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BHP: ‘Future facing’ commodities have more shareholder value than fossil fuels

September 09, 2022

S&P Global Market Intelligence ($):

BHP Group Ltd. sees better margins in "future-facing" commodities than the fossil fuel businesses, and "the divestment of our petroleum business and some of our smaller coal assets wasn't for the purposes of decarbonization. This was all about shareholder value and risk," CEO Mike Henry told a Sept. 8 shareholder call.

The divested assets were only attractive "in the near-to-medium term," Henry said. "Over the longer-term, we think there are more questions about where those assets trend and in the case of petroleum, we believe they would be better focused in a portfolio that was better able to navigate the energy transition."

Merging BHP's petroleum portfolio with Woodside Energy Group Ltd. and divesting its 80% stake in BHP Mitsui Coal Pty. Ltd. were key planks in building a portfolio aligned to the electrification and decarbonization megatrends, "with more upside than downside," the CEO said.

Divesting would free up the company to focus on growing its exposure to "forward-facing" commodities like copper, nickel and potash, which are expected to have decades-long demand growth, the CEO said.

"BHP's divestment of the petroleum division and the [BHP Mitsui Coal] assets was less about decarbonization and more about decreasing the company's exposure to climate transition risk in the coming decades," Harriet Kater, climate lead for Australia at the Australasian Centre for Corporate Responsibility, told S&P Global Commodity Insights. "We are nearing a stage where divesting oil and gas assets will become harder," said Kater. "BHP managed to get out before the music stopped this time, unlike its attempted divestment of the Mt Arthur thermal coal mine."

"Within five to 10 years we'll have a substantial potash business plus more nickel and copper production which will give us plenty of diversification," Henry said.

[Anthony Barich]

More ($): BHP's petroleum exit not for decarbonization but shareholder value, CEO says

 

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