 based on an exchange rate of AUD/USD 0.78.
Guidance for production and unit costs for the 2018 financial year is also
detailed on page 3. Capital expenditure and project information is detailed on
pages 4 and 5.
--------------------------------------------------------------------------------
News Release 20
Financial information for Coal for the December 2017 and December 2016 half
years is presented below.
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Queensland Coal...................... 3,350 1,504 294 1,210 7,987 176
New Mexico........................... -- -- -- -- -- --
New South Wales Energy Coal/(2)/..... 750 304 92 212 1,035 10
Colombia/(2)/........................ 403 201 47 154 905 39
Other/(3)/........................... -- (53) 2 (55) (23) (1)
----- ------ ----- ----- ------ ----
Total Coal from Group production..... 4,503 1,956 435 1,521 9,904 224
----- ------ ----- ----- ------ ----
Third party products................. -- -- -- -- -- --
----- ------ ----- ----- ------ ---- --- ---
Total Coal........................... 4,503 1,956 435 1,521 9,904 224 7 7
----- ------ ----- ----- ------ ---- --- ---
Adjustment for equity accounted
investments/(4)(5)/................ (456) (166) (81) (85) -- (39) -- --
----- ------ ----- ----- ------ ---- --- ---
Total Coal statutory result.......... 4,047 1,790 354 1,436 9,904 185 7 7
----- ------ ----- ----- ------ ---- --- ---
Half year ended Net
31 December 2016 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Queensland Coal...................... 3,381 1,823 315 1,508 8,360 80
New Mexico/(1)/...................... 3 (6) 3 (9) -- 1
New South Wales Energy Coal/(2)/..... 584 187 77 110 1,120 5
Colombia/(2)/........................ 364 180 49 131 875 19
Other/(3)/........................... 8 (29) 4 (33) (20) 18
----- ------ ----- ----- ------ ----
Total Coal from Group production..... 4,340 2,155 448 1,707 10,335 123
----- ------ ----- ----- ------ ----
Third party products................. -- -- -- -- -- --
----- ------ ----- ----- ------ ---- --- ---
Total Coal........................... 4,340 2,155 448 1,707 10,335 123 3 3
----- ------ ----- ----- ------ ---- --- ---
Adjustment for equity accounted
investments/(4)(5)/................ (413) (144) (65) (79) -- (20) -- --
----- ------ ----- ----- ------ ---- --- ---
Total Coal statutory result.......... 3,927 2,011 383 1,628 10,335 103 3 3
----- ------ ----- ----- ------ ---- --- ---
(1) Includes the Navajo mine (divested in July 2016).
(2) Newcastle Coal Infrastructure Group and Cerrejon are equity accounted
investments and their financial information presented above, with the
exception of net operating assets, reflects BHP's share.
(3) Predominantly comprises divisional activities and IndoMet Coal (divested in
October 2016).
(4) Total Coal statutory result Revenue excludes US$403 million (2016: US$364
million) revenue related to Cerrejon. Total Coal statutory result Underlying
EBITDA includes US$47 million (2016: US$49 million) D&A and US$56 million
(2016: US$57 million) net finance costs and taxation expense related to
Cerrejon, that are also included in Underlying EBIT. Total Coal statutory
result Capital expenditure excludes US$39 million (2016: US$19 million)
related to Cerrejon.
(5) Total Coal statutory result Revenue excludes US$53 million (2016: US$49
million) revenue related to Newcastle Coal Infrastructure Group. Total Coal
statutory result excludes US$63 million (2016: US$38 million) Underlying
EBITDA, US$34 million (2016: US$16 million) D&A and US$29 million (2016:
US$22 million) Underlying EBIT related to Newcastle Coal Infrastructure
Group until future profits exceed accumulated losses. Total Coal statutory
result Capital expenditure excludes US$ nil (2016: US$1 million) related to
Newcastle Coal Infrastructure Group.
--------------------------------------------------------------------------------
BHP Results for the half year 21
ended 31 December 2017
Group and unallocated items
Underlying EBITDA loss for Group and unallocated items increased by US$68
million to US$89 million in the December 2017 half year, as a strong performance
at Nickel West was more than offset by increased corporate spend on technology
projects and unfavourable exchange rate impacts on corporate provision balances.
Nickel West's Underlying EBITDA increased by 92 per cent to US$71 million for
the December 2017 half year, predominantly due to higher prices and improved
mill utilisation and concentrator recoveries.
--------------------------------------------------------------------------------
News Release 22
The Financial Report on pages 27 to 48 has been prepared in accordance with IAS
34 'Interim Financial Reporting'. This news release including the financial
information is unaudited. Variance analysis relates to the relative financial
and/or production performance of BHP and/or its operations during the December
2017 half year compared with the December 2016 half year, unless otherwise
noted. Operations includes operated and non-operated assets, unless otherwise
noted.
The following abbreviations may have been used throughout this report: barrels
(bbl); billion cubic feet (bcf); barrels of oil equivalent (boe); billion tonnes
(Bt); cost and freight (CFR); cost, insurance and freight (CIF), dry metric
tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms per
tonne (kg/t); kilometre (km); metre (m); million barrels of oil equivalent
(MMboe); million barrels of oil equivalent per day (MMboe/d); thousand cubic
feet equivalent (Mcfe); million cubic feet per day (MMcf/d); million ounces per
annum (Mozpa); million pounds (Mlb); million tonnes (Mt); million tonnes per
annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent
(Mboe); thousand ounces (koz); thousand ounces per annum (kozpa); thousand
standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum
(ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).
The following footnotes apply to this Results Announcement:
(i) We use other financial measures (each of which is calculated with
reference to IFRS measures) to assess our performance, which are defined
below:
. Free cash flow - comprises net operating cash flows less net
investing cash flows.
. Gearing ratio - represents the ratio of net debt to net debt plus net
assets.
. Net debt - comprises Interest bearing liabilities less Cash and cash
equivalents for the Group at the reporting date.
(ii) We use various alternate performance measures to reflect our underlying
performance. Our two primary measures of performance are Underlying
attributable profit and Underlying EBITDA.
We believe these alternate performance measures provide useful
information, but should not be considered as an indication of, or as a
substitute for, Attributable profit and other statutory measures as an
indicator of actual operating performance or as an alternative to cash
flow as a measure of liquidity.
We consider Underlying attributable profit to be a key measure that
provides insight on the amount of profit available to distribute to
shareholders, which aligns to our purpose as outlined in Our Charter.
Underlying attributable profit is also the key performance indicator
against which short-term incentive outcomes for our senior executives are
measured and, in our view, is a relevant measure to assess the financial
performance of BHP for this purpose.
Underlying EBITDA is the key alternate performance measure that
management uses internally to assess the performance of the Group's
segments and make decisions on the allocation of resources. In the
Group's view, this is more relevant to capital intensive industries with
long-life assets.
. Underlying attributable profit is Profit after taxation attributable
to owners of the BHP Group (also referred to as Attributable
profit') excluding any exceptional items attributable to the owners
of the BHP Group.
. Underlying EBITDA is Earnings before net finance costs, depreciation,
amortisation and impairments, taxation expense, and exceptional
items. Underlying EBITDA includes net finance costs and taxation
expense, depreciation, amortisation and impairments related to equity
accounted investments of US$318 million (2016: US$267 million) and
excludes exceptional items of US$137 million (2016: US$48 million)
related to share of loss from equity accounted investments.
. Underlying EBIT is Underlying EBITDA, including depreciation,
amortisation and impairments of US$4,336 million for the December
2017 half year (2016: US$3,914 million). Underlying EBIT includes net
finance costs and taxation expense of US$211 million (2016: US$156
million) related to equity accounted investments and excludes
exceptional items of US$137 million (2016: US$48 million) related to
share of loss from equity accounted investments.
(iii) Further alternate performance measures are defined as follows:
. Adjusted effective tax rate - comprises Total taxation expense
excluding exceptional items and exchange rate movements included in
taxation expense divided by Profit before taxation and exceptional
items. Management believes this measure provides useful information
regarding the tax impacts from underlying operations.
. Net operating assets - represents operating assets net of operating
liabilities including the carrying value of equity accounted
investments and predominantly excludes cash balances, loans to
associates, interest bearing liabilities and deferred tax balances.
The carrying value of investments accounted for using the equity
accounted method represents the balance of the Group's investment in
equity accounted investments, with no adjustment for any cash
balances, interest bearing liabilities and deferred tax balances of
the equity accounted investment.
. Operating assets free cash flow - comprises net operating cash flows
adjusted for dividends received, net interest received/(paid) and net
income tax and royalty-related taxation refunded/(paid) less net
investing cash flows. Dividends received, net interest and net income
tax and royalty-related taxation are not allocated to operating asset
free cash flow as financing structures and tax regimes differ across
the Group's assets and substantial components of the Group's interest
and tax charges are levied at a Group level rather than an
operational level.
. Underlying basic earnings per share - represents underlying
attributable profit divided by the weighted average number of basic
shares.
. Underlying EBITDA margin - comprises Underlying EBITDA excluding
third party product EBITDA, divided by revenue excluding third party
product revenue.
. Underlying return on capital employed (ROCE) - represents annualised
attributable profit after tax excluding exceptional items and net
finance costs (after tax) divided by average capital employed.
Average capital employed is calculated as the average of net assets
less net debt for the last two reporting periods.
The method of calculation of the Principal factors that affect Underlying
EBITDA is as follows:
References to operation/s in each Principal factor excludes equity
accounted investments which are included within 'Other'.
. Change in sales prices - Change in average realised price for each
operation from the corresponding period to the current period,
multiplied by current period volumes.
. Price-linked costs - Change in price-linked costs for each operation
from the corresponding period to the current period, multiplied by
current period volumes.
. Productivity volumes - Change in volumes for each operation not
included in the Growth category from the corresponding period to the
current period, multiplied by the prior year Underlying EBITDA
margin. Used to determine changes in productivity in footnote /(iv)/.
. Growth volumes - Volume - Growth comprises Underlying EBITDA for
operations that are new or acquired in the current period minus
Underlying EBITDA for operations that are new or acquired in the
corresponding period, change in volumes for operations identified as
a Growth project from the corresponding period to the current period
multiplied by the prior year Underlying EBITDA margin, and change in
volume for our petroleum assets from the corresponding period to the
current period multiplied by the prior year Underlying EBITDA margin.
--------------------------------------------------------------------------------
BHP Results for the half year 23
ended 31 December 2017
. Controllable cash costs - comprises operating cash costs and
exploration and business development costs. Management believes this
measure provides useful information regarding the Group's financial
performance because it considers these expenses to be the principal
operating and overhead expenses that are most directly under the
Group's control. Used to determine changes in productivity in
footnote /(iv)/.
. Operating cash costs - Change in total costs, other than price-linked
costs, exchange rates, inflation on costs, fuel and energy costs,
non-cash costs and one-off items as defined below for each operation
from the corresponding period to the current period.
. Exploration and business development - Exploration and business
development expense in the current period minus exploration and
business development expense in the corresponding period.
. Exchange rates - Change in exchange rate multiplied by current period
local currency revenue and expenses. The majority of the Company's
selling prices are denominated in US dollars and so there is little
impact of exchange rate changes on Revenue.
. Inflation - Change in inflation rate applied to expenses, other than
depreciation and amortisation, price-linked costs, exploration and
business development expenses, expenses in ceased and sold operations
and expenses in new and acquired operations.
. Fuel and energy - Fuel and energy expense in the current period minus
fuel and energy expense in the corresponding period.
. Non-cash - Includes non-cash items mainly depletion of stripping
capitalised.
. One-off items - Change in costs exceeding a pre-determined threshold
associated with an unexpected event that had not occurred in the last
two years and is not reasonably likely to occur within the next two
years.
. Asset sales - Profit/loss on the sale of assets or operations in the
current period minus profit/loss on sale in the corresponding period.
. Ceased and sold operations - Underlying EBITDA for operations that
ceased or were sold in the current period minus Underlying EBITDA for
operations that ceased or were sold in the corresponding period.
. Other - Share of operating profit from equity accounted investments
for the period minus share of operating profit from equity accounted
investments in the corresponding period and variances not explained
by the above factors.
(iv) Represents changes in controllable cash costs (refer to footnote (iii)),
changes in volumes attributed to productivity (refer to definition of
'productivity volumes' in footnote (iii)) and changes in capitalised
exploration. Changes in capitalised exploration is capitalised
exploration in the current period less capitalised exploration in the
prior period.
(v) Capital and exploration expenditure represents purchases of property,
plant and equipment plus exploration expenditure from the Consolidated
Cash Flow Statement.
(vi) Conventional petroleum unit cash costs exclude inventory movements,
freight, and third party and exploration expense; WAIO, Queensland Coal
and NSWEC unit cash costs exclude freight and royalties; Escondida unit
cash costs include the grade decline and exclude freight and treatment
and refining charges and are net of by-product credits. 2018 financial
year unit cost guidance is based on exchange rates of AUD/USD 0.75 and
USD/CLP 663. Other forward-looking guidance is based on internal exchange
rate assumptions.
(vii) Copper equivalent production based on 2017 financial year average
realised prices.
(viii) Balances relating to hedging derivatives of external debt included within
net other financial assets/(liabilities) for the half year ended 31
December 2017 was US$0.1 billion (30 June 2017: US$(0.7) billion).The
movement of US$0.8 billion includes a non-cash fair value adjustment of
US$0.7 billion, which offsets in net debt, and US$0.1 billion of other
cash movements.
(ix) Maintenance capital includes non-discretionary spend for the following
purposes: deferred development and production stripping; risk reduction,
compliance and asset integrity.
(x) Iron ore production and guidance excludes production from Samarco; Energy
Coal production and guidance excludes production from New Mexico Coal
following divestments; Metallurgical coal production and guidance
excludes production from Haju following the divestment of IndoMet Coal.
Forward-looking statements
This release contains forward-looking statements, including statements
regarding: trends in commodity prices and currency exchange rates; demand for
commodities; plans, strategies and objectives of management; closure or
divestment of certain operations or facilities (including associated costs);
anticipated production or construction commencement dates; capital costs and
scheduling; operating costs and shortages of materials and skilled employees;
anticipated productive lives of projects, mines and facilities; provisions and
contingent liabilities; tax and regulatory developments.
Forward-looking statements can be identified by the use of terminology such as
'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe',
'expect', 'may', 'should', 'will', 'continue', 'annualised' or similar words.
These statements discuss future expectations concerning the results of
operations or financial condition, or provide other forward-looking statements.
These forward-looking statements are not guarantees or predictions of future
performance, and involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control, and which may cause actual
results to differ materially from those expressed in the statements contained in
this release. Readers are cautioned not to put undue reliance on forward-looking
statements.
For example, our future revenues from our operations, projects or mines
described in this release will be based, in part, upon the market price of the
minerals, metals or petroleum produced, which may vary significantly from
current levels. These variations, if materially adverse, may affect the timing
or the feasibility of the development of a particular project, the expansion of
certain facilities or mines, or the continuation of existing operations.
Other factors that may affect the actual construction or production commencement
dates, costs or production output and anticipated lives of operations, mines or
facilities include our ability to profitably produce and transport the minerals,
petroleum and/or metals extracted to applicable markets; the impact of foreign
currency exchange rates on the market prices of the minerals, petroleum or
metals we produce; activities of government authorities in some of the countries
where we are exploring or developing these projects, facilities or mines,
including increases in taxes, changes in environmental and other regulations and
political uncertainty; labour unrest; and other factors identified in the risk
factors discussed in BHP's filings with the U.S. Securities and Exchange
Commission (the 'SEC') (including in Annual Reports on Form 20-F) which are
available on the SEC's website at www.sec.gov.
Except as required by applicable regulations or by law, the Group does not
undertake any obligation to publicly update or review any forward-looking
statements, whether as a result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
Non-IFRS financial information
BHP results are reported under International Financial Reporting Standards
(IFRS). This release may also include certain non-IFRS (also referred to as
alternate performance measures) and other measures including Underlying
attributable profit, Underlying EBITDA, Underlying EBIT, Adjusted effective tax
rate, Controllable cash costs, Free cash flow, Gearing ratio, Net debt, Net
operating assets, Operating assets free cash flow, Principal factors that affect
Underlying EBITDA, Underlying basic earnings per share, Underlying EBITDA margin
and Underlying return on capital employed (ROCE). These measures are used
internally by management to assess the performance of our business and segments,
make decisions on the allocation of our resources and assess operational
management. Non-IFRS and other measures have not been subject to audit or review
and should not be considered as an indication of or alternative to an IFRS
measure of profitability, financial performance or liquidity.
--------------------------------------------------------------------------------
News Release 24
No offer of securities
Nothing in this release should be construed as either an offer, or a
solicitation of an offer, to buy or sell BHP securities in any jurisdiction, or
be treated or relied upon as a recommendation or advice by BHP.
Reliance on third party information
The views expressed in this release contain information that has been derived
from publicly available sources that have not been independently verified. No
representation or warranty is made as to the accuracy, completeness or
reliability of the information. This release should not be relied upon as a
recommendation or forecast by BHP.
No financial or investment advice - South Africa
BHP does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
BHP and its subsidiaries
In this release, the terms 'BHP', 'Group', 'BHP Group', 'we', 'us', 'our' and
'ourselves' are used to refer to BHP Billiton Limited, BHP Billiton Plc and,
except where the context otherwise requires, their respective subsidiaries as
defined in note 28 'Subsidiaries' in section 5.1 of BHP's 30 June 2017 Annual
Report on Form 20-F and in note 13 'Related undertaking of the Group' in section
5.2 of BHP's 30 June 2017 Annual Report on Form 20-F.
Sponsor: UBS South Africa (Pty) Limited
--------------------------------------------------------------------------------
BHP Results for the half year 25
ended 31 December 2017
Further information on BHP can be found at: bhp.com
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Neil Burrows Rob Clifford
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BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
LEI WZE1WSENV6JSZFK0JC28 LEI 549300C116EOWV835768
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Members of the BHP Group which is
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--------------------------------------------------------------------------------
News Release 26
[LOGO]
BHP
Financial Report
Half year ended
31 December 2017
--------------------------------------------------------------------------------
Contents
Half Year Financial Statements Page
Consolidated Income Statement for the half year ended 31 December 2017.. 29
Consolidated Statement of Comprehensive Income for the half year
ended 31 December 2017................................................ 29
Consolidated Balance Sheet as at 31 December 2017....................... 30
Consolidated Cash Flow Statement for the half year ended 31
December 2017......................................................... 31
Consolidated Statement of Changes in Equity for the half year
ended 31 December 2017................................................ 32
Notes to the Financial Information...................................... 33
1. Basis of preparation............................................. 33
2. Exceptional items................................................ 34
3. Interests in associates and joint venture entities............... 35
4. Net finance costs................................................ 35
5. Income tax expense............................................... 36
6. Deferred tax balances............................................ 37
7. Earnings per share............................................... 38
8. Dividends........................................................ 38
9. Financial risk management - Fair values.......................... 39
10. Significant events - Samarco dam failure......................... 42
11. Impairment of non-current assets - Onshore US.................... 47
12. Subsequent events................................................ 48
Directors' Report....................................................... 49
Directors' Declaration of Responsibility................................ 51
Lead Auditor's Independence Declaration under Section 307C of the
Corporations Act 2001................................................. 52
Independent Review Report............................................... 53
--------------------------------------------------------------------------------
Financial Report 28
Consolidated Income Statement for the half year ended 31 December 2017
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
Notes US$M US$M US$M
----- ---------- ----------- ------------
Revenue.............................................................. 21,779 18,796 38,285
Other income......................................................... 137 510 736
Expenses excluding net finance costs................................. (15,393) (13,387) (27,540)
Profit from equity accounted investments and related expenses........ 3 213 138 272
------- ------- -------
Profit from operations............................................... 6,736 6,057 11,753
------- ------- -------
Financial expenses................................................... (749) (639) (1,574)
Financial income..................................................... 79 62 143
------- ------- -------
Net finance costs.................................................... 4 (670) (577) (1,431)
------- ------- -------
Profit before taxation............................................... 6,066 5,480 10,322
------- ------- -------
Income tax expense................................................... (3,448) (1,902) (3,933)
Royalty-related taxation (net of income tax benefit)................. (44) (126) (167)
------- ------- -------
Total taxation expense............................................... 5 (3,492) (2,028) (4,100)
------- ------- -------
Profit after taxation................................................ 2,574 3,452 6,222
------- ------- -------
Attributable to non-controlling interests.......................... 559 248 332
Attributable to BHP shareholders................................... 2,015 3,204 5,890
------- ------- -------
Basic earnings per ordinary share (cents)............................ 7 37.9 60.2 110.7
Diluted earnings per ordinary share (cents).......................... 7 37.7 60.0 110.4
------- ------- -------
Dividends per ordinary share - paid during the period (cents)........ 8 43.0 14.0 54.0
Dividends per ordinary share - determined in respect of the period
(cents)............................................................ 8 55.0 40.0 83.0
------- ------- -------
The accompanying notes form part of this financial information.
Consolidated Statement of Comprehensive Income for the half year ended 31 December 2017
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
US$M US$M US$M
---------- ----------- ------------
Profit after taxation................................................ 2,574 3,452 6,222
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Available for sale investments:
Net valuation gains/(losses) taken to equity...................... 10 1 (1)
Cash flow hedges:
Gains/(losses) taken to equity.................................... 666 (666) 351
(Gains)/losses transferred to the income statement................. (623) 586 (432)
Exchange fluctuations on translation of foreign operations
taken to equity................................................... (1) 1 (1)
Tax recognised within other comprehensive income..................... (15) 21 24
------- ------- -------
Total items that may be reclassified subsequently to the
income statement.................................................. 37 (57) (59)
------- ------- -------
Items that will not be reclassified to the income statement:
Remeasurement gains/(losses) on pension and other post-retirement
obligations........................................................ 2 (18) 36
Tax recognised within other comprehensive income..................... (3) (12) (26)
------- ------- -------
Total items that will not be reclassified to the income
statement......................................................... (1) (30) 10
------- ------- -------
Total other comprehensive income/(loss).............................. 36 (87) (49)
------- ------- -------
Total comprehensive income........................................... 2,610 3,365 6,173
------- ------- -------
Attributable to non-controlling interests......................... 561 246 332
Attributable to BHP shareholders.................................. 2,049 3,119 5,841
------- ------- -------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
BHP Results for the half year 29
ended 31 December 2017
Consolidated Balance Sheet as at 31 December 2017
31 Dec 2017 30 June 2017
Notes US$M US$M
----- ----------- ------------
ASSETS
Current assets
Cash and cash equivalents ....................................... 12,322 14,153
Trade and other receivables ..................................... 3,542 2,836
Other financial assets .......................................... 51 72
Inventories ..................................................... 4,020 3,673
Current tax assets .............................................. 97 195
Other ........................................................... 111 127
-------- --------
Total current assets ............................................ 20,143 21,056
-------- --------
Non-current assets
Trade and other receivables ..................................... 319 803
Other financial assets .......................................... 1,501 1,281
Inventories ..................................................... 1,019 1,095
Property, plant and equipment ................................... 78,849 80,497
Intangible assets ............................................... 3,873 3,968
Investments accounted for using the equity method ............... 2,456 2,448
Deferred tax assets ............................................. 6 4,355 5,788
Other ........................................................... 67 70
-------- --------
Total non-current assets ........................................ 92,439 95,950
-------- --------
Total assets .................................................... 112,582 117,006
-------- --------
LIABILITIES
Current liabilities
Trade and other payables ........................................ 5,999 5,551
Interest bearing liabilities .................................... 2,033 1,241
Other financial liabilities ..................................... 217 394
Current tax payable ............................................. 1,438 2,119
Provisions ...................................................... 1,780 1,959
Deferred income ................................................. 63 102
-------- --------
Total current liabilities ....................................... 11,530 11,366
-------- --------
Non-current liabilities
Trade and other payables ........................................ 6 5
Interest bearing liabilities .................................... 25,700 29,233
Other financial liabilities ..................................... 633 1,106
Non-current tax payable ......................................... 2 134 --
Deferred tax liabilities ........................................ 6 3,526 3,765
Provisions ...................................................... 8,542 8,445
Deferred income ................................................. 350 360
-------- --------
Total non-current liabilities ................................... 38,891 42,914
-------- --------
Total liabilities ............................................... 50,421 54,280
-------- --------
Net assets ...................................................... 62,161 62,726
-------- --------
EQUITY
Share capital - BHP Billiton Limited ............................ 1,186 1,186
Share capital - BHP Billiton Plc ................................ 1,057 1,057
Treasury shares ................................................. (8) (3)
Reserves ........................................................ 2,391 2,400
Retained earnings ............................................... 52,351 52,618
-------- --------
Total equity attributable to BHP shareholders ................... 56,977 57,258
Non-controlling interests ....................................... 5,184 5,468
-------- --------
Total equity .................................................... 62,161 62,726
-------- --------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
Financial Report 30
Consolidated Cash Flow Statement for the half year ended 31 December 2017
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
US$M US$M US$M
---------- ----------- ------------
Operating activities
Profit before taxation................................................. 6,066 5,480 10,322
Adjustments for:
Non-cash or non-operating exceptional items.......................... 183 (48) 350
Depreciation and amortisation expense................................ 4,037 3,800 7,719
Impairments of property, plant and equipment, financial assets
and intangibles.................................................... 299 114 188
Net finance costs.................................................... 626 511 1,304
Share of operating profit of equity accounted investments............ (350) (186) (444)
Other................................................................ 307 67 290
Changes in assets and liabilities:
Trade and other receivables.......................................... (702) (638) 315
Inventories.......................................................... (271) (505) (679)
Trade and other payables............................................. 297 28 337
Provisions and other assets and liabilities.......................... (107) (138) (325)
------- ------- -------
Cash generated from operations......................................... 10,385 8,485 19,377
Dividends received..................................................... 370 340 636
Interest received...................................................... 80 77 164
Interest paid.......................................................... (558) (534) (1,149)
Settlement of cash management related instruments...................... (275) -- (140)
Net income tax and royalty-related taxation refunded................... 39 353 501
Net income tax and royalty-related taxation paid....................... (2,698) (1,024) (2,585)
------- ------- -------
Net operating cash flows............................................... 7,343 7,697 16,804
------- ------- -------
Investing activities
Purchases of property, plant and equipment............................. (2,413) (2,288) (4,252)
Exploration expenditure................................................ (464) (439) (968)
Exploration expenditure expensed and included in operating
cash flows........................................................... 192 292 612
Net investment and funding of equity accounted investments............. 271 (168) (234)
Proceeds from sale of assets........................................... 107 541 648
Proceeds from divestment of subsidiaries, operations and
joint operations, net of their cash.................................. -- 189 186
Other investing........................................................ (139) (49) (153)
------- ------- -------
Net investing cash flows............................................... (2,446) (1,922) (4,161)
------- ------- -------
Financing activities
Proceeds from interest bearing liabilities............................. 500 1,200 1,577
(Settlements)/proceeds from debt related instruments................... (227) -- 36
Repayment of interest bearing liabilities.............................. (4,010) (2,200) (7,120)
Distributions to non-controlling interests............................. (6) (8) (16)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts...... (96) (68) (108)
Dividends paid......................................................... (2,276) (748) (2,921)
Dividends paid to non-controlling interests............................ (944) (300) (581)
------- ------- -------
Net financing cash flows............................................... (7,059) (2,124) (9,133)
------- ------- -------
Net (decrease)/increase in cash and cash equivalents................... (2,162) 3,651 3,510
Cash and cash equivalents, net of overdrafts, at the
beginning of period................................................. 14,108 10,276 10,276
Foreign currency exchange rate changes on cash and cash equivalents.... 331 1 322
------- ------- -------
Cash and cash equivalents, net of overdrafts, at end of period......... 12,277 13,928 14,108
------- ------- -------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
BHP Results for the half year 31
ended 31 December 2017
Consolidated Statement of Changes in Equity for the half year ended 31 December 2017
Attributable to BHP shareholders
--------------------------------------------------------------------
Share capital Treasury shares
---------------- ----------------
Total equity
BHP BHP BHP BHP attributable to Non-
Billiton Billiton Billiton Billiton Retained BHP controlling Total
Limited Plc Limited Plc Reserves earnings shareholders interests equity
-------- -------- -------- -------- -------- -------- --------------- ----------- ------
Balance as at 1 July 2017 1,186 1,057 (2) (1) 2,400 52,618 57,258 5,468 62,726
----- ----- ---- ---- ----- ------ ------ ----- ------
Total comprehensive income.... -- -- -- -- 35 2,014 2,049 561 2,610
----- ----- ---- ---- ----- ------ ------ ----- ------
Transactions with owners:
Purchase of shares by ESOP
Trusts...................... -- -- (87) (9) -- -- (96) -- (96)
Employee share awards
exercised net of employee
contributions............... -- -- 81 10 (100) 9 -- -- --
Employee share awards
forfeited................... -- -- -- -- (1) 1 -- -- --
Accrued employee entitlement
for unexercised awards...... -- -- -- -- 57 -- 57 -- 57
Distribution to
non-controlling interests... -- -- -- -- -- -- -- (6) (6)
Dividends..................... -- -- -- -- -- (2,291) (2,291) (839) (3,130)
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 31 December
2017........................ 1,186 1,057 (8) - 2,391 52,351 56,977 5,184 62,161
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 1 July 2016..... 1,186 1,057 (7) (26) 2,538 49,542 54,290 5,781 60,071
----- ----- ---- ---- ----- ------ ------ ----- ------
Total comprehensive income.... -- -- -- -- (57) 3,176 3,119 246 3,365
----- ----- ---- ---- ----- ------ ------ ----- ------
Transactions with owners:
Purchase of shares by ESOP
Trusts...................... -- -- (66) (2) -- -- (68) -- (68)
Employee share awards
exercised net of employee
contributions and other
adjustments................. -- -- 69 21 (119) 29 -- -- --
Employee share awards
forfeited................... -- -- -- -- (17) 17 -- -- --
Accrued employee
entitlement for
unexercised awards.......... -- -- -- -- 51 -- 51 -- 51
Distribution to
non-controlling interests... -- -- -- -- -- -- -- (8) (8)
Dividends..................... -- -- -- -- -- (743) (743) (215) (958)
Divestment of subsidiaries,
operations and
joint operations............ -- -- -- -- -- -- -- (28) (28)
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 31 December
2016........................ 1,186 1,057 (4) (7) 2,396 52,021 56,649 5,776 62,425
----- ----- ---- ---- ----- ------ ------ ----- ------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
Financial Report 32
Notes to the Financial Information
1. Basis of preparation
This general purpose financial report for the half year ended 31 December 2017
is unaudited and has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards Board (IASB) and
as adopted by the European Union (EU), AASB 134 'Interim Financial Reporting' as
issued by the Australian Accounting Standards Board (AASB) and the Disclosure
and Transparency Rules of the Financial Conduct Authority in the United Kingdom
and the Australian Corporations Act 2001 as applicable to interim financial
reporting.
The half year financial statements represent a 'condensed set of financial
statements' as referred to in the UK Disclosure and Transparency Rules issued by
the Financial Conduct Authority. Accordingly, they do not include all of the
information required for a full annual report and are to be read in conjunction
with the most recent annual financial report. The comparative figures for the
financial year ended 30 June 2017 are not the statutory accounts of the Group
for that financial year. Those accounts, which were prepared under IFRS, have
been reported on by the Company's auditor and delivered to the registrar of
companies. The auditor has reported on those accounts; the report was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain statements under Section 498 (2) or (3) of the UK Companies Act 2006.
The half year financial statements have been prepared on the basis of the
accounting policies and methods of computation consistent with those applied in
the 30 June 2017 annual financial statements contained within the Annual Report
of the Group.
The directors have made an assessment of the Group's ability to continue as a
going concern and consider it appropriate to adopt the going concern basis of
accounting in preparing the half year financial statements.
The following new significant accounting standards are not yet effective, but
may have an impact on the Group in financial years commencing on or after 1
January 2018:
Application
date for the
Application date financial year
Title of standard Summary of impact on the Financial Statements of standard commencing
------------------- ------------------------------------------------------------- ---------------- ---------------
IFRS 15/AASB 15 Initial implementation activities focused on understanding 1 January 2018 1 July 2018
'Revenue from the standard contractual arrangements across the Group's
Contracts with principal revenue streams, particularly key terms and
Customers' conditions which may impact revenue recognition.
During FY2018, detailed reviews of individual contracts
across the Groups key commodities has commenced. To date,
no significant measurement differences have been identified
in addition to those outlined in the Groups Annual Report
for the year ended 30 June 2017.
------------------------------------------------------------------------------------------------------------------
IFRS 9/AASB 9 Implementation activities to date have focused on the 1 January 2018 1 July 2018
'Financial Groups Treasury and Marketing operations, which hold the
Instruments' majority of the Groups financial instruments.
During FY2018, detailed analysis has commenced focusing on
changes to the calculation of credit loss provisions on
financial assets, with no significant impacts being
identified to date. Application of the revised hedge
accounting model and other impacts of the standard continue
to be assessed.
------------------------------------------------------------------------------------------------------------------
IFRS 16/AASB 16 A detailed review of contracts has commenced to identify 1 January 2019 1 July 2019
'Leases' leases and support the quantification of financial impacts.
An assessment of likely system requirements and processes is
ongoing.
------------------------------------------------------------------------------------------------------------------
In addition to the above, other accounting standards, amendments and
interpretations that have been issued and will be applicable in future periods
are subject to ongoing assessment, however no significant impacts have been
identified to date.
These standards have not been applied in the preparation of these half year
financial statements.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency and the functional currency of the majority of its
operations is US dollars as this is the principal currency of the economic
environment in which it operates. Amounts in this financial information have,
unless otherwise indicated, been rounded to the nearest million dollars.
--------------------------------------------------------------------------------
BHP Results for the half year 33
ended 31 December 2017
2. Exceptional items
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and amount is considered
material to the Financial Statements. Such items included within the Group's
profit for the half year are detailed below:
Gross Tax Net
Half year ended 31 December 2017 US$M US$M US$M
-------------------------------- ----- ------- ------
Exceptional items by category
Samarco dam failure......................................... (210) -- (210)
US tax reform............................................... -- (1,828) (1,828)
Total....................................................... (210) (1,828) (2,038)
---- ------- ------
Attributable to non-controlling interests................... -- -- --
Attributable to BHP shareholders............................ (210) (1,828) (2,038)
---- ------- ------
Samarco Mineracao SA (Samarco) dam failure
The exceptional loss of US$210 million related to the Samarco dam failure in
November 2015 comprises the following:
Half year ended 31 December 2017 US$M
-------------------------------- ----
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP
entities in relation to the Samarco dam failure.......................... (29)
Loss from equity accounted investments and related expenses:
Share of loss relating to the Samarco dam failure.......................... (50)
Samarco dam failure provision.............................................. (87)
Net finance costs............................................................ (44)
----
Total/(1)/................................................................... (210)
----
(1) Refer to note 10 Significant events - Samarco dam failure for further
information.
US tax reform
On 22 December 2017, the US President signed the Tax Cuts and Jobs Act (the
TCJA) into law. The TCJA (effective 1 January 2018) includes a broad range of
tax reforms affecting the Group, including, but not limited to, a reduction in
the US corporate tax rate from 35 per cent to 21 per cent and changes to
international tax provisions.
Following enactment of the TCJA, the Group has recognised an exceptional income
tax charge of US$1,828 million, primarily relating to the reduced US corporate
income tax rate, which resulted in re-measurement of the Group's deferred tax
position and impairment of foreign tax credits due to reduced forecast
utilisation, together with tax charges on the deemed repatriation of accumulated
earnings of non-US subsidiaries.
Half year ended 31 December 2017 US$M
-------------------------------- ----
Re-measurement of deferred taxes as a result of reduced US
corporate income tax rate................................................ (898)
Impairment of foreign tax credits.......................................... (834)
Net impact of tax charges on deemed repatriation of accumulated earnings
of non-US subsidiaries/(1)/.............................................. (194)
Recognition of Alternative Minimum Tax Credits............................. 95
Other impacts.............................................................. 3
------
Total/(2)/................................................................. (1,828)
------
(1) Includes US$(134) million to be settled over a period greater than 12 months
and classified as a non-current tax payable on the face of the balance
sheet.
(2) Refer to note 5 Income tax expense for further information.
Gross Tax Net
Half year ended 31 December 2016 US$M US$M US$M
-------------------------------- ------ ------ -------
Exceptional items by category
Samarco dam failure................................ (155) -- (155)
Cancellation of the Caroona exploration licence.... 164 (49) 115
---- ---- -----
Total.............................................. 9 (49) (40)
---- ---- -----
Attributable to non-controlling interests.......... -- -- --
Attributable to BHP shareholders................... 9 (49) (40)
---- ---- -----
--------------------------------------------------------------------------------
Financial Report 34
2. Exceptional items (continued)
Gross Tax Net
Year ended 30 June 2017 US$M US$M US$M
-------------------------------- ------ ------ -------
Exceptional items by category
Samarco dam failure................................ (381) -- (381)
Escondida industrial action........................ (546) 179 (367)
Cancellation of the Caroona exploration licence.... 164 (49) 115
Withholding tax on Chilean dividends............... -- (373) (373)
---- ---- ------
Total.............................................. (763) (243) (1,006)
---- ---- ------
Attributable to non-controlling interests
- Escondida industrial action.................... (232) 68 (164)
Attributable to BHP shareholders................... (531) (311) (842)
---- ---- ------
3. Interests in associates and joint venture entities
The Group's major shareholdings in associates and joint venture entities,
including their profit/(loss), are listed below:
Profit/(loss)
Ownership interest at the from equity accounted investments
Group's reporting date/(1)/ related and expenses
--------------------------- --------------------------------------------
31 Dec 31 Dec 30 June Half year ended Half year ended Year ended
2017 2016 2017 31 Dec 2017 31 Dec 2016 30 June 2017
% % % US$M US$M US$M
-------- -------- --------- --------------- --------------- ------------
Share of operating profit/(loss) of
equity accounted investments:
Carbones del Cerrejun LLC.................. 33.33 33.33 33.33 87 64 129
Compania Minera Antamina SA................ 33.75 33.75 33.75 282 138 341
Samarco Mineracao SA/(2)(3)/............... 50.00 50.00 50.00 (50) (61) (134)
Other...................................... (19) (16) (26)
----- ----- -----
Share of operating profit of equity
accounted investments.................... 300 125 310
----- ----- -----
Samarco dam failure provision
(expense)/release/(2)/................... (87) 13 (38)
----- ----- -----
Profit from equity accounted investments
and related expenses..................... 213 138 272
----- ----- -----
(1) The ownership interest at the Group's and the associates and joint venture
entities' reporting dates are the same.
(2) Refer to note 10 Significant events - Samarco dam failure for further
information. Financial impact of US$(210) million from the Samarco dam
failure relates to US$(50) million share of loss from US$(50) million
funding provided during the period, US$(29) million direct costs incurred by
BHP Billiton Brasil Ltda and other BHP entities, US$(44) million
amortisation of discounting impacting net finance costs and US$(87) million
other movements in the Samarco dam failure provision including foreign
exchange.
(3) As the carrying value has been previously written down to US$ nil, any
additional share of Samarco's losses are only recognised to the extent BHP
Billiton Brasil Ltda has an obligation to fund the losses or investment
funding is provided. BHP Billiton Brasil Ltda has provided US$(50) million
funding during the period and recognised additional share of losses of
US$(50) million.
4. Net finance costs
Half year Half year
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M
----------- ----------- ------------
Financial expenses
Interest on bank loans, overdrafts and all other borrowings........... 558 558 1,131
Interest capitalised at 3.86% (30 June 2017: 3.25%;
31 December 2016: 3.08%)/(1)/....................................... (59) (53) (113)
Discounting on provisions and other liabilities....................... 223 238 462
Fair value change on hedged loans..................................... 93 (1,133) (1,185)
Fair value change on hedging derivatives.............................. (26) 1,020 1,244
Exchange variations on net debt....................................... (75) (4) (23)
Other financial expenses.............................................. 35 13 58
----- ------ ------
749 639 1,574
Financial income
Interest income....................................................... (79) (62) (143)
----- ------ ------
Net finance costs..................................................... 670 577 1,431
----- ------ ------
(1) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where
financed through general borrowings, at a capitalisation rate representing
the average interest rate on such borrowings.
--------------------------------------------------------------------------------
BHP Results for the half year 35
ended 31 December 2017
5. Income tax expense
Half year Half year
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M
----------- ----------- ------------
Total taxation expense comprises:
Current tax expense............................................................. 2,331 1,956 4,288
Deferred tax expense/(benefit).................................................. 1,161 72 (188)
------ ------ -----
3,492 2,028 4,100
------ ------ -----
Half year Half year
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M
----------- ----------- ------------
Factors affecting income tax expense for the period
Income tax expense differs to the standard rate of corporation
tax as follows:
Profit before taxation......................................................... 6,066 5,480 10,322
Tax on profit at Australian prima facie tax rate of 30 per cent................ 1,820 1,644 3,097
Impact of US tax reform
Tax on remitted and unremitted foreign earnings/(1)/........................... 194 -- --
Non-tax effected operating losses and capital gains............................ 834 -- --
Tax rate changes............................................................... 898 -- --
Recognition of previously unrecognised tax assets.............................. (95) -- --
Other.......................................................................... (3) -- --
------ ------ -------
Subtotal....................................................................... 1,828 -- --
Other items not related to US tax reform
Tax on remitted and unremitted foreign earnings................................ 221 9 478
Non-tax effected operating losses and capital gains............................ 81 101 259
Tax rate changes............................................................... 16 4 25
Amounts (over)/under provided in prior years................................... (26) 130 199
Tax effect of profit from equity accounted investments and
related expenses/(2)/........................................................ (64) (41) (82)
Investment and development allowance........................................... (81) (58) (53)
Foreign exchange adjustments................................................... (98) 82 88
Impact of tax rates applicable outside of Australia............................ (280) (81) (189)
Recognition of previously unrecognised tax assets.............................. (24) (18) (106)
Other.......................................................................... 55 130 217
------ ------ -------
Income tax expense............................................................. 3,448 1,902 3,933
------ ------ -------
Royalty-related taxation (net of income tax benefit)........................... 44 126 167
------ ------ -------
Total taxation expense......................................................... 3,492 2,028 4,100
------ ------ -------
(1) Comprising US$797 million repatriation tax and US$603 million of previously
unrecognised tax credits.
(2) The profit from equity accounted investments and related expenses is net of
income tax. This item removes the prima facie tax effect on such profits and
related expenses.
The Group operates across many tax jurisdictions. Application of tax law can be
complex and requires judgement to assess risk and estimate outcomes,
particularly in relation to the Group's cross-border operations and
transactions.
US tax reform
As per note 2 - Exceptional items, the impact of the TCJA has been included in
the Financial Statements. The TCJA includes a number of complex provisions, the
application of which are potentially subject to further implementation and
regulatory guidance, and possible elections. Judgements are required about the
application of the TCJA and its interaction with income tax accounting
principles.
--------------------------------------------------------------------------------
Financial Report 36
5. Income tax expense (continued)
Key judgements and estimates
The Group has made preliminary determinations, based on currently available
implementation guidance. However, judgements made are subject to risk and
uncertainty, hence there is a possibility that changes in circumstances or
future regulatory guidance may alter the judgements made, which may potentially
impact the amount of deferred or current taxes recognised on the balance sheet
and the amount of other tax balances not yet recognised.
The significant judgements and estimates include:
. The TCJA requires mandatory deemed repatriation of post-1986 undistributed
earnings and profits from specific non-US subsidiaries. In assessing the
potential tax charge, the Group has made certain assumptions as to offsets
available under the TCJA, including the use of available foreign tax credits
to partially offset the deemed repatriation tax liability.
. The US will continue to tax foreign income from partnerships on a worldwide
basis with the ability to offset US tax liabilities on foreign earnings with
a credit for taxes paid in foreign jurisdictions. The reduction in the US
corporate tax rate and the revised differential in tax rates with other
jurisdictions impacts the forecasted utilisation of these foreign tax
credits. The Group has made certain assumptions as to the utilisation of
available foreign tax credits based on an assessment of probable future US
income tax.
Where further clarifying regulatory guidance is issued, this may potentially
impact the assumptions made and result in a different outcome.
6. Deferred tax balances
The movement for the period in the Group's net deferred tax position is as
follows:
31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M
----------- ----------- ------------
Net deferred tax asset
At the beginning of the period................................................. 2,023 1,823 1,823
Income tax (charge)/credit recorded in the income statement.................... (1,161) (72) 188
Income tax (charge)/credit recorded directly in equity......................... (13) 22 12
Other movement................................................................. (20) 48 --
------ ------ ------
At the end of the period....................................................... 829 1,821 2,023
------ ------ ------
For recognition and measurement refer to note 5 Income tax expense.
The composition of the Group's net deferred tax assets and liabilities
recognised in the balance sheet and the deferred tax expense charged/(credited)
to the income statement is as follows:
Charged/(credited) to the income
Deferred tax assets Deferred tax liabilities statement
------------------------ ----------- ------------ ------------------------------------
Half year Half year
ended ended Year ended
31 Dec 2017 30 June 2017 31 Dec 2017 30 June 2017 31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M US$M US$M US$M US$M
----------- ------------ ----------- ------------ ----------- ----------- ------------
Type of temporary difference
Depreciation................................ (2,555) (3,454) 1,384 1,411 (925) 161 391
Exploration expenditure..................... 515 543 -- -- 28 (60) (22)
Employee benefits........................... 309 379 (2) 3 64 1 (37)
Closure and rehabilitation.................. 1,614 1,809 (206) (230) 218 20 (151)
Resource rent tax........................... 491 559 1,441 1,614 (104) (99) (189)
Other provisions............................ 126 131 (1) (1) 4 1 14
Deferred income............................. (15) (2) (1) (10) 22 5 3
Deferred charges............................ (405) (443) 285 322 (76) (38) (77)
Investments, including foreign tax credits.. 660 1,145 600 648 418 46 (17)
Foreign exchange gains and losses........... (78) (87) 36 69 (43) (30) (77)
Tax losses.................................. 3,784 5,352 -- -- 1,569 (256) (381)
Other....................................... (91) (144) (10) (61) (14) 321 355
----- ----- ----- ----- ----- ---- ----
Total ...................................... 4,355 5,788 3,526 3,765 1,161 72 (188)
----- ----- ----- ----- ----- ---- ----
The Group had unrecognised deferred tax assets of US$1,682 million at 31
December 2017 (30 June 2017: US$856 million) and unrecognised deferred tax
liabilities of US$2,318 million (30 June 2017: US$2,500 million) associated with
investments in subsidiaries. The Group's unrecognised deferred tax assets
increased by US$834 million and unrecognised deferred tax liabilities decreased
by US$192 million due to the impact of US tax reform at 31 December 2017.
--------------------------------------------------------------------------------
BHP Results for the half year 37
ended 31 December 2017
7. Earnings per share
Half year Half year
ended ended Year ended
31 Dec 2017 31 Dec 2016 30 June 2017
----------- ----------- ------------
Earnings attributable to BHP shareholders (US$M)................. 2,015 3,204 5,890
Weighted average number of shares - Basic (Million)/(1)/......... 5,323 5,322 5,323
Weighted average number of shares - Diluted (Million)/(2)/....... 5,338 5,336 5,336
Basic earnings per ordinary share (US cents)/(3)/................ 37.9 60.2 110.7
Diluted earnings per ordinary share (US cents)/(3)/.............. 37.7 60.0 110.4
(1) The calculation of the number of ordinary shares used in the computation of
basic earnings per share is the aggregate of the weighted average number of
ordinary shares of BHP Billiton Limited and BHP Billiton Plc outstanding
during the period after deduction of the number of shares held by the
Billiton Employee Share Ownership Plan Trust and the BHP Billiton Limited
Employee Equity Trust.
(2) For the purposes of calculating diluted earnings per share, the effect of 15
million of dilutive shares has been taken into account for the half year
ended 31 December 2017 (31 December 2016: 14 million shares; 30 June 2017:
13 million shares). The Group's only potential dilutive ordinary shares are
share awards granted under employee share ownership plans. Diluted earnings
per share calculation excludes instruments which are considered
antidilutive.
At 31 December 2017, there are no instruments which are considered
antidilutive (31 December 2016: nil; 30 June 2017: nil).
(3) Each American Depositary Share represents twice the earnings for BHP
ordinary shares.
8. Dividends
Half year ended Half year ended Year ended
31 Dec 2017 31 Dec 2016 30 June 2017
------------------- ------------------ -------------------
Per share Total Per share Total Per share Total
US cents US$M US cents US$M US cents US$M
----------- ------- ----------- ------ ----------- -------
Dividends paid during the period/(1)/
Prior year final dividend................ 43.0 2,291 14.0 749 14.0 749
Interim dividend......................... N/A -- N/A -- 40.0 2,130
---- ----- ---- ---- ----- -----
43.0 2,291 14.0 749 54.0 2,879
---- ----- ---- ---- ----- -----
(1) 5.5 per cent dividend on 50,000 preference shares of(pound)1 each determined
and paid annually (31 December 2016: 5.5 per cent; 30 June 2017: 5.5 per
cent).
Subsequent to the half year ended 31 December 2017, on 20 February 2018, BHP
Billiton Limited and BHP Billiton Plc determined an interim dividend of 55 US
cents per share (US$2,928 million), which will be paid on 27 March 2018.
At 31 December 2017, BHP Billiton Limited had 3,211 million ordinary shares on
issue and held by the public and BHP Billiton Plc had 2,112 million ordinary
shares on issue and held by the public. No shares in BHP Billiton Limited were
held by BHP Billiton Plc at 31 December 2017 (31 December 2016: nil, 30 June
2017: nil).
Dividends paid during the period differs from the amount of dividends paid in
the Cash Flow Statement as a result of foreign exchange gains and losses
relating to the timing of equity distributions between the record date and the
payment date.
The Dual Listed Company merger terms require that ordinary shareholders of BHP
Billiton Limited and BHP Billiton Plc are paid equal cash dividends on a per
share basis. Each American Depositary Share (ADS) represents two ordinary shares
of BHP Billiton Limited or BHP Billiton Plc. Dividends determined on each ADS
represent twice the dividend determined on BHP ordinary shares.
BHP Billiton Limited dividends for all periods presented are, or will be, fully
franked based on a tax rate of 30 per cent.
--------------------------------------------------------------------------------
Financial Report 38
9. Financial risk management - Fair values
All financial assets and financial liabilities, other than derivatives, are
initially recognised at the fair value of consideration paid or received, net of
transaction costs as appropriate, and subsequently carried at fair value or
amortised cost, as indicated in the tables below. Derivatives are initially
recognised at fair value on the date the contract is entered into and are
subsequently remeasured at their fair value.
The carrying amount of financial assets and liabilities measured at fair value
is principally calculated based on inputs other than quoted prices that are
observable for these financial assets or liabilities, either directly (i.e. as
unquoted prices) or indirectly (i.e. derived from prices). Where no price
information is available from a quoted market source, alternative market
mechanisms or recent comparable transactions, fair value is estimated based on
the Group's views on relevant future prices, net of valuation allowances to
accommodate liquidity, modelling and other risks implicit in such estimates.
The inputs used in fair value calculations are determined by the relevant
segment or function. The functions support the assets and operate under a
defined set of accountabilities authorised by the Executive Leadership Team.
Movements in the fair value of financial assets and liabilities may be
recognised through the income statement or in other comprehensive income.
For financial assets and liabilities carried at fair value, the Group uses the
following to categorise the method used:
Fair value hierarchy Level 1 Level 2 Level 3
--------------------- ----------------------- --------------------------------- -------------------------
Valuation method Based on quoted prices Based on inputs other than quoted Based on inputs not
(unadjusted) in active prices included within Level 1 observable in the market
markets for identical that are observable for the using appropriate
financial assets and financial asset or liability, valuation models,
liabilities. either directly (i.e. as unquoted including discounted cash
prices) or indirectly (i.e. flow modelling.
derived from prices).
The financial assets and liabilities are presented by class in the tables below
at their carrying values, which generally approximate to fair value. In the case
of US$3,019 million (30 June 2017: US$3,019 million) of fixed rate debt not
swapped to floating rate, the fair value at 31 December 2017 was US$3,684
million (30 June 2017: US$3,523 million) included within Notes and debentures in
the table below.
For financial instruments that are carried at fair value on a recurring basis,
the Group determines whether transfers have occurred between levels in the
hierarchy by reassessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each
reporting period. There were no transfers between categories during the period.
For financial instruments not valued at fair value on a recurring basis, the
Group uses a method that is categorised as Level 2.
--------------------------------------------------------------------------------
BHP Results for the half year 39
ended 31 December 2017
9. Financial risk management - Fair values (continued)
Financial assets and liabilities
Other financial
Held at fair assets and
31 December 2017 Loans and Available for value through Cash flow liabilities at
US$M receivables sale securities profit or loss hedges amortised cost Total
---------------- ----------- --------------- -------------- --------- --------------- ----------
Fair value hierarchy/(1)/................... Level 3 Levels 1,2 & 3 Level 2
Current cross currency and
interest rate swaps..................... -- -- 6 -- -- 6
Current other derivative
contracts/(2)(6)/....................... -- -- 23 7 -- 30
Current available for sale shares
and other investments/(3)/.............. -- -- 15 -- -- 15
Non-current cross currency and
interest rate swaps..................... -- -- 869 (47) -- 822
Non-current other derivative
contracts/(2)(6)/....................... -- -- 254 1 -- 255
Non-current available for sale
shares and other investments/(3)(4)/.... -- 80 344 -- -- 424
------- ------ ------ ---- ------- -------
Total other financial assets................ -- 80 1,511 (39) -- 1,552
Cash and cash equivalents................... 12,322 -- -- -- -- 12,322
Trade and other receivables/(5)/............ 2,011 -- 1,406 -- -- 3,417
Loans to equity accounted investments....... 144 -- -- -- -- 144
------- ------ ------ ---- ------- -------
Total financial assets...................... 14,477 80 2,917 (39) -- 17,435
------- ------ ------ ---- ------- -------
Non-financial assets........................ 95,147
-------
Total assets................................ 112,582
-------
Current cross currency and
interest rate swaps..................... -- -- 190 (102) -- 88
Current other derivative contracts/(2)/... -- -- 129 -- -- 129
Non-current cross currency and
interest rate swaps..................... -- -- 391 238 -- 629
Non-current other derivative
contracts/(2)/ -- -- 3 1 -- 4
------- ------ ------ ---- ------- -------
Total other financial liabilities........... -- -- 713 137 -- 850
Trade and other payables/(7)/............... -- -- 386 -- 5,471 5,857
Bank overdrafts and short-term
borrowings/(8)/........................... -- -- -- -- 45 45
Bank loans/(8)/............................. -- -- -- -- 2,656 2,656
Notes and debentures/(8)/................... -- -- -- -- 24,063 24,063
Finance leases.............................. -- -- -- -- 857 857
Other/(8)/.................................. -- -- -- -- 112 112
------- ------ ------ ---- ------- -------
Total financial liabilities................. -- -- 1,099 137 33,204 34,440
------- ------ ------ ---- ------- -------
Non-financial liabilities................... 15,981
-------
Total liabilities........................... 50,421
-------
--------------------------------------------------------------------------------
Financial Report 40
9. Financial risk management - Fair values (continued)
Financial assets and liabilities
Other financial
Held at fair assets and
30 June 2017 Loans and Available for value through Cash flow liabilities at
US$M receivables sale securities profit or loss hedges amortised cost Total
---------------- ----------- --------------- -------------- --------- --------------- ----------
Fair value hierarchy/(1)/................... Level 3 Levels 1,2 & 3 Level 2
Current cross currency and
interest rate swaps..................... -- -- -- -- -- --
Current other derivative contracts/(2)/... -- -- 41 -- -- 41
Current available for sale shares
and other investments/(3)/.............. -- -- 31 -- -- 31
Non-current cross currency and
interest rate swaps..................... -- -- 578 27 -- 605
Non-current other derivative
contracts/(2)/ ......................... -- -- 332 -- -- 332
Non-current available for sale
shares and other investments/(3)(4)/.... -- 70 274 -- -- 344
------- ------ ------ ---- ------- -------
Total other financial assets................ -- 70 1,256 27 -- 1,353
Cash and cash equivalents................... 14,153 -- -- -- -- 14,153
Trade and other receivables/(5)/............ 1,813 -- 920 -- -- 2,733
Loans to equity accounted investments....... 644 -- -- -- -- 644
------- ------ ------ ---- ------- -------
Total financial assets ..................... 16,610 70 2,176 27 -- 18,883
------- ------ ------ ---- ------- -------
Non-financial assets ....................... 98,123
-------
Total assets ............................... 117,006
-------
Current cross currency and
interest rate swaps .................... -- -- (4) 254 -- 250
Current other derivative
contracts/(2)(6)/ ...................... -- -- 144 -- -- 144
Non-current cross currency and
interest rate swaps .................... -- -- 42 1,053 -- 1,095
Non-current other derivative
contracts/(2)(6)/ ...................... -- -- 4 7 -- 11
------- ------ ------ ----- ------- -------
Total other financial liabilities .......... -- -- 186 1,314 -- 1,500
Trade and other payables/(7)/ .............. -- -- 502 -- 4,920 5,422
Bank overdrafts and short-term
borrowings/(8)/ .......................... -- -- -- -- 45 45
Bank loans/(8)/ ............................ -- -- -- -- 2,281 2,281
Notes and debentures/(8)/ .................. -- -- -- -- 27,041 27,041
Finance leases ............................. -- -- -- -- 897 897
Other/(8)/ ................................. -- -- -- -- 210 210
------- ------ ------ ----- ------- -------
Total financial liabilities ................ -- -- 688 1,314 35,394 37,396
------- ------ ------ ----- ------- -------
Non-financial liabilities .................. 16,884
-------
Total liabilities .......................... 54,280
-------
(1) All of the Group's financial assets and financial liabilities recognised at
fair value were valued using market observable inputs categorised as Level 2
with the exception of the specified items in the following footnotes.
(2) Includes other derivative contracts of US$268 million (30 June 2017: US$365
million) categorised as Level 3.
(3) Includes other investments held at fair value through profit or loss (US
Treasury Notes) of US$115 million categorised as Level 1 (30 June 2017:
US$97 million).
(4) Includes shares and other investments available for sale of US$80 million
(30 June 2017: US$70 million) categorised as Level 3.
(5) Excludes input taxes of US$300 million (30 June 2017: US$262 million)
included in other receivables.
(6) Includes net assets of US$7 million (30 June 2017: net liabilities of US$7
million) natural gas futures contracts used by the Group to mitigate price
risk designated as cash flow hedges.
(7) Excludes input taxes of US$148 million (30 June 2017: US$134 million)
included in other payables.
(8) All interest bearing liabilities, excluding finance leases, are unsecured.
--------------------------------------------------------------------------------
BHP Results for the half year 41
ended 31 December 2017
9. Financial risk management - Fair values (continued)
Sensitivity of level 3 financial assets and liabilities
Financial instruments categorised as level 3 are shares and other investments
available for sale and other derivative contracts with a carrying net amount of
US$348 million (30 June 2017: US$435 million). Significant items are derivatives
embedded in physical commodity purchase and sales contracts of gas in Trinidad
and Tobago with a net assets fair value of US$272 million (30 June 2017: US$370
million).
The potential effect of using reasonably possible alternative assumptions in
these models, based on a change in the most significant input, commodity prices,
by an increase/(decrease) of 10 per cent while holding all other variables
constant will increase/(decrease) profit after taxation by US$50 million (30
June 2017: US$62 million).
10. Significant events - Samarco dam failure
On 5 November 2015, the Samarco Mineracao S.A. (Samarco) iron ore operation in
Minas Gerais, Brazil, experienced a tailings dam failure that resulted in a
release of mine tailings, flooding the communities of Bento Rodrigues, Gesteira
and Paracatu and impacting other communities downstream (the Samarco dam
failure).
Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton Brasil) and
Vale S.A. (Vale). BHP Billiton Brasil's 50 per cent interest is accounted for as
an equity accounted joint venture investment. BHP Billiton Brasil does not
separately recognise its share of the underlying assets and liabilities of
Samarco, but instead records the investment as one line on the balance sheet.
Each period, BHP Billiton Brasil recognises its 50 per cent share of Samarco's
profit or loss and adjusts the carrying value of the investment in Samarco
accordingly. Such adjustment continues until the investment carrying value is
reduced to US$ nil, with any additional share of Samarco losses only recognised
to the extent that BHP Billiton Brasil has an obligation to fund the losses, or
when future investment funding is provided. After applying equity accounting,
any remaining carrying value of the investment is tested for impairment.
Any charges relating to the Samarco dam failure incurred directly by BHP
Billiton Brasil or other BHP entities are recognised 100 per cent in the Group's
results.
The financial impacts of the Samarco dam failure on the Group's income
statement, balance sheet and cash flow statement for the half year ended 31
December 2017 are shown in the table below and have been treated as an
exceptional item.
Half year Half year Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 June 2017
Financial impacts of Samarco dam failure US$M US$M US$M
---------------------------------------- ----------- ----------- ------------
Income statement
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil and other BHP entities
in relation to the Samarco dam failure/(1)(2)/.............................. (29) (41) (82)
Loss from equity accounted investments and related expenses:
Share of loss relating to the Samarco dam failure/(2)/........................ (50) (61) (134)
Samarco dam failure provision/(2)/............................................ (87) 13 (38)
------ ------ ------
Loss from operations............................................................ (166) (89) (254)
Net finance costs............................................................. (44) (66) (127)
------ ------ ------
Loss before taxation............................................................ (210) (155) (381)
Income tax benefit.............................................................. -- -- --
------ ------ ------
Loss after taxation............................................................. (210) (155) (381)
------ ------ ------
Balance sheet movement
Trade and other payables ....................................................... (2) (2) (3)
Provisions...................................................................... 25 97 143
------ ------ ------
Net assets...................................................................... 23 95 140
------ ------ ------
--------------------------------------------------------------------------------
Financial Report 42
10. Significant events - Samarco dam failure (continued)
Half year Half year Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 June 2017
US$M US$M US$M
----------- ----------- ------------
Cash flow statement
Loss before taxation ..................................................... (210) (155) (381)
Comprising:
Costs incurred directly by BHP Billiton Brasil and other BHP
entities in relation to the Samarco dam failure/(1)(2)/................. (29) (41) (82)
Share of loss relating to the Samarco dam failure/(2)/.................... (50) (61) (134)
Samarco dam failure provision/(2)/........................................ (87) 13 (38)
Net finance costs......................................................... (44) (66) (127)
------ ------ ------
Non-cash or non-operating exceptional items............................... 183 116 302
------ ------ ------
Net operating cash flows ................................................. (27) (39) (79)
------ ------ ------
Net investment and funding of equity accounted investments/(3)/........... (206) (211) (442)
------ ------ ------
Net investing cash flows.................................................. (206) (211) (442)
------ ------ ------
Net decrease in cash and cash equivalents................................. (233) (250) (521)
------ ------ ------
(1) Includes legal and advisor costs incurred.
(2) Financial impacts of US$(210) million from the Samarco dam failure relates
to US$(50) million share of loss from US$(50) million funding provided
during the period, US$(29) million direct costs incurred by BHP Billiton
Brasil Ltda and other BHP entities, US$(44) million amortisation of
discounting impacting net finance costs and US$(87) million other movements
in the Samarco dam failure provision including foreign exchange.
(3) Includes US$(50) million funding provided during the period and US$(156)
million utilisation of the Samarco dam failure provision, of which US$(154)
million allowed for the continuation of reparatory and compensatory programs
in relation to the Framework Agreement and a further US$(2) million for dam
stabilisation.
Equity accounted investment in Samarco
BHP Billiton Brasil's investment in Samarco remains at US$ nil. BHP Billiton
Brasil provided US$50 million funding under a working capital facility during
the period and recognised additional share of losses of US$50 million. No
dividends have been received by BHP Billiton Brasil from Samarco during the
period. Samarco currently does not have profits available for distribution and
is legally prevented from paying previously declared and unpaid dividends.
Provision for Samarco dam failure
31 Dec 2017 30 June 2017
US$M US$M
----------- ------------
At the beginning of the reporting period.................................. 1,057 1,200
Movement in provision..................................................... (25) (143)
Comprising:
Utilised.................................................................. (156) (308)
Adjustments charged to the income statement:
Amortisation of discounting impacting net finance costs................. 44 127
Other/(1)/.............................................................. 87 38
------ -----
At the end of the reporting period 1,032 1,057
------ ------
Comprising:
Current................................................................. 331 310
Non-current............................................................. 701 747
------ ------
At the end of the reporting period........................................ 1,032 1,057
------ ------
(1) US$87 million relates to other movements in the Samarco dam failure
provision including foreign exchange.
--------------------------------------------------------------------------------
BHP Results for the half year 43
ended 31 December 2017
10. Significant events - Samarco dam failure (continued)
Dam failure provisions and contingencies
As at 31 December 2017, provisions and contingent liabilities for BHP Billiton
Brasil are not materially different from those disclosed in note 3 'Significant
events - Samarco dam failure' in the 30 June 2017 Annual Report, subject to the
updates set out below:
Environment and socio-economic remediation
Framework Agreement
On 2 March 2016, BHP Billiton Brasil, together with Samarco and Vale, entered
into a Framework Agreement with the Federal Government of Brazil, the states of
Espirito Santo and Minas Gerais and certain other public authorities to
establish a foundation (Fundacao Renova) that will develop and execute
environmental and socio-economic programs to remediate and provide compensation
for damage caused by the Samarco dam failure.
Mining and processing operations remain suspended following the dam failure.
Samarco is currently progressing plans to resume operations, however,
significant uncertainties surrounding the nature and timing of ongoing future
operations remain. In light of these uncertainties and based on currently
available information, at 31 December 2017, BHP Billiton Brasil has recognised a
provision of US$1.0 billion before tax and after discounting (30 June 2017:
US$1.1 billion), in respect of its potential obligations under the Framework
Agreement.
The measurement of the provision requires the use of estimates and assumptions
and may be affected by, among other factors, potential changes in scope of work
and funding amounts required under the Framework Agreement including further
technical analysis required under the Preliminary Agreement, the outcome of the
ongoing negotiations with the Federal and State Prosecutors, costs incurred in
respect of programs delivered, resolution of uncertainty in respect of
operational restart, updates to discount and foreign exchange rates, resolution
of existing and potential legal claims and the status of the Framework
Agreement. As a result, future actual expenditures may differ from the amounts
currently provided and changes to key assumptions and estimates could result in
a material impact to the amount of the provision in future reporting periods.
For the half year ended 31 December 2017, BHP Billiton Brasil has paid US$154
million to allow for the continuation of reparatory and compensatory programs in
relation to the Framework Agreement and a further US$2 million for dam
stabilisation, with the total US$156 million offset against the provision for
the Samarco dam failure.
On 22 December 2017, BHP Billiton Brasil announced a further US$133 million to
support Fundacao Renova, in the event Samarco does not meet its funding
obligations under the Framework Agreement. Any support to the Fundacao Renova
provided by BHP Billiton Brasil will be offset against the provision for the
Samarco dam failure.
Preliminary Agreement
On 18 January 2017, BHP Billiton Brasil together with Samarco and Vale, entered
into a Preliminary Agreement with the Federal Prosecutors' Office in Brazil,
which outlines the process and timeline for further negotiations towards a
settlement regarding the R$20 billion (approximately US$6 billion) Public Civil
Claim and R$155 billion (approximately US$47 billion) Federal Public Prosecution
Office claim relating to the dam failure.
The Preliminary Agreement provides for the appointment of experts to advise the
Federal Prosecutors in relation to social and environmental remediation and the
assessment and monitoring of programs under the Framework Agreement. The expert
advisors' conclusions will be considered in the negotiation of a final
settlement arrangement with the Federal Prosecutors.
Under the Preliminary Agreement, BHP Billiton Brasil, Samarco and Vale agreed
interim security (Interim Security) comprising R$1.3 billion (approximately
US$395 million) in insurance bonds, R$100 million (approximately US$30 million)
in liquid assets, a charge of R$800 million (approximately US$240 million) over
Samarco's assets, and R$200 million (approximately US$60 million) to be
allocated within the next four years through existing Framework Agreement
programs in the Municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado
and Ponte Nova.
The Interim Security was provided to the 12th Civil/Agricultural Federal Court
of Minas Gerais on 24 January 2017 and will remain in place until the earlier of
20 April 2018 and the date that a settlement arrangement is agreed between the
Federal Prosecutors, BHP Billiton Brasil, Samarco and Vale.
--------------------------------------------------------------------------------
Financial Report 44
10. Significant events - Samarco dam failure (continued)
On 16 November 2017, BHP Billiton Brasil, together with Samarco and Vale,
entered into an Amendment Agreement with the Federal Prosecutors' Office in
Brazil (Federal Prosecutors) and the Minas Gerais State Prosecutors Office
(State Prosecutors). The Amendment Agreement amends the Preliminary Agreement by
providing for the State Prosecutors to become party to the Preliminary
Agreement, in addition to including provisions for additional community
consultation and replacing one of the socioeconomic experts appointed in the
Preliminary Agreement to advise the Federal Prosecutors.
In light of the ongoing negotiations, BHP Billiton Brasil, Samarco and Vale,
together with the Federal and State Prosecutors, requested, and the 12th
Civil/Agricultural Federal Court of Minas Gerais approved, an extension to the
date for negotiations towards a settlement agreement in relation to the R$20
billion (approximately US$6 billion) public civil claim and R$155 billion
(approximately US$47 billion) Federal Public Prosecution Office claim to 20
April 2018. During the extension period, the Interim Security and the current
suspension of legal proceedings and injunctions under the Preliminary Agreement
(see below) will remain in place. The parties will use best efforts to achieve a
partial settlement agreement, focused mainly on including prosecutor and
community participation into the governance structure of the Framework
Agreement, by 20 April 2018.
Legal
The following matters are disclosed as contingent liabilities:
BHP Billiton Brasil is among the companies named as defendants in a number of
legal proceedings initiated by individuals, non-governmental organisations
(NGOs), corporations and governmental entities in Brazilian federal and state
courts following the Samarco dam failure. The other defendants include Vale,
Samarco and the Foundation. The lawsuits include claims for compensation,
environmental rehabilitation and violations of Brazilian environmental and other
laws, among other matters. The lawsuits seek various remedies, including
rehabilitation costs, compensation to injured individuals and families of the
deceased, recovery of personal and property losses, moral damages and injunctive
relief. It is not possible at this time to provide a range of possible outcomes
or a reliable estimate of potential future exposures for BHP Billiton Brasil.
In addition, governmental inquiries and investigations relating to the Samarco
dam failure have been commenced by numerous agencies of the Brazilian government
and are ongoing.
Ultimately, all legal matters disclosed as contingent liabilities could have a
material adverse impact on BHP's business, competitive position, cash flows,
prospects, liquidity and shareholder returns.
As at 31 December 2017, contingent liabilities for BHP Billiton Brasil are not
materially different from those disclosed in note 3 'Significant events -
Samarco dam failure' in the 30 June 2017 Annual Report, subject to the updates
set out below:
R$20 billion Public Civil claim
Among the claims brought against BHP Billiton Brasil, is a public civil claim
commenced by the Federal Government of Brazil, states of Espirito Santo, Minas
Gerais and other public authorities on 30 November 2015, seeking the
establishment of a fund of up to R$20 billion (approximately US$6 billion) in
aggregate for clean-up costs and damages.
While a final decision by the 12th Civil/Agricultural Federal Court of Minas
Gerais on the issue of ratification of the Framework Agreement is pending, the
Preliminary Agreement suspends a R$1.2 billion (approximately US$360 million)
injunction order under the R$20 billion Public Civil Claim.
The Preliminary Agreement also requests suspension of the R$20 billion
(approximately US$6 billion) Public Civil Claim with a decision from the Court
pending.
The R$1.2 billion (approximately US$360 million) injunction order may be
reinstated if a settlement arrangement is not agreed by 20 April 2018.
Given the status of these proceedings, it is not possible at this time to
provide a range of possible outcomes or a reliable estimate of potential future
exposures for BHP Billiton Brasil.
--------------------------------------------------------------------------------
BHP Results for the half year 45
ended 31 December 2017
10. Significant events - Samarco dam failure (continued)
Federal Public Prosecution Office claim
BHP Billiton Brasil is among the defendants named in a claim brought by the
Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion
(approximately US$47 billion) for reparation, compensation and moral damages in
relation to the Samarco dam failure.
With regard to the Preliminary Agreement, the 12th Civil/Agricultural Federal
Court of Minas Gerais suspended the Federal Public Prosecution Office claim,
including a R$7.7 billion (approximately US$2.3 billion) injunction request.
However, proceedings may be resumed if a settlement arrangement is not agreed by
20 April 2018. Given the status of these proceedings, it is not possible at this
time to provide a range of possible outcomes or a reliable estimate of potential
future exposures for BHP Billiton Brasil.
Class action complaint - shareholders
In February 2016, a putative class action complaint (Complaint) was filed in the
U.S. District Court for the Southern District of New York on behalf of
purchasers of American Depository Receipts of BHP Billiton Ltd and BHP Billiton
Plc between 25 September 2014 and 30 November 2015 against BHP Billiton Ltd and
BHP Billiton Plc and certain of its current and former executive officers and
directors. The Complaint asserts claims under U.S. federal securities laws and
indicates that the plaintiffs will seek certification to proceed as a class
action.
The amount of damages sought by the plaintiffs on behalf of the putative class
is unspecified. On 14 October 2016, the defendants moved to dismiss the
Complaint. In a decision of the District Court dated 28 August 2017, the claims
were dismissed in part, including the claims against the current and former
executive officers and directors.
Given the preliminary status of this matter, it is not possible at this time to
provide a range of possible outcomes or a reliable estimate of potential future
exposures to BHP Billiton Ltd and BHP Billiton Plc.
Class action complaint - bond holders
On 14 November 2016, a putative class action complaint (Complaint) was filed in
the U.S District Court for the Southern District of New York on behalf of all
purchasers of Samarco's ten-year bond notes due 2022-2024 between 31 October
2012 and 30 November 2015 against Samarco and the former chief executive officer
of Samarco. The complaint asserts claims under the U.S. federal securities laws
and indicates that the plaintiff will seek certification to proceed as a class
action.
On 6 March 2017, the Complaint was amended to include BHP Billiton Ltd, BHP
Billiton Plc, BHP Billiton Brasil Ltda and Vale S.A. and officers of Samarco,
including four of Vale S.A. and BHP Billiton Brasil Ltda's nominees to the
Samarco Board. On 5 April 2017, the plaintiff dismissed the claims against the
individuals. The remaining corporate defendants filed a joint motion to dismiss
the Complaint on 26 June 2017. That motion is pending before the Court.
The amount of damages sought by the plaintiff on behalf of the putative class is
unspecified. Given the preliminary status of this matter, it is not possible at
this time to provide a range of possible outcomes or a reliable estimate of
potential future exposures to BHP Billiton Ltd, BHP Billiton Plc and BHP
Billiton Brasil Ltda.
Criminal charges
The Federal Prosecutors' Office has filed criminal charges against BHP Billiton
Brasil, Samarco and Vale and certain employees and former employees of BHP
Billiton Brasil (Affected Individuals), Vale and Samarco in the Federal Court of
Ponte Nova, Minas Gerais. On 3 March 2017, BHP Billiton Brasil filed its
preliminary defences. BHP Billiton Brasil rejects outright the charges against
the company and the Affected Individuals and will defend the charges and fully
support each of the Affected Individuals in their defence of the charges.
Under the criminal charges against BHP Billiton Brasil, Vale and Samarco and
certain of the individuals, a R$20 billion (approximately US$6 billion) asset
freezing order application was made by the Federal Prosecutors. In July 2017,
the Federal Court of Ponte Nova denied the Federal Prosecutors' application for
an asset freezing order.
Given the status of this matter, it is not possible at this time to provide a
range of possible outcomes or a reliable estimate of potential future exposures
for BHP Billiton Brasil.
--------------------------------------------------------------------------------
Financial Report 46
10. Significant events - Samarco dam failure (continued)
Other claims
Additional lawsuits and government investigations relating to the Samarco dam
failure may be brought against BHP Billiton Brasil and possibly other BHP
entities in Brazil or other jurisdictions.
BHP's and BHP Billiton Brasil's potential liabilities, if any, resulting from
other pending and future claims, lawsuits and enforcement actions relating to
the Samarco dam failure, together with the potential cost of implementing
remedies sought in the various proceedings, cannot be reliably estimated at this
time and therefore a provision has not been recognised and nor has any
contingent liability been quantified for such matters.
BHP Insurance
BHP has third party liability insurance for claims related to the Samarco dam
failure made directly against BHP Billiton Brasil or other BHP entities.
External insurers have been advised of the Samarco dam failure and a formal
claim has been prepared and submitted. At 31 December 2017, an insurance
receivable has not been recognised for any potential recoveries under insurance
arrangements.
Commitments
Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does
not have an existing obligation to fund Samarco. For the half year ended 31
December 2017, BHP Billiton Brasil has provided US$50 million funding to support
Samarco's operations and a further US$2 million for dam stabilisation, with
undrawn amounts of US$24 million expiring as at 31 December 2017.
On 22 December 2017, BHP Billiton Brasil announced a new short-term facility of
up to US$48 million to carry out ongoing repair works, maintain Samarco's
facilities and support restart planning. Funds will be released to Samarco only
as required and subject to the achievement of key milestones with amounts
undrawn expiring at 30 June 2018.
Any additional requests for funding or future investment provided would be
subject to a future decision, accounted for at that time.
11. Impairment of non-current assets - Onshore US
The Group is currently progressing a number of alternatives to exit our Onshore
US assets for value. In light of this process, and the significant management
judgement required when assessing the recoverable amount of assets, this note
provides an update on the Group's assessment of the recoverability of the
Onshore US assets.
Carrying amount
For impairment testing purposes, the goodwill arising from the Petrohawk
acquisition in August 2011 is allocated to the Onshore US group of cash
generating units (CGUs) which includes the Permian, Haynesville, Fayetteville,
Black Hawk and Hawkville CGUs. The carrying amount of the Onshore US group of
CGUs for impairment purposes is determined on a basis consistent with the way
the recoverable amount is determined and comprises:
31 Dec 2017 30 June 2017
US$M US$M
----------- ------------
Property, plant and equipment ............................................ 11,473 11,795
Working capital deficiency ............................................... (573) (357)
Provisions ............................................................... (543) (520)
Other .................................................................... 40 38
------ ------
Net operating assets for Onshore US (included in financial information
for Petroleum on page 15) .............................................. 10,397 10,956
Goodwill ................................................................. 3,009 3,022
Working capital deficiency ............................................... 583 357
Other .................................................................... 8 34
------ ------
Onshore US carrying amount for impairment purposes ....................... 13,997 14,369
------ ------
Impairment testing requirements
Impairment tests are carried out annually for goodwill. In addition, impairment
tests for all assets and CGUs are performed when there is an indication of
impairment. If the carrying amount of the asset or CGU exceeds its recoverable
amount, the asset or CGU is impaired and an impairment loss is charged to the
income statement so as to reduce the carrying amount to its recoverable amount.
--------------------------------------------------------------------------------
BHP Results for the half year 47
ended 31 December 2017
11. Impairment of non-current assets - Onshore US (continued)
Previously impaired assets and CGUs (excluding goodwill) are reviewed for
possible reversal of previous impairment at each reporting date. Impairment
reversal cannot exceed the carrying amount that would have been determined (net
of depreciation) had no impairment loss been recognised for the asset or CGU.
At the half year, impairment tests, including for goodwill, are only performed
if there is an indication of an impairment, or impairment reversal, since the
end of the last financial year.
FY2017 Assessment
The annual impairment test of the Onshore US goodwill was performed in June
after an assessment of the individual CGUs that it comprises. The recoverable
amount of Onshore US at 30 June 2017 was calculated using fair value less cost
of disposal (FVLCD) methodology.
The impairment testing at 30 June 2017 resulted in no impairment or reversals of
impairment for Onshore US.
HY2018 Assessment
For HY2018, an assessment was performed to determine whether there were any
indicators of an impairment or impairment reversal since 30 June 2017. This
included consideration of changes to market participant assumptions for the most
significant estimates impacting asset recoverable amount valuations, including:
. Production - the review of additional production data from BHP's wells and
third party data did not indicate a significant change to the assumptions
regarding production volumes;
. Price - the Group has forecast some decreases in the long run crude oil and
natural gas prices from the forecasts used at 30 June 2017. However,
sensitivities performed on internal valuations for these changes did not
give rise to an indicator of impairment; and
. Discount rate - no indicators have arisen since 30 June 2017 that would
indicate a significant change to the real post-tax rate of 7.0 per cent.
The enactment of the TCJA in the US on 22 December 2017 is expected to have a
positive impact on the fair values of the Onshore US assets, largely due to the
reduction in the rate of US corporate income tax. Ongoing analysis is being
performed to assess the longer term potential impact of the TCJA on price
forecasts, supply costs and the cost of capital.
Overall, the Group has assessed that there have been no changes that would
indicate an impairment or impairment reversal since 30 June 2017. Accordingly, a
recoverable amount determination at 31 December 2017 was not required to be
performed.
Key judgements and estimates
In determining the recoverable amount of assets, in the absence of quoted market
prices, estimates are made regarding the present value of future post-tax cash
flows. These estimates require significant management judgement and are subject
to risk and uncertainty that may be beyond the control of the Group. The
estimates are made from the perspective of a market participant and include
prices, future production volumes, operating costs, tax attributes and discount
rates.
The calculation of FVLCD for Onshore US is most sensitive to changes in a market
participant's perspective of crude oil and natural gas prices, production
volumes and discount rates. In our FY2017 financial statements we identified
reasonably possible changes that would result in the estimated recoverable
amount being equal to the carrying amount of Onshore US, including goodwill.
Therefore there is a possibility that changes in circumstances will materially
alter projections, which may impact the recoverable amount of assets at future
reporting dates.
The Group's current divestment timeline includes the opening of data rooms and
the receipt of bids prior to 30 June 2018, with evaluation and negotiation in
the September quarter. Other divestment options continue to be considered. As
the Group progresses alternative exit strategies, this may give rise to new
information relevant to the assumptions used by management in the estimation of
recoverable amount.
12. Subsequent events
No matters or circumstances have arisen since the end of the financial year
that have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent accounting
periods.
--------------------------------------------------------------------------------
Financial Report 48
Directors' Report
The Directors present their report together with the half year financial
statements for the half year ended 31 December 2017 and the auditor's review
report thereon.
Review of Operations
A detailed review of the Group's operated and non-operated assets, the results
of those operations during the half year ended 31 December 2017 and likely
future developments are given on pages 1 to 26. The Review of Operations has
been incorporated into, and forms part of, this Directors' Report.
Principal Risks and Uncertainties
Due to the international scope of the Group's operated and non-operated assets
and the industries in which it is engaged, there are a number of risk factors
and uncertainties which could have an effect on the Group's results and
operations over the next six months. The principal risks affecting the Group are
described on pages 34 to 43 of the Group's Annual Report for the year ended 30
June 2017 (a copy of which is available on the Group's website at www.bhp.com)
and are summarised below. There are no material changes in those risk factors
for the remaining six months of the financial year except to the extent
described in note 10 'Significant events - Samarco dam failure' of the half year
financial statements and the 'Outlook' section.
- Fluctuations in commodity prices (including - We may not fully recover our investments in
sustained price shifts) and impacts of ongoing mining, oil and gas assets, which may require
global economic volatility may negatively financial write-downs
affect our results, including cash flows and
asset values
- Our financial results may be negatively - The commercial counterparties we transact with
affected by exchange rate fluctuations may not meet their obligations, which may
negatively impact our results
- Reduction in Chinese demand may negatively - Unexpected natural and operational catastrophes
impact our results may adversely impact our assets
- Actions by governments, regulation, political, - Breaches in, or failures of, our information
community or social events, judicial or technology may adversely impact our business
community activism or unrest in the countries activities
where our assets are located could have a
negative impact on our business
- Failure to discover or acquire new resources, - Our potential liability from litigation and
maintain reserves or develop new assets could other actions resulting from the Samarco dam
negatively affect our future results and failure is subject to significant uncertainty
financial condition and cannot be reliably estimated at this time
but they could have a material adverse impact
on our business
- Potential changes to our portfolio of assets - Cost pressures and reduced productivity could
through acquisitions and divestments may have a negatively impact our operating margins and
material adverse effect on our future results expansion plans
and financial condition
- Increased costs and schedule delays may - Non-operated assets have their own management
adversely affect our development projects and operating standards, joint venture partners
or other companies managing those non-operated
assets may take action contrary to our
standards or fail to adopt standards equivalent
to BHP's standards, and commercial
counterparties may not comply with our
standards
- If our liquidity and cash flow deteriorate - Safety, health, environmental and community
significantly it could adversely affect our impacts, incidents or accidents may adversely
ability to fund our major capital programs affect our people, assets and reputation or
licence to operate
Dividend
Full details of dividends are given on page 10.
--------------------------------------------------------------------------------
BHP Results for the half year 49
ended 31 December 2017
Board of Directors
The Directors of BHP at any time during or since the end of the half year are:
Ken MacKenzie - Chairman since September 2017 (a Director since September 2016)
Jac Nasser - Chairman from March 2010 to August 2017 (a Director from June 2006 to August 2017)
Andrew Mackenzie - an Executive Director since May 2013
Terry Bowen - a Director since October 2017
Malcolm Brinded - a Director from April 2014 to October 2017
Malcolm Broomhead - a Director since March 2010
Anita Frew - a Director since September 2015
Carolyn Hewson - a Director since March 2010
Grant King - a Director from March 2017 to August 2017
Lindsay Maxsted - a Director since March 2011
John Mogford - a Director since October 2017
Wayne Murdy - a Director since June 2009
Shriti Vadera - a Director since January 2011
Auditor's independence declaration
KPMG in Australia are the auditors of BHP Billiton Limited. Their auditor's
independence declaration under Section 307C of the Australian Corporations Act
2001 is set out on page 52 and forms part of this Directors' Report.
Rounding of amounts
BHP Billiton Limited is an entity to which Australian Securities and Investments
Commission (ASIC) Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 dated 24 March 2016 applies. Amounts in the Directors'
Report and half year financial statements have been rounded to the nearest
million dollars in accordance with ASIC Instrument 2016/191.
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie - Chairman
Andrew Mackenzie - Chief Executive Officer
Dated this 20th day of February 2018
--------------------------------------------------------------------------------
Financial Report 50
Directors' Declaration of Responsibility
The half year financial report is the responsibility of, and has been approved
by, the Directors. In accordance with a resolution of the Directors of BHP
Billiton Limited and BHP Billiton Plc, the Directors declare that:
(a) in the Directors' opinion and to the best of their knowledge, the half
year financial statements and notes, set out on pages 27 to 48, have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
issued by the IASB, IAS 34 'Interim Financial Reporting' as adopted by
the EU, AASB 134 'Interim Financial Reporting' as issued by the AASB, the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority in the United Kingdom and the Australian Corporations Act 2001,
including:
(i) complying with applicable accounting standards and the Australian
Corporations Regulations 2001; and
(ii) giving a true and fair view of the financial position of the Group
as at 31 December 2017 and of its performance for the half year
ended on that date;
(b) to the best of the Directors' knowledge, the Directors' Report, which
incorporates the Review of Operations on pages 1 to 26, includes a fair
review of the information required by:
(i) DTR4.2.7R of the Disclosure Guidance and Transparency Rules in the
United Kingdom, being an indication of important events during the
first six months of the current financial year and their impact on
the half year financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(ii) DTR4.2.8R of the Disclosure Guidance and Transparency Rules in the
United Kingdom, being related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or
performance of the Group during that period, and any changes in
the related party transactions described in the last annual report
that could have such a material effect; and
(c) in the Directors' opinion, there are reasonable grounds to believe that
each of BHP Billiton Limited, BHP Billiton Plc and the Group will be able
to pay its debts as and when they become due and payable.
Signed on behalf of the Directors in accordance with a resolution of the Board
of Directors.
Ken MacKenzie - Chairman
Andrew Mackenzie - Chief Executive Officer
Dated this 20th day of February 2018
--------------------------------------------------------------------------------
BHP Results for the half year 51
ended 31 December 2017
Lead Auditor's Independence Declaration under Section 307C of the Australian
Corporations Act 2001
To: the Directors of BHP Billiton Limited
I declare that, to the best of my knowledge and belief, in relation to the
review of BHP Billiton Limited for the half year ended 31 December 2017 there
have been:
i. no contraventions of the auditor independence requirements as set out in
the Australian Corporations Act 2001 in relation to the review; and
ii. no contraventions of any applicable code of professional conduct in
relation to the review.
This declaration is in respect of BHP Billiton Limited and the entities it
controlled during the financial period.
KPMG
Anthony Young
Partner
Melbourne
20 February 2018
KPMG, an Australian partnership and a
member firm of the KPMG network of
independent member firms affiliated with
KPMG International Cooperative ('KPMG
International'), a Swiss entity.
KPMG Australia's liability limited by a
scheme approved under Professional
Standards Legislation.
--------------------------------------------------------------------------------
Financial Report 52
Independent Review Report
Independent Auditors' review report of KPMG LLP ('KPMG UK') to the members of
BHP Billiton Plc and of KPMG ('KPMG Australia') to the members of BHP Billiton
Limited
Conclusions
For the purposes of these reports, the terms 'we' and 'our' denote KPMG UK in
relation to UK responsibilities and reporting obligations to the members of BHP
Billiton Plc, and KPMG Australia in relation to Australian responsibilities and
reporting obligations to the members of BHP Billiton Limited.
BHP ('the Group') consists of BHP Billiton Plc, BHP Billiton Limited and the
entities they controlled during the half year ended 31 December 2017.
We have reviewed the accompanying condensed financial statements of the Group
for the half year ended 31 December 2017 ('half year financial statements'),
which comprise the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow
Statement, Consolidated Statement of Changes in Equity, Notes 1 to 12 comprising
a summary of significant accounting policies and other explanatory information.
KPMG Australia considers the Directors' Declaration to be part of the half year
financial statements when forming its conclusion.
Review conclusion by KPMG UK
Based on our review, nothing has come to our attention that causes us to believe
that the half year financial statements for the six months ended 31 December
2017 are not prepared, in all material respects, in accordance with IAS 34
'Interim Financial Reporting', as adopted by the European Union ('EU'), and the
Disclosure Guidance and Transparency Rules ('the DTR') of the United Kingdom's
Financial Conduct Authority ('the UK FCA').
Review conclusion by KPMG Australia
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half year financial statements, including
the Directors' Declaration, of the Group are not in accordance with the
Australian Corporations Act 2001, including:
a) Giving a true and fair view of the Group's financial position as at 31
December 2017 and of its performance for the half year ended on that date;
and
b) Complying with Australian Accounting Standard AASB 134 'Interim Financial
Reporting' and the Australian Corporations Regulations 2001.
Scope of review
KPMG UK conducted its review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' ('ISRE 2410') issued by the
Auditing Practices Board for use in the UK. We read the other information
contained in the half year financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the information in the
half year financial statements.
KPMG Australia conducted its review in accordance with Auditing Standard on
Review Engagements ASRE 2410 'Review of a Financial Report Performed by the
Independent Auditor of the Entity' ('ASRE 2410'), as issued by the Australian
Auditing and Assurance Standards Board. As the auditor of BHP Billiton Limited,
ASRE 2410 requires that KPMG Australia complies with the ethical requirements
relevant to the audit of the annual consolidated financial statements.
A review of half year financial statements consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with auditing standards and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
--------------------------------------------------------------------------------
BHP Results for the half year 53
ended 31 December 2017
Directors' responsibilities
The Directors are responsible for preparing the half year financial report which
gives a true and fair view in accordance with:
. The DTR of the UK FCA, and under those rules, in accordance with IAS 34
'Interim Financial Reporting' as adopted by the EU; and
. Australian Accounting Standards and the Australian Corporations Act 2001 and
for such internal control as the Directors determine is necessary to enable
the preparation of the half year financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Respective responsibilities of KPMG UK and KPMG Australia
KPMG UK's responsibility is to express a conclusion on the half year financial
statements in the half year financial report based on our review.
KPMG Australia's responsibility is to express a conclusion on the half year
financial statements, including the Directors' Declaration based on our review.
The purpose of our review work and to whom we owe our responsibilities
KPMG UK's report is made solely to BHP Billiton Plc's members, as a body, in
accordance with the terms of KPMG UK's engagement to assist BHP Billiton Plc in
meeting the requirements of the DTR of the UK FCA.
KPMG Australia's report is made solely to BHP Billiton Limited's members, as a
body, in accordance with the Australian Corporations Act 2001. KPMG Australia
has performed an independent review of the half year financial statements,
including the Directors' Declaration, in order to state whether, on the basis of
the procedures described, it has become aware of any matter that makes KPMG
Australia believe that the half year financial statements, including the
Directors' Declaration, are not in accordance with the Australian Corporations
Act 2001 including: giving a true and fair view of the Group's financial
position as at 31 December 2017 and its performance for the half year ended on
that date; and complying with Australian Accounting Standard AASB 134 'Interim
Financial Reporting' and the Australian Corporations Regulations 2001.
Our review work has been undertaken so that we might state to the members of
each BHP Billiton Plc and BHP Billiton Limited those matters we are required to
state to them in this report, and the further matters we are required to state
to them in accordance with the terms agreed with each company, and for no other
purpose. Accordingly, each of KPMG UK and KPMG Australia makes the following
statement: to the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our review work, for our report, or for the conclusions we have
reached.
--------------------------------------------------------------------------------
Financial Report 54
Independence
In conducting its review, KPMG Australia has complied with the independence
requirements of the Australian Corporations Act 2001.
Michiel Soeting
For and behalf of KPMG LLP
Chartered Accountants
London
20 February 2018
KPMG
Anthony Young
Partner
Melbourne
20 February 2018
KPMG, an Australian partnership and KPMG
LLP, a UK limited liability partnership,
are member firms of the KPMG network of
independent member firms affiliated with
KPMG International Cooperative ('KPMG
International'), a Swiss entity.
KPMG Australia's liability limited by a
scheme approved under Professional
Standards Legislation.
--------------------------------------------------------------------------------
BHP Results for the half year 55
ended 31 December 2017
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