BHP Billiton full year production report

OK, I remember a time when we used to sit and wait for this report like crazy, but in truth, we are long equities in quality stocks, so we are committed to owning a quality stock like BHP Billiton. Unless something changes of course. Here goes: BHP BILLITON PRODUCTION REPORT FOR THE YEAR ENDED 30 JUNE 2011. Important news on one of our mostly widely held stocks.

Some really good parts there (obviously in the highlights segment). Here goes: "Annual production records were achieved across four commodities and ten operations as a result of our strategy to invest throughout the economic cycle." Excellent. And: "Eleventh consecutive annual production record achieved in Iron Ore while Western Australia Iron Ore shipments rose to an annualised rate of 155 million tonnes per annum in the June 2011 quarter (100% basis)." I guess you can attribute that to the miracle that is China. Remember that this report is both quarterly and more importantly, annual production, so quickly folks can get an idea of what to expect for the full year.

The petroleum division first. Total petroleum products, when measured in barrels of oil equivalent, increased 6 percent to nearly 160 million barrels. Global oil consumption is around 85 million barrels a day, so this total production is around 10 million barrels shy of 2 days worth of global consumption, I guess nothing to be sneezed at. But the existing business is expecting lower volume growth this year: "When excluding volume growth from the Fayetteville Shale acquisition, we continue to expect production to be lower in the 2012 financial year."

According to the official release way back then BHP Billiton acquires Chesapeake Energy Corporation's interests in the Fayetteville Shale: "This acquisition will increase BHP Billiton's net reserve and resource base by 45 per cent. These assets currently produce over 400 million cubic feet of gas per day and include development options that will support substantially higher production over a 40 year operating life. BHP Billiton and Chesapeake have also agreed a 12 month services agreement to ensure the safe transfer of operations to BHP Billiton."

400 million cubic feet of gas a day? Currently the entire gas segment in BHP Billiton produces 405 billion cubic feet per annum. So annualise 400 cubic feet a day and you get to 146 billion cubic feet per annum. According to Wiki, on the barrel of oil equivalent: "One BOE is roughly equivalent to 5,800 cubic feet of natural gas or 58 CCF. The USGS gives a figure of 6,000 cubic feet (170 cubic meters) of typical natural gas" Phew.

I am working backwards here and really quickly, roughly 35 percent extra gas production is added. So roughly an extra 20 million barrels of oil equivalent per annum added through the Chesapeake purchase. There, I think I have nailed the extra production. That is the petroleum division. Next, one of the other "big" ones, base metals and in particular copper, which saw production 6 percent higher for the year, 6 percent lower for the same quarter comparison and flat compared to last quarter. Complicated, all you need to know is that copper production for the year was up. Copper production expected to be flattish next year, ramping up the year after that.

The other division worth noting because of its outlandish sized contribution to earnings is the iron ore division. Production grew 8 percent for the year. Strangely they shipped a whole lot more than they produced for the year. Which I guess is both good and bad. We wait for the results for the full year. The exploration and development report, wow, that is another kettle of fish, some mega projects in there, interest ones. Angostura, Macedon, but the most interesting in the petroleum division are their projects in the North West Shelf in Australia (both gas and oil), but sadly BHP Billiton only has a one sixth stake here. Looks amazing. Massive by way of monetary expansion projects proceeding in iron ore, all expected to yield 60 million tons plus per annum by 2014. This is all provided that the prices stay at current levels and the main customer still looks strong.