hartley's research report ..., page-13

More on your BHP, Trouser.

From Daily reckoning


--CIC has a problem too. It has $500 billion to invest. And it's probably a bit wary. It bought stakes in Morgan Stanley and Blackstone Group in 2007, during the height of the financial crisis, and got burned. Where will it look next?

--Well if CIC follows the lead of the China National Petroleum Corporation, China's largest oil company, it may look to shale gas assets abroad. Bloomberg reports that China National Petroleum is set to spend $40 billion in cash on US and Chinese shale gas companies. This follows a $1.02 billion investment by China Petrochemical Corporation in one of the Oklahoma fields belonging to Chesapeake Energy Corporation.

--Whether China will be able to actually make larger shale gas investments in the US is another question. Energy is increasingly deemed a 'strategic asset'. National governments have been wary to sell off prized energy resources to countries they consider strategic rivals. But what about Australia?

--BHP has made strategic shale acquisitions in the US. It's also been absolutely caned on those acquisitions, writing off $2.84 billion from its Fayetteville Shale assets late last year. This cost Marius Kloppers his bonus for 2012, and arguably his job for good.

--It also goes to show you that in a land rush, it's better to be early to make the most money. The less you know about the geology, the more likely you are to overpay for an asset. This is what makes Aussie shale so interesting right now, by the way. The stocks with the biggest potential are also the stocks with the biggest questions marks about the asset. The less you know, the more it could be worth!

--But in BHP's case, less was definitely not more. It must be hoping it does not make the same mistake here in Australia. And it IS getting involved here in Australia. 'We're clearly going to be very studious in Australia and we're going to be very studious in Europe,' says BHP Billiton Petroleum CEO Mike Yeager.

--'You'll see us start to take land positions and you'll start to see us possibly do some things,' he enigmatically added at a conference in Houston this week. BHP has 45 drill rigs working onshore in the US already. It was hurt by the timing of its acquisition in the US because the natural gas price halved.

--BHP is already late to the shale game in Australia. Your editor came back from a conference in Houston in 2011 in which the excitement was about natural gas and promptly recommended two more shale gas explorers on top of the one we'd already tipped. THAT was the time to take an extremely speculative position that land would be grabbed up in the most promising regions of Australia.

A lot of the land grabbing has already happened, at least in the Cooper Basin. That's where three of our recommendations operate. A fourth - admittedly a very risky speculation - has its assets located in the Canning Basin. The Canning Basin is out Pilbara way. And that could make things interesting for BHP.

--Keep in mind that BHP has shelved the $30 billion expansion of the copper and uranium project at Olympic Dam in South Australia. It also cancelled the $20 billion 'outer harbour' project at Port Hedland, an iron-ore related project. For a miner that prides itself on the diversity of its asset portfolio, you'd think onshore shale gas from Australia would be a nice fit.

--In any event, BHPs interest in the industry isn't necessary for there to be a boom. Chevron signed up with a $349 million deal last week. The game is afoot. You can read about it here...
Take this as you may.

http://pro.portphillippublishing.com.au/p03shale/ESISP325/?o=942010&s=947456&u=52958286&l=548031&r=Milo

"could blow out shale gas stocks in Australia"

http://blogs.wsj.com/dealjournalaustralia/2013/02/25/chevrons-australian-shale-gas-gamble/