dug permian basin - amazon s3 · a premier global supplier of iron ore. copper a leading global...

DUG Permian Basin

Robert Manelis

General Manager, Permian Production Unit

21 May 2014

Disclaimer

Forward-looking statements

This presentation includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995

regarding future events, conditions, circumstances and the future financial performance of BHP Billiton, including for capital expenditures,

production volumes, project capacity, and schedules for expected production. Often, but not always, forward-looking statements can be

identified by the use of the words such as “plans”, “expects”, “expected”, “scheduled”, “estimates”, “intends”, “anticipates”, “believes” or

variations of such words and phrases or state that certain actions, events, conditions, circumstances or results “may”, “could”, “would”,

“might” or “will” be taken, occur or be achieved. These forward-looking statements are not guarantees or predictions of future performance,

and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual

results to differ materially from those expressed in the statements contained in this presentation. For more detail on those risks, you should

refer to the sections of our annual report on Form 20-F for the year ended 30 June 2012 entitled “Risk factors”, “Forward looking

statements” and “Operating and financial review and prospects” filed with the U.S. Securities and Exchange Commission. All estimates and

projections in this presentation are illustrative only. Our actual results may be materially affected by changes in economic or other

circumstances which cannot be foreseen. Nothing in this presentation is, or should be relied on as, a promise or representation either as to

future results or events or as to the reasonableness of any assumption or view expressly or impliedly contained herein.

No offer of securities

Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billiton securities in

any jurisdiction.

Reliance on third party information

The views expressed in this presentation contain information that has been derived from publicly available sources that have not been

independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This

presentation should not be relied upon as a recommendation or forecast by BHP Billiton.

Robert Manelis, General Manager Permian Production Unit, BHP Billiton Petroleum, 21 May 2014 Slide 2

Key Themes

• One of the world’s largest corporations, diversified global portfolio of assets

• A large, high quality resource base concentrated in Australia and the US

– Conventional and Unconventional

• Committed to ongoing improvement in our HSEC performance and a good

neighbor in the communities where we operate

• We have successfully refocused drilling activity on our liquids rich acreage

• Progressing development in the liquids rich Permian

• We will continue to optimize our investment program for value

• Pursuing significant productivity opportunities targeting cost and resource

recovery


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50

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150

200

250

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rd)

Anglo

Am

erican (

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Other

Diversified

Miners

25th largest company in the world

by market cap

Market capitalisation at 30th April 2014

(US$ billion)

Sources: Bloomberg, BHP Billiton.

Petrochina, Ind & Commercial Bank of China, China Mobile and other enterprises have been excluded due to high percentage of non free float shares.

An outstanding global portfolio of assets,

diversified by commodity, geography and market

Iron Ore

A premier global supplier of iron ore.

Copper

A leading global explorer and producer

of copper, silver, lead, uranium and zinc.

Coal

A global producer of thermal coal and

the largest global supplier of seaborne

traded hard coking coal.

Petroleum

A global leader in oil and gas

exploration, production, development

and marketing.

Potash Development Option

Focused on potash project

development.

Aluminium, Manganese and Nickel

A global producer and supplier of

primary aluminium, alumina and nickel

and manganese ore and alloys.


A 670 Mboe/d Petroleum business comprised of

high-quality Conventional and Shale assets

Shenzi Neptune

Atlantis Mad Dog

Pyrenees

Stybarrow

UK

Trinidad and

Tobago

Minerva

Algeria Pakistan

NW Shelf Bass Strait

Eagle Ford

Fayetteville Haynesville

Permian

Macedon

Shale (42%)

International (11%)

Australia (34% of FY13 production)

Gulf of Mexico (13%)

Source: BHP Billiton analysis.


Australia and the US remain our core

regions

Trinidad & Tobago

United Kingdom

Pakistan Algeria

Australia

Onshore US

Gulf of Mexico

Petroleum

other

FY14 BHP Billiton capital and exploration expenditure

Shale

Australia

Gulf of Mexico

Exploration

other

Petroleum BHP Billiton

Bubble size represents resource of one billion barrels of oil equivalent.


Note: Please refer to BHP Billiton Investor Briefing – Day 2 lodged with the ASX on 11/12/2013.

The material assumptions underpinning the estimates presented above are unchanged.

Committed to sustainable development

Be the safest company in industry

Protect the land where we operate

Safeguard and manage water resources

Minimise air emissions

Be a good neighbor to our communities


To be the safest company in the industry

• US Onshore business is very

challenging;

• Relatively inexperienced workforce;

• Contractor selection is critical;

• Hazard identification is a key focus

area;

• Material risks identified and

managed;

• Regularly host safety workshops

(safety stand-up).

2006 2007 2008 2009 2010 2011 BHPBilliton

2012

Recordable Injuries per Million Feet Drilled

(US H&P rig fleet)

Recordable Injuries per Million Hours Worked (TRIF, 12 month moving average)

0

2

4

6

8

2008 2009 2010 2011 2012 2013

Shale TRIF

Petroleum TRIF

H&P Onshore US rig fleet average

BHP Billiton Onshore US H&P rigs

Source: Helmerich & Payne, Inc.; BHP Billiton.


Community; Being a Good Neighbor

Slide 10

DARE high school students rehabilitating a home in Pecos

• Creating a Community Reference Group

(CRG) in Pecos. The CRG is composed

of 15 local civic leaders that meet

monthly to discuss current events and

get an update on BHP Billiton activities.

• Supporting local DARE projects such as

repairing senior citizens homes and

summer camp for at-risk-kids.

• Granting college scholarships to high

school students based on their

community involvement.

• Provide equipment and training for

First Responders.

Community Reference Group Meeting

Robert Manelis, General Manager Permian Production Unit, BHP Billiton Petroleum, 21 May 2014

Significant presence in premier US shale

plays

• We hold 1.5 million net acres1 across

four highly productive US shale plays

and three US states:

– Black Hawk (Eagle Ford) –

condensate rich;

– Hawkville (Eagle Ford) – mix of

condensate and gas with NGL;

– Permian – liquids rich but

geologically complex;

– Haynesville – prolific dry gas

wells with premier acreage

position;

– Fayetteville – long term, low

technical risk, dry gas option.

BHP Billiton Onshore US shale plays

Houston

liquids focused area

dry gas focused area

1. As at 30 June 2013.


Shale development plan will be continually

optimised for value

• We are prioritizing investment in the

liquids rich, high return shale assets.

– pursuing accelerated development in

the prolific Black Hawk area;

– timing Hawkville development for

liquids content and lease retention;

– large scale development of the

Permian will extend our liquids

production profile;

• We are preserving the value of our dry

gas shale assets.

– current drilling the Haynesville

delivers 30%¹ rates of return;

– Fayetteville investment limited to

strong non-operated opportunities

with 25%¹ rates of return;

• We have flexibility in our Shale portfolio to

time investment for maximum value.

BHP Billiton Onshore US shale plays

Houston

liquids focused area

dry gas focused area

1. Rate of return after tax, based on September 2013 futures prices.


Extending our high return liquids profile

• Efforts underway to expand our

Permian land position in our core focus

area.

– 100,000 net acres in identified

focus areas;

– acquiring acreage in highly

prospective areas and divesting

acreage elsewhere;

– testing multiple productive horizons.

• First shale exploration well drilled in

October 2013 in the emerging Pearsall

play.

– successfully accessed an option

across 100,000 net contiguous

acres;

– evaluation ongoing to determine

liquids production potential;

Pearsall

Focus

area

Pearsall 100,000 net acres

Permian 100,000 net acres

Black Hawk 58,000 net acres

Houston


Permian – we have defined a highly

prospective focus area

BHP Billiton acreage in the Permian basin

Focus area

Under evaluation


Permian – unique multiple horizon potential

• Large liquid bearing column

creates the potential for multiple

economically productive

horizons.

• A vertical well program followed

by targeted horizontal wells has

been used to appraise the play.

• Extensive appraisal program

given the large areal and

vertical footprint.

• Lease ownership interest can

vary by depth and horizon.

Lower

Middle

Upper

3rd

2nd

1st

Avalon

Bo

ne S

pri

ng

W

olf

cam

p

Schematic for

representative purposes

Ap

pro

xim

ate

ly 4

,00

0 f

ee

t th

ick


Acreage position appraised through vertical

program

• Appraisal program designed to delineate acreage position spatially and vertically.

• Vertical test wells drilled through subject intervals with ‘mini-fracs’ placed in multiple prospective horizons.

• Frac’d zones flowed back and correlated to observed horizontal well performance.

• Subsequent horizontal laterals followed up to confirm encouraging vertical frac flowback results.

• Results informed development plan.

Spatially Vertically A B C D E

Schematic for representative purposes

A

B

C

D

E

Wells

Te

ste

d H

oriz

on

s


Permian – targeting a 100 kboe/d

development

Production rate – recent wells in focus area (boe/d, 100% basis)

• Well results support planned 100

kboe/d development within the

focus area with approximately

60% liquids.

• Process of acquiring and

consolidating our acreage

position.

• Testing multiple productive

horizons.

• Significant productivity upside with

lower well cost and higher

recovery as we have

demonstrated in Black Hawk.

(days)

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1,200

1,400

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0 50 100 150 200


Learning to get better – faster

• Benchmark relentlessly

• Build upon best-in-class performance

• Utilize models to drive trials and pilots

• Apply design of experiment principles to accelerate feedback

• Invest in diagnostics to validate models and gather insights

• Leverage learnings across organization


1. Drilling time from spud to rig release.

2. 3-string well design.

Improving speed and reducing cost

BHP Billiton Black Hawk drilling time performance1

(days)

0

10

20

30

40

Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14

BHP Billiton Black Hawk drilling cost performance2

(US$ million)

0

2

4

6

8

Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14

• Balance drilling focus between time improvements and cost improvements.

• Tendered key contracts for tangibles and services.

• Continual review of well specification and procedures to ensure fit for purpose design.

• Eliminating waste and wait time in process.

• Reduce variability in drilling performance.

productivity

improvement

of ~26%

productivity

improvement

of ~24%


Utilize models to diagnose performance

issues

12

0

8

4

1200 800 400 0

Days

Ga

s R

ate

Pre

ssure

Hyperbolic/terminal

decline

Rate

restricted Apparent

boundary

dominated

flow

Time (days)

X History

-- Model

Propped in lower layers

Poorly propped in upper layers

Sm

ackover

Hayn

esvill

e

Bossie

r

0.2 lb/ft2

0.8 lb/ft2

0.4 lb/ft2

0.6 lb/ft2

0.0 lb/ft2

Length (Idealized Case)

5000ft 0ft

Lab based pressure dependent permeability

(md ratio vs psi)

Gas rate history

(mmcfd)

Flowing BHP Billiton match

(psi)

Proppant placement model

(feet)

X History

-- Model

Time (days)

Source: BHP Billiton.


Uniform fracture geometry is ideal

Previous Design – Longer stage length

Production Log

Microseismic

• Microseismic and production logging confirm

disproportionate contribution by cluster.

• Using diversion techniques to improve

stimulated rock volume and create a more

uniform distribution across clusters.

• Early results encouraging.

Schlumberger BroadBand

Source: BHP Billiton, Schlumberger.


Uniform fracture geometry is ideal

Production Log

Concept – Shorter stage length Microseismic

Schlumberger BroadBand

• Microseismic and production logging confirm

disproportionate contribution by cluster.

• Using diversion techniques to improve

stimulated rock volume and create a more

uniform distribution across clusters.

• Early results encouraging.

Source: BHP Billiton, Schlumberger.


Benchmarking performance to measure

effectiveness

BHP

Billiton

(226 wells)

A

(227)

B

(642)

C

(333)

D

(162)

BHP

Billiton

(192 wells)

A

(235)

B

(558)

C

(265)

D

(154)

BHP

Billiton

(57 wells)

A

(48)

B

(167)

C

(52)

D

(52)

BHP

Billiton

(161 wells)

A

(154)

B

(435)

C

(176)

D

(120)

Pro

du

ctio

n, b

o

Pro

du

ctio

n, m

bo

Pro

du

ctio

n, m

bo

e

Pro

du

ctio

n, m

bo

Source: BHP Billiton analysis.


Summary

• One of the world’s largest corporations

with a strong portfolio of Conventional

and Shale assets.

• One of the most active unconventional

operators in North America.

• Success in Unconventionals requires

organizations to learn – quickly.

• Analytical and numerical models help

target trials and accelerate learning.

• Benchmarking is an important tool to

allow you to build upon the success of

others.


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