World’s Largest Miner Books Massive $7.2 Billion Writedown On US Shale “Assets”

Late last month, Freeport McMoRan co-founder and executive chairman James R. Moffett was shown the door.
Moffett, known as the ‘last of the old-time wildcatters’, was a legend in the industry but made a fatal mistake in 2013: he paid $2.1 billion for McMoRan Exploration Co (an oil-and-gas company the parent company had separated from in the 1990s), and $6.9 billion for Plains Plains Exploration & Production.
As WSJ put it, ‘the deals in part were a bet that oil prices would remain high.’
Well, they didn’t, and the gamble ended up increasing the combined entity’s debt fivefold and Carl Icahn is now pushing Freeport to dump the ‘high cost’ assets.
Freeport wasn’t the only mining giant to make an ill-timed bet on US oil and gas assets. BHP Billiton, the world’s largest miner, spent $20 billion buying US assets in 2011, making it the largest overseas investor in US shale. Now, as ‘lower for longer’ turns to ‘lower for longer-er’, the company is set to take a huge writedown on its US onshore portfolio.
How huge, you ask? $7.2 billion huge (or $4.9 billion after taxes) on assets the company was carrying at just over $20 billion. The company now values its US assets at $16 billion. ‘While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today,’ CEO Andrew Mackenzie said. ‘However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery.’

This post was published at Zero Hedge on 01/15/2016.