BHP Q3 production report, beat on petroleum, flat on iron ore

Right. This is perhaps the most exciting time of the quarter, time to get down and dirty with the BHP BILLITON PRODUCTION REPORT FOR THE QUARTER ENDED 30 SEPTEMBER 2012. As I looked at the production report I was immediately struck with the petroleum division number. In the highlights segment, BHP Billiton say: "Petroleum production averaged a record 666 thousand barrels of oil equivalent per day during the September 2012 quarter as the Atlantis and Mad Dog facilities in the Gulf of Mexico successfully recommenced production.". Excellent, in fact the quarterly production number of 61.25 million barrels of oil equivalent is roughly half of what they used to produce. The company says that they are on track for 240 million barrels of oil equivalent for the year. To put that number into context, that is roughly 40 million barrels of oil more than South Africa uses. Or around 435 days worth of local usage, check it out -> South Africa Crude Oil consumption by year. Excellent.


Disappointments? Well, perhaps Iron Ore. This was as a result of a planned shutdown for inner harbour expansion, which is exactly what it sounds like. Inner harbour? If you remember from late August: WAIO dual harbour strategy. But the company said that they were on track to increase iron ore production by five percent for the year, which implies from the last full year that they should clock 167 million tons. Which is roughly four times the size of Kumba Iron Ore, just that single division alone.


The other very important division, or let me rephrase, segment inside of a division is their copper business. Byron re-tweeted a Joe Weisenthal comment, in which he sarcastically said, who would have thought: "I'm surprised. Chinese copper imports are on track for a record year.". With the photo: China copper imports: On track for a record year. Other than the graph being upside down the signs are clear, copper consumption per capita increases as consumer consumption expands. More washing machines and refrigerators. Back to BHP Billiton specifically, they say: "Escondida copper production remains on track to increase by 20 per cent in the 2013 financial year following the completion of scheduled maintenance and tie-in activities in the September 2012 quarter." Yes! And remember that the copper price has been holding up quite *nicely*, here is a one year graph courtesy of the freebies available at Kitco:

BHP Billiton stock is up 1.15 percent in Sydney post this production report. Whilst the stock has had a marvellous run in Rand terms since the middle of July, In Aussie Dollar terms the stock is up "only" ten percent. Over the last year in Aussie the stock is down 11.1 percent. The reasons are clear, the worries over Chinese consumption and iron ore prices having been volatile have meant that Mr. Market has only been able to give the stock a modest valuation. On a longer dated basis the stock looks cheap. It is a buy at current levels.