BHP Group At Vantage Point to Leverage Strong Demand for Crude Oil 

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Summary

  • Crude oil demand is expected to increase by 6 Mbbl/d in 2021 amidst sound economic growth in the second half.
  • BHP owns strategic assets in the most prominent oil & gas geographies including GOM, Australia and Mexico.
  • The Company has set aside nearly half a billion dollars to support exploration and appraisal activities this year.

The oil cartel-OPEC has released its monthly report for April. The report presents an optimistic view of the oil & gas industry for the rest of the year 2021. The demand is forecast to increase by 6 Mbbl/d Y-o-Y in 2021.

The cloud of COVID-19 fear is anticipated to subside as global vaccine cover will increase. The world could witness more relaxation in movement, leading to a surge in fuel consumption, primarily in the petrol and diesel categories.

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The global oil demand is estimated to remain around 90.5 Mbbl/d in 2021. The second half of the year is expected to deliver sound growth in demand amid robust economic performance by the global economies.

In the supply-side, Russia and the US have shown a decline in production. The OPEC countries produced 25.04 Mbbl/d of oil during March. In the near term, oil production is expected to remain in the same range. As the latest trends of oil rig numbers in the US are up, a decent growth in production levels can be expected.

Global resource giant BHP Group Limited (ASX:BHP) owns several resource-rich oil & gas assets in some of the world’s prolific basins. The Company has operating assets in the US Gulf of Mexico (GOM), Australia, Trinidad & Tobago, Mexico, and Algeria.

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BHP has set its petroleum production guidance for FY21 in the range of 95-102 Mboe. During 1H FY21, the Company reported hydrocarbon production of 50 MMboe. The reporting period saw several hurricane appearances in the Gulf of Mexico, impacting the production adversely.

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The acquisition of an additional working interest of 28% in the Shenzi Project in GOM shows the intention of the Company to become a major oil & gas player in the region. BHP now holds a 72% interest in the project. The Company has set aside US$450 million for the exploration and appraisal program during the ongoing financial year.

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The Ruby Project in Trinidad & Tobago is running on schedule and under budget. BHP is the project operator with a 68.46% stake. The project is scheduled to commence production in 2021. On completion, the Ruby Project will produce up to 16,000 barrels of oil per day and 80 Mcf/d of natural gas.

The Bass Strait West Barracouta Project is also expected to become operational this year. The new floating production facility at Mad Dog Phase 2 (GOM) is taking final shape and is likely to start production in 2022. The facility, entailing an investment of US$2.154 billion, is designed to have a production capacity of 140,000 barrels of oil per day.

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In Mexico, the project is in its initial stages of the exploration phase. The Company has concluded the seismic acquisition over the Trion field.

BHP was trading at A$46.990 on 15 April 2021 (AEST 12:46 PM) with a market cap of A$135.53 billion.

Many other ASX-listed players operating in the oil & gas industry are experiencing swift movements in their share prices including Santos Limited (ASX:STO), Origin Energy (ASX:ORG), Woodside Petroleum (ASX:WPL) and Oil Search Limited (ASX:OSH).

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