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UPDATE: BHP Takes $3.29 Billion Writedown; CEO Kloppers Declines Bonus

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-- BHP to book US$2.84 billion impairment against value of some US shale assets

-- It will recognize US$450 million charge against Australian nickel assets

-- CEO Marius Kloppers and petroleum CEO Michael Yeager decline bonuses

(Recasts first paragraph, adds detail and background throughout and fund manager comment in the twelfth-thirteenth paragraphs.)

By Robb M. Stewart

MELBOURNE--BHP Billiton Ltd. (BHP) said Friday it will write down the value of U.S. shale gas and Australian nickel assets by a combined US$3.29 billion, prompting Chief Executive Marius Kloppers to decline an annual bonus in the latest sign the global resources boom has lost momentum.

BHP blamed a slump in U.S. natural gas prices for the US$2.84 billion impairment charge on the Fayetteville shale assets acquired last year, following peers such as BP PLC (BP) and Encana Corp. (ECA) that have announced big writedowns of U.S. shale deposits in the past two weeks alone.

The Anglo-Australian company said it also plans to recognize a US$450 million pre-tax charge against the value of its Australian nickel assets, where a supply glut has squeezed margins.

But in a significant move, BHP said the potential to pump oil from shale rock meant it wouldn't write down any of the U.S. assets acquired through the $12.1 billion takeover of Petrohawk Energy Corp. in August last year. That deal was BHP's biggest since Mr. Kloppers took the helm of BHP in 2007.

Mining and energy companies are being squeezed by falling commodity prices on one side and rising operating costs on the other, prompting many to reconsider investment plans to focus on trimming jobs and costs.

BHP faces shareholder pressure to defer approval of some or all of three US$10 billion-plus expansion projects before the year-end. South Africa-born Mr. Kloppers has faced criticism of overpaying to grab thousands of acres of shale assets for almost US$17 billion last year, just before prices tumbled on oversupply.

The impairment charge is being taken against the carrying value of the largely gas assets that BHP picked up early in 2011 when it bought Chesapeake Energy Corp.'s (CHK) Fayetteville shale assets and a pipeline system in Arkansas for US$4.75 billion.

The company said an assessment of its assets concluded the value of the larger liquids-rich acreage in Texas and Louisiana, which came with the later Petrohawk deal aren't affected.

"The Fayetteville charge reflects the fall in United States domestic gas prices and the company's decision to adjust its development plans by shifting drilling from dry gas to the more liquids-rich fields," Mr. Kloppers said in a statement, adding the company had responded appropriately to changed market conditions.

Chairman Jacques Nasser said BHP's board had agreed with Mr. Kloppers and petroleum chief executive Michael Yeager's decision not to be considered for a bonus for the financial year ended in June.

Analysts had flagged a shale writedown of as much as US$6 billion.

Tim Schroeders, a fund manager at Pengana Capital in Melbourne, welcomed Mr. Kloppers and Mr. Yeager "sharing the pain of investors," who have seen BHP's share price fall to near three-year lows.

"This potentially diffuses any speculation around senior management," said Mr. Schroeders, noting Mr. Nasser's strong support for Mr. Kloppers in BHP's statement.

BHP is due to release its full-year earnings results Aug. 22 and profit for the financial year is expected to have fallen to almost US$16.88 billion before one-time items from a record US$21.68 billion on a similar basis last year, according to the consensus expectations of 25 analysts.

"These are difficult times, particularly for those companies and their shareholders who are being affected by global uncertainty," Mr. Nasser said. "Notwithstanding the prevailing environment, we are confident in the outlook for the U.S. natural gas market and the role our shale assets will play in BHP Billiton's portfolio in continuing to deliver long term shareholder returns."

Write to Robb M. Stewart at robb.stewart@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

August 02, 2012 21:17 ET (01:17 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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