More news from the commodities sector involves BHP Billiton and that massive bid for Petrohawk. The deal has been completed and BHP have secured 97.4% of the US shale gas producer who will then become a wholly owned subsidiary of BHP. Since the bid the Nymex gas price has dropped 13% but the deal is a long term play on what seems a very depressed gas price for a commodity being utilised more and more in an energy hungry globe.
On top of this acquisition they also bought those Chesapeake gas assets for $4.75 billion as part of a huge expansion plan into shale gas which has $60bn flagged for investment over the next decade. $60bn is massive and again I reiterate how companies, the entities we actually invest in, who are on the ground floor experiencing that demand and dealing with clients, are confident to allocate cash into actual assets. They are gearing themselves up for what they believe to be long term, sustainable demand. When you have over 300 million people urbanising in China alone, the demand for energy is going to be massive.
This is also the kind of behaviour that will sort out the US debt problem. Yes, it is tiny in comparison but in this acquisition we have $12bn allocated into the hands of shareholders, from a foreign company in the form of BHP Billiton who have made the majority of this money from selling commodities to a very hungry China. Taxes will be paid, more investment into these US assets will take place and jobs will be created. Good to see.