BHP Billiton Chief Executive Marius Kloppers will give up a bonus potentially worth millions of dollars after the world's biggest miner said it was taking $3.3 billion in writedowns due to plunging commodities prices. BHP will take a $2.84 billion charge on a recently-acquired US shale gas business and a $450 million writedown on its Australian nickel business, the company said on Friday.
Kloppers is already under pressure from shareholders, including investment fund BlackRock, to pay bigger dividends or buyback more shares, which they say are being forsaken in favour of capital spending on new ventures. Chairman Jac Nasser said in a statement the shale gas writedown was "very disappointing" after low gas prices had cut the value of the Fayetteville business it bought last year. "The board remains of the view that the investment in the US shale assets is the right decision for BHP Billiton shareholders," Nasser said, adding that both Kloppers and the head of petroleum, Mike Yeager, would not take their bonuses.
Kloppers in the 2011 fiscal year received a bonus of $2.35 million in cash and the equivalent amount in deferred shares after the company posted a record profit of $23.6 billion The chief executive of Rio Tinto in 2011 also forfeited an annual bonus after the firm made an $8.9 billion writedown on Alcan aluminium assets bought under his watch.
BHP's move into US shale gas followed several ill-fated attempts under Kloppers to beef up, most notably a plan to buy Rio Tinto before the global financial crisis and Canada's Potash Corp in 2010. BHP bought its Fayetteville and Petrohawk US shale gas businesses in 2011, promoting the acquisitions as a way to leap frog into a growing market for energy. Shale gas prices have roughly halved since the acquisition.
It paid $4.75 billion for Fayetteville and $12 billion plus $3 billion in debt for Petrohawk. The Petrohawk division was not affected by the writedown. "This is not to say buying these assets was a bad thing," said Morningstar analyst Mark Taylor. "Shale gas is the future, and these were a good way to get a foot on the best assets. It might have been an expensive way to do it.. You can't time the bottom of a price cycle to perfection," Taylor said. The writedown was anticipated - BHP's shares slipped 2.5 percent against a 1 percent drop in the broader market - but was below some forecasts.