BHP Billiton Limited Update

Submitted by Craig Strzelecki on 3 May, 2007 - 18:22

BHP Billition Limited has a Buy 2 broker call and a $36 share price target from sharemarket analyst UBS. Recent transaction implies value of $25bn for BHP's Petroleum assets: Eni buys Dominion's deepwater Gulf of Mexico assets: Eni's purchase of Dominion’s deepwater Gulf of Mexico portfolio for $4.757bn is the largest in the recent series of European transactions in the area. Eni is buying 222 million boe of 2P reserves for a cost of $21.4/boe. Part of the transaction is for exploration acreage. Eni gave a value of $680m for this element, hence it is paying $18.4/boe for the oil/gas in the ground. Implies BHP's Petroleum assets are valued at US$25bn: According to BHP's latest reserve factsheet, it had 1,362mboe of proved, developed and undeveloped reserves in June 2006. Applying the US$21.4/boe to BHP's assets implies a value of US$29bn (16% higher than our current valuation of US$25bn). However at US$18.4/boe, BHP's Petroleum division is valued at $25bn, in line with our current valuation. BHP Billiton Limited stock continues to trade at low multiples: The stock continues to trade at multiples which suggest peak cycle earnings. We believe that commodity prices could continue to perform strongly, underpinned by continued GDP growth in China, strong performance in Europe and improving confidence in the US. On this basis, the analyst believes BHP Billiton Limited should trade at higher than its current 9x forward earnings multiples.Their price target is based on 11x FY08E EPS.

BHP Billiton Limited is listed on the Australian Stock Exchange (ASX) under stock code BHP. You can view their investor website here. BHP was listed on the ASX on 13 August, 1885. Charles "Chip" Goodyear is the CEO of BHP Billiton and Don Argus the Chairman. BHP Billiton was created through the Dual Listed Companies (DLC) merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), which was concluded on 29 June 2001. BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a combined basis as BHP Billiton. The headquarters of BHP Billiton Limited, and the global headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP Billiton Plc is located in London, United Kingdom. The company is principally involved in minerals exploration, production and processing (particularly coal, iron ore, copper and manganese ore) and hydrocarbon exploration, production and refining. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade BHP. Check your charts and good luck with your share trading!