BHP Billiton production report for Q4

BHP Billiton released their production report for the full year this morning and on balance it looks good. I think that the thesis that we have on the company will hold true over time, and in the short term however all these commodity producers are lumped together from a quality point of view. But in our opinion, we agree with company and the CEO, their quality of their asset base is unrivalled globally. Tier one assets as Marius Kloppers often calls them.


Whilst the company might refer to the environment as challenging, they will still be able to produce annual production records across ten of their operations. This is also the 12th consecutive year of record Western Australian Iron Ore production which saw the June quarter register an annualised record of 179 million tons per annum. For the full year Iron Ore production topped 159.4 million tons actual for the year, an increase of 19 percent for the full year, and 8 percent on last quarter. There was a strong bounce back in the copper division, a 15 percent increase quarter on quarter, but because of the "challenges", they registered 4 percent lower production, 1094.5 thousand tons of copper for the year. The biggest change, and I guess it is no coincidence, is the petroleum division which reported a 40 percent increase in the year to barrel of oil equivalent to end at 222.34 million. Or roughly two and a half days production to match our global usage.


So in this department (oil and gas) BHP Billiton are not necessarily a big producer globally, but it has become a significant part of their business. I remember when oil production was much lower than at these levels, but because of the high levels of the oil price relative to their other divisions, this division contributed half of the profits in 2007. Five years ago. Remember that Iron ore is now a strong contributor, as margins have widened significantly. Energy and metallurgical coal volumes both increased by 2 percent, perhaps ahead of folks expectations particularly with the flooding in Queensland.

I am pleased with these numbers, they seem to be ahead of consensus. BHP Billiton is for us the only truly well diversified mining company at that scale. At most scales really. We continue to believe that you must be patient here, whilst earnings are never going to be smooth with commodities companies, they are more likely to be reliable. We will be closely watching on the 22nd of August, that is five weeks today. I don't think that I can wait that long.