MELBOURNE -Global miner BHP Billiton said on Friday it’ll get the exact value its U.S. shale assets by US$7.2 billion on a bleak outlook for oil and gas prices, cementing expectations it will likely be instructed to cut its dividend for the first time in over 25 years.
Investors have argued that BHP should abandon its policy of holding or increasing its dividend at each result, because it is having to rely on debt to finance the payout carrying out a rout in commodity prices and steep fall in profits.
“Simply put, the organization can’t manage to maintain its dividend policy if you don’t take the balance sheet into territory that might be incredibly uncomfortable for a company of its nature,” said Ben Lyons, a portfolio manager at ATI Asset Management.
Analysts said the charge around the U.S. shale assets, which takes total writedowns around the business to $12.8 billion in under four years, would hurt the metrics that ratings agencies measure the company, which on top of plunging prices because of its products, would force a dividend cut.
“At this time, the marketplace would like to discover their whereabouts protecting the total amount sheet by cutting both the dividend as well as their not-immediate capital requirements,” said Rohan Walsh, a portfolio manager at Karara Capital.
The so-called progressive dividend policy has been around place since BHP merged with Billiton in 2001, targeted at offering stability with the ups and downs of the commodities cycle. It had been maintained even just in August after profits hit ten years low.