BHP Billiton writes down 7.2 billion dollars on U.S. oil assets

BHP Billiton expects to write down the value of its U.S. onshore oil and gas assets, reflecting the slump and bleak outlook for oil and gas prices, a move expected by fund managers who claim the company paid too much for them in 2011.

BHP Billiton will book a 7.2 billion U.S. dollar pre-tax impairment charge in its half yearly results, to be announced early February, its second major write down of U.S. shale assets in six months.

"Oil and gas markets have been significantly weaker than the industry expected," BHP Billiton chief executive Andrew McKenzie said in a statement on Friday.

BHP has sharply cut its operating cots and capital spending at its U.S. onshore operations in the wake of the 30 percent drop in oil prices, reducing the number of rigs from 26 to five in under a year.

"While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today," McKenzie said.

BHP Billiton expects its net operating assets to be approximately 16 billion U.S. dollars following the write down.

BHP said it has cut their oil and gas price assumptions for the short and medium term which led to the write down, though expect prices to improve from their current lows.

The write downs were expected by market analysts and fund managers which value BHP's U.S. shale assets well below 16 billion U.S. dollars, instead calling into question the ability of the company's management.

"For some time, the market has been of the view that previous management significantly overpaid for these assets," ATI Asset Management portfolio manager Ben Lyons said.

BHP Billiton acquired the U.S. onshore assets for 20.6 billion U.S. dollars, including assumed debt, in two acquisitions in 2011 when benchmark oil prices were at record highs above 125 U.S. dollars per barrel.

Oil prices had fallen to new 12-year lows below 30 U.S. dollars per barrel this week as the market remains saturated from increasing OPEC and non-OPEC output. On Friday, benchmark Brent crude was trading at 31.03 U.S. dollars per barrel.

At 1126 local time (AEDT), BHP Billiton shares had gained 50 Australian cents (34.93 U.S. cents), or 3.36 percent to 15.38 Australian dollars (10.74 U.S. dollars). Endit