BHP lifts shale spending as oil gains lure drillers to add rigs

MELBOURNE (Bloomberg) -- BHP Billiton Ltd., the largest overseas investor in U.S. shale, boosted spending on its onshore oil and gas division as rising prices lure drillers to add rigs and spur a deals spree.

The company boosted spending on the unit to $165 million in the three months to Dec. 31, from $108 million the previous quarter, according to a BHP statement. It also boosted overall planned petroleum exploration spending by 17% to $820 million for fiscal 2017, after its successful bid for Mexico’s Trion field and positive drilling results in the Gulf of Mexico.

The oil industry is expected to raise spending for the first time in three years after slashing almost half a million jobs globally during the downturn, industry consultant Graves & Co. said this month. Projects in BHP’s petroleum division will account for about half of its capital expenditure over the next five years, according to Macquarie Group Ltd.

“We will accelerate our counter-cyclical oil exploration efforts this year,” said BHP CEO Andrew Mackenzie. “After the first successful rig, our onshore U.S. gas hedging program will also be expanded to secure attractive returns.”

BHP, which last year booked writedowns of $7.2 billion against the shale unit, lifted the number of operating rigs in its U.S. onshore division to three from two at the end of September, following the successful execution of its hedging pilot, according to the statement.

BHP, which earns about 21% of revenue from its petroleum business, including offshore assets, sees oil and natural gas as better placed for price gains into next year than iron ore, its top earner.

Oil prices have risen since the Organization of Petroleum Exporting Countries reached a deal to curtail supply last year. The Nov. 30 agreement has prompted a surge in activity in the U.S., which is not an OPEC member, as oil and gas producers increase drilling from last year’s record low.