UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
August 22, 2017
| BHP BILLITON LIMITED | BHP BILLITON PLC | |
| (ABN 49 004 028 077) | (REG. NO. 3196209) | |
| (Exact name of Registrant as specified in its charter) | (Exact name of Registrant as specified in its charter) |
| VICTORIA, AUSTRALIA | ENGLAND AND WALES | |
| (Jurisdiction of incorporation or organisation) |
(Jurisdiction of incorporation or organisation) |
| 171 COLLINS STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA |
NOVA SOUTH, 160 VICTORIA STREET LONDON, SW1E 5LB UNITED KINGDOM | |
| (Address of principal executive offices) | (Address of principal executive offices) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: ☒ Form 20-F ☐ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: ☐ Yes ☒ No
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a
22 August 2017
Results for announcement to
the market
Name of Companies: BHP Billiton Limited (ABN 49 004 028 077) and BHP Billiton Plc (Registration No. 3196209)
Report for the year ended 30 June 2017
This statement includes the consolidated results
of the BHP Group, comprising BHP Billiton Limited and BHP Billiton Plc, for the year ended 30 June 2017 compared with the year ended 30 June 2016.
This
page and the following 47 pages comprise the year end information given to the ASX under Listing Rule 4.3A and released to the market under UK Listing Rule 9.7A. The 2017 BHP Group annual financial report will be released in September.
The results are prepared in accordance with IFRS and are presented in US dollars.
US$ Million
Revenue up 24% to 38,285
Profit/(loss) after taxation
attributable to the members of the BHP Group up 192% to 5,890
Net Tangible Asset Backing:
Net tangible assets per fully paid share were US$11.04 as at 30 June 2017, compared with US$10.51 as at 30 June 2016.
Dividends per share:
Final dividend for current period US 43 cents fully franked (record date
8 September 2017; payment date
26 September 2017)
Final dividend
for previous corresponding period US 14 cents fully franked
This statement was approved by the Board of Directors.
Margaret Taylor
Group Company Secretary
BHP Billiton Limited and BHP Billiton Plc
Release Time IMMEDIATE
Date 22 August 2017
Number 21/17
BHP RESULTS FOR THE YEAR ENDED 30 JUNE 2017
ï,— Tragically, we had a fatality at Escondida in October 2016, and more recently at Goonyella Riverside. ï,— Attributable profit of US$5.9 billion,
Underlying EBITDA(ii) of US$20.3 billion, Underlying EBITDA margin(iii) of 55% and Underlying return on capital employed(iii) of 10% (after tax) for the 2017 financial year. ï,— Productivity gains(iv) of US$1.3 billion achieved
for the period, with more than US$12 billion accumulated over the last five years. We expect to deliver a further US$2 billion by the end of the 2019 financial year, with gains weighted to the second year.
ï,— Net operating cash flow of US$16.8 billion and free cash flow(i) of US$12.6 billion were underpinned by higher commodity prices, strong operating
performance and improved capital productivity.
ï,— Capital and exploration expenditure(v) reduced by 32% to US$5.2 billion, as we focused on capital
efficient latent capacity projects and exercised flexibility in our Onshore US plans.
ï,— Capital and exploration expenditure is expected to increase to
US$6.9 billion in the 2018 financial year as we focus on our suite of low-risk, high-return latent capacity projects, progress Mad Dog Phase 2 and the Spence Growth Option and ramp-up drilling activity in Onshore US.
ï,— In accordance with our capital allocation framework, we expect capital and
exploration expenditure to remain below US$8 billion per annum for the 2019 and 2020 financial years.
ï,— We strengthened our balance sheet, with
net debt(i) of US$16.3 billion reflecting strong free cash flow generation and a favourable non-cash movement in net debt of US$0.6 billion.
ï,— The Board has determined to pay a final dividend of 43 US cents per share which is covered by free cash flow generated in the current period. Total dividends of
US$4.4 billion determined for the 2017 financial year include US$1.1 billion in additional amounts over and above the 50% minimum payout policy. ï,— In Petroleum, positive drilling results were reported following the discovery of
oil in multiple horizons at the Wildling-2 appraisal well in the Gulf of Mexico this month.
ï,— We have
determined that our Onshore US assets are non-core and we are actively pursuing options to exit these assets for value. In the meantime, we will complete well trials, acreage swaps and assess midstream
solutions to increase the value, profitability and marketability of our acreage.
ï,— In Brazil, progress continues on the social and environmental
remediation programs following the Samarco dam failure.
2017 2016 Change Year ended 30 June(1) US$M US$M %
Profit/(loss) from operations 11,753 (6,235) n/a Attributable profit/(loss) 5,890 (6,385) n/a Basic earnings/(loss) per share (cents) 110.7 (120.0) n/a Dividend per share (cents)
83.0 30.0 177% Net operating cash flow 16,804 10,625 58% Capital and exploration expenditure(v) 5,220 7,711 (32)% Net debt(i) 16,321 26,102 (37)% Underlying EBITDA(ii) 20,296 12,340 64% Underlying
EBIT(ii) 12,389 3,469 257% Underlying attributable profit(ii) 6,732 1,215 454% Underlying basic earnings per share (cents)(iii) 126.5 22.8 455%
(1) Where we have used alternate performance measures they are identified by a footnote, and definitions can be found on pages 26 and 27.
1
News Release
Results for the year ended
30 June 2017
BHP Chairman, Jac Nasser, said: “Over the last five years, we have laid the foundations to significantly improve our return on capital and
grow long-term shareholder value.
We have reduced unit costs by over 40 per cent and achieved over US$12 billion in productivity gains. Our capital
allocation framework provides flexibility at the bottom of the cycle and discipline at the top. We have shifted our focus to low-cost, high-return latent capacity projects which has allowed us to reduce
capital expenditure by over 70 per cent. We strengthened our balance sheet and changed our dividend policy to make sure we have stability and flexibility to create value and reward shareholders in a more volatile environment. And we have
reshaped our portfolio so that we focus on large, long-life, low-cost assets that will support shareholder returns for decades to come. At the end of this month, I leave my role as Chairman knowing these
strong foundations, proven strategy and core values position BHP well for the future.” BHP Chief Executive Officer, Andrew Mackenzie, said: “We had a very strong financial year. Free cash flow was US$12.6 billion, our second highest
on record. We used this cash to reduce net debt by nearly US$10 billion and return US$4.4 billion to shareholders. Productivity gains across our simpler portfolio of tier one assets increased our return on capital to 10 per cent.
This strong momentum will be carried into the 2018 financial year, with volume growth of seven per cent and further productivity gains expected. Our relentless
focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year.”
The
health and safety of our people and the communities in which we operate always come first
Health and safety are core to our values and our highest priority.
Tragically, two of our colleagues died over the last 14 months, one colleague at Escondida in October 2016 and one colleague at Goonyella Riverside in August 2017. We achieve nothing unless we achieve it safely. Our Total Recordable Injury Frequency
was 4.2 per million hours worked in the 2017 financial year, a two per cent decrease compared with the prior year. Our field leadership
program was implemented
during the year and coupled with ongoing technology initiatives will drive even higher levels of safety across all assets.
Making significant progress on the
social and environmental remediation programs in Brazil
BHP remains committed to supporting the Renova Foundation with the recovery of communities and ecosystems
affected by the Samarco tragedy. Substantial progress has been made during the period.
Relocation of the communities most severely affected by the dam failure is
continuing, with urban planning underway and regulatory approvals being sought. The Renova Foundation’s compensation program is in progress and over 82,000 claims have been resolved, the majority of which were for temporary interruption to
water supplies immediately following the dam failure. The environmental programs are proceeding well. Turbidity in the Rio Doce has generally returned to pre-dam failure levels and erosion control in priority
areas is almost complete.
On 18 January 2017, Samarco and its shareholders, Vale S.A. and BHP Billiton Brasil Ltda, entered into a Preliminary Agreement with
the Federal Prosecutors’ Office in Brazil in relation to the Samarco dam failure. The final date for negotiation of a settlement has been extended from 30 June 2017 to 30 October 2017.
Restart of Samarco’s operations remains a focus but is subject to separate negotiations with relevant parties and will occur only if it is safe, economically viable and has
the support of the community. Resuming operations requires the granting of licenses by state and federal authorities, community hearings and an appropriate restructure of Samarco’s debt.
In the 2017 financial year, BHP reported an exceptional loss of US$381 million (after tax) in relation to the Samarco dam failure. This includes funding of
US$134 million, direct costs of US$82 million, discount unwinding of US$127 million and other movements of US$38 million. Additional commentary is included on page 41.
2
BHP Results for the year ended 30 June 2017
Financial performance
Earnings and margins
ï,· Attributable profit of US$5.9 billion includes an exceptional loss of US$842 million (after tax), compared to an attributable loss of US$6.4 billion,
including an exceptional loss US$7.6 billion (after tax), in the prior period. The 2017 financial year exceptional loss related to the Samarco dam failure, Escondida industrial action and Chilean withholding tax paid at a concessional rate,
partially offset by the reimbursement received on cancellation of the Caroona
exploration licence. The 2016 financial year exceptional loss related to the
impairment of our Onshore US assets, the Samarco dam failure and global taxation matters.
ï,· Underlying attributable profit of US$6.7 billion,
compared to US$1.2 billion in the prior period.
ï,· Profit from operations of US$11.8 billion, compared to a loss of US$6.2 billion in
the prior period, driven by higher revenue due to prices and lower expenses due to impairment charges on our Onshore US assets in the 2016 financial year.
ï,· Underlying EBITDA of US$20.3 billion, with higher prices, operating cash cost improvements and other net movements (in total US$9.4 billion)
more than offsetting the impacts of unfavourable exchange rate movements, inflation and one-off items (in total US$1.4 billion).
ï,· Underlying EBITDA margin of 55 per cent, compared with 41 per cent in the prior period.
ï,· Underlying return on capital employed of 10 per cent (after tax), a significant improvement from 2.4 per cent in the prior period.
Productivity and costs
ï,· US$1.3 billion of additional productivity gains
delivered, with total annualised productivity gains of more than US$12 billion accumulated over the last five years. Productivity gains were lower than guidance largely as a result of volumes at the lower end of guidance ranges and increased
exploration expenditure, including the successful bid for Trion in Mexico.
ï,· Improvements continue to be realised across the portfolio. We expect to
deliver a further US$2 billion of productivity gains over the two years to the end of the 2019 financial year, with gains weighted to the second year.
ï,· Group copper equivalent unit costs(vi) declined by four per cent compared to the 2016 financial year. Escondida and Western Australia Iron Ore
(WAIO) unit cash costs(vii) decreased by 17 per cent and three per cent, respectively. Conventional petroleum and Queensland Coal unit costs(vii) increased by two per cent and eight per cent respectively. Escondida unit costs were lower as a
result of continued productivity improvements and favourable inventory movements. If costs related to the industrial action were included, Escondida unit costs would have been US$1.13 per pound. WAIO unit costs declined due to reductions in labour
and contractor costs and productivity improvements. Conventional petroleum unit costs were higher due to lower volumes as a result of planned maintenance at Atlantis and natural field decline. Queensland Coal unit costs were higher as sales volumes
were impacted by Cyclone Debbie.
ï,· Historical costs and guidance for the 2018 financial year are summarised below:
FY18(1) FY18e vs FY17 vs guidance FY17 FY16 FY17 FY16
Conventional petroleum unit cost(2) (US$
per barrel of oil equivalent) 10 8.82 8.63 13% 2% Escondida unit cost(3) (US$ per pound) ~1.00 0.93 1.12 8% (17%) Western Australia Iron Ore unit cost (US$ per tonne) <14 14.60 15.06 (4%) (3%) Queensland Coal unit cost (US$ per tonne) 59 59.67
55.25 (1%) 8% (1) 2018 financial year guidance is based on exchange rates of AUD/USD 0.75 and USD/CLP 663.
(2) Excludes impact from revaluation of embedded
derivatives in the Trinidad and Tobago gas contract: FY17 US$37 million loss; FY16 US$14 million gain.
(3) 2017 financial year unit cost excludes the
impact of the industrial action that was reported as an exceptional item.
News Release
Cash flow and balance sheet
ï,· Net operating cash flows of US$16.8 billion reflect higher commodity prices and further cash cost efficiencies. ï,· Free cash flow
of US$12.6 billion. All operating assets were free cash flow positive(iii), reflecting continued improvements in both productivity and capital efficiency.
ï,· We continued to strengthen our balance sheet, with a reduction in net debt of US$9.8 billion to finish the period at US$16.3 billion
(31 December 2016: US$20.1 billion; 30 June 2016: US$26.1 billion). This reduction reflects strong free cash flow generation during the period as well as a non-cash fair value adjustment of
US$1.2 billion related to interest rate and exchange rate movements, partially offset by the Kelar finance lease of US$0.6 billion. ï,· Gearing ratio(i) of 20.6 per cent (31 December 2016: 24.3 per cent;
30 June 2016: 30.3 per cent).
ï,· We will maintain a strong balance sheet through the commodity price cycle. In the medium term, this translates
to a net debt range of US$10 to US$15 billion.
Dividends
ï,·
The dividend policy provides for a minimum 50 per cent payout of Underlying attributable profit at every reporting period. The minimum dividend payment for second half of the 2017 financial year is 33 US cents per share. ï,·
Recognising the importance of cash returns to shareholders, the Board has determined to pay an additional amount of 10 US cents per share, taking the final dividend to 43 US cents per share.
ï,· In total, dividends of US$4.4 billion (83 US cents per share) have been determined for the 2017 financial year, including additional amounts of
US$1.1 billion.
Capital and exploration
ï,· Capital and
exploration expenditure of US$5.2 billion, down 32 per cent in the 2017 financial year, included maintenance spend(viii) of US$1.2 billion and exploration of US$1.0 billion. Expenditure was seven per cent lower than guidance as a
result of the industrial action interruptions to Escondida projects and lower sustaining capital spend at WAIO.
ï,· Capital and exploration expenditure
is now expected to be US$6.9 billion for the 2018 financial year, higher than previous guidance, as a result of Escondida projects spend carried over from the previous year, an increase in Onshore US drilling and development expenditure and
unfavourable exchange rate movements. The increase in expenditure compared to the prior year reflects continued investment in high-return latent capacity projects, increased Onshore US drilling activity (completing trials to increase investable
inventory and utilising our gas hedging strategy to reduce price risk and secure attractive rates of return) and approval of Mad Dog Phase
2 and the Spence Growth
Option. The Group’s development expenditure of approximately US$2.5 billion (related to Onshore US, latent capacity and major projects) in the 2018 financial year is expected to have an average rate of return of over 20 per cent.
ï,· A US$0.9 billion exploration program is now planned for the 2018 financial year. This includes petroleum exploration expenditure of
US$715 million, a decrease of US$125 million from prior guidance primarily driven by optimisation of the drilling program.
ï,· In accordance
with our capital allocation framework, we expect capital and exploration expenditure to remain below US$8 billion per annum in the 2019 and 2020 financial years.
Capital allocation framework
Strict adherence to our capital allocation framework balances
value creation, cash returns to shareholders and balance sheet strength in a transparent and consistent manner. Our capital allocation framework is embedded in every capital decision we make to achieve optimal balance between value accretive
investments, cash returns and the balance sheet. The transparent competition for capital ensures all investment decisions are tested against additional returns to shareholders.
4
BHP Results for the year ended 30 June 2017
Our priorities for capital are to:
ï,· first, maintain safe and
stable operations;
ï,· second, maintain a strong balance sheet through the cycle;
ï,· third, pay shareholders a minimum of 50 per cent of Underlying attributable profit as dividends; and
ï,· fourth, direct remaining cash to the value-maximising outcome, with debt reduction, paying additional dividend amounts, buying back shares, investing in projects
and acquiring assets all competing for capital.
During the 2017 financial year, we invested US$1.2 billion to maintain safe and reliable operations, we
preserved our balance sheet strength and we paid out the minimum dividend of US$2 billion. With the remaining US$13 billion, which included US$0.7 billion in portfolio simplification proceeds, we invested US$4 billion in our
organic development projects, returned US$0.9 billion in additional dividend amounts to our shareholders and further strengthened our balance sheet, consistent with our bias to debt reduction.
Our balance sheet remains a fundamental enabler of our strategy. Our ongoing focus on debt reduction will protect the Group through periods of heightened volatility and support
counter
cyclical investments as we move through the cycle. We will focus on further improvements in operational and capital efficiency. We will invest in releasing
near-term latent production capacity, which offers attractive returns for low-risk. Where there is a compelling investment case, we will progress our broad suite of medium and long-term development options.
While these are timed to meet identified market windows, we will proceed only if they pass our strict capital allocation framework tests. We will remain disciplined, with shareholder value and returns at the centre of everything we do.
Outlook
Economic outlook
World economic growth is likely to be close to the top of the anticipated range of three to three and a half per cent in the 2017 calendar year. A modest lift in international
trade has occurred this year despite ongoing political uncertainty. China’s economic growth is expected to slow modestly in the 2018 financial year, while remaining within the official GDP target range of between six and
a half and seven per cent. However, we expect to see a cooling of growth rates in the housing and automobile markets in combination with a continuation of strength in infrastructure.
China’s policymakers will continue to seek a balance between the pursuit of reform and the maintenance of macroeconomic and financial stability. We expect a continuation of
current efforts to address excess capacity and improve balance sheet health in over-indebted sectors. Over the longer term, our view remains that China’s economic growth rate will decelerate as the working age population falls and the capital
stock matures. China’s economic structure will continue to rebalance from industry to services and growth drivers will shift from investment and exports towards consumption.
The medium term outlook for the US economy is uncertain. Progress on growth enhancing infrastructure spending and tax reform has been slow and monetary conditions are expected to
tighten further. In Europe and Japan, where the limits of monetary policy effectiveness may have been reached, any upside on growth in the medium term will have to come from external demand sources. India’s economy is on a healthy growth
trajectory. Meanwhile the 2017 financial year stabilisation of commodity prices has put a floor under growth in resource-exporting emerging markets.
Commodities
outlook
Crude oil prices overall trended higher in the 2017 financial year. OPEC agreed to its first production cut since 2008 as well as a cooperative deal with non-OPEC producers. However, concerns around inventories, increasing production from OPEC countries exempt from the agreement, and rising US output weighed on price near the end of the 2017 financial year. A
balanced market is forecast for the near-term. OPEC strategy, US supply and US shale costs are the major uncertainties for the short and medium term. The long-term outlook remains positive, underpinned by rising demand from the developing world and
natural field decline.
Despite an overall mild winter in the US, the domestic gas price strengthened in the 2017 financial year on strong power demand, rising
exports and lower year on year production. Lower inventory levels and robust demand are
5
News Release likely to support prices in the near-term, although there are risks to this outlook on the supply side. Longer term, strong
demand growth and natural field decline will incentivise investment in new supply. However, the abundance of lower-cost supply is likely to moderate the degree of price inflation.
Copper prices increased in the second half of the 2017 financial year due to stronger Chinese demand and increased mine disruption. In the near-term, incremental mine production
from committed projects, combined with increased scrap availability, will be sufficient to meet steady growth in copper demand. In the longer term, demand growth will remain solid, with a deficit expected to emerge early next decade. Grade decline,
increased input costs, water constraints and a scarcity of high-quality future development opportunities will require higher prices to attract sufficient investment to balance the market.
Global steel production growth regained momentum in the 2017 financial year led by a recovery in China and steady growth in emerging regions. Steel demand growth in tandem with
capacity curtailment in China led to higher capacity utilisation rates and improved profitability. Our views on long run Chinese steel use are unchanged, with a growth rate of approximately one per cent per annum building towards a peak in the mid-2020s. The recovery in the rest of the world is likely to continue after a multi-year stagnation. In the long term, the global steel market will grow modestly, supported mainly by incremental demand from India
and other populous emerging markets.
The iron ore price increased in the 2017 financial year. This was driven by higher pig iron production in China and a
preference for higher grade materials amid improved steel margins and high coke prices. Seaborne supply continued to increase from Australia and Brazil as well as from some non-traditional origins. In the
medium and longer term, committed supply projects will ramp-up and production increases from productivity and de-bottlenecking are likely to translate into a further
flattening of the cost curve.
Metallurgical coal prices increased significantly in the first half of the 2017 financial year, due to China’s supply side
reform policy and adverse weather conditions in China and Queensland. The future application of China’s coal supply reform policy remains a source of uncertainty. As currently constructed, the policy is positive for long-run industry sustainability. The expected further concentration of blast furnace capacity in China towards contestable coastal locations will underpin seaborne metallurgical coal demand growth in excess of
total pig iron demand. Over the longer term, emerging markets such as India are expected to support seaborne demand growth, while high-quality metallurgical coals will continue to offer steel makers value-in-use benefits.
Potash demand has been strong in the calendar year to date, which has put a floor under prices.
Higher utilisation rates at existing operations and additional greenfield supply will inhibit price inflation in the near term. Over the long term, we expect annual demand growth of between two and three per cent, with the demand outstripping supply
in the mid-2020s.
Capital and exploration
Historical capital and exploration expenditure and guidance for the 2018 financial year are summarised below:
FY18e FY17 FY16 US$B US$M US$M
Capital expenditure (purchases of property, plant and
equipment)(1) 6.0 4,252 6,946 Add: exploration expenditure 0.9 968 765
Capital and exploration expenditure 6.9 5,220 7,711 (1) Includes capitalised deferred
stripping of US$416 million for FY17 and US$886 million for FY18e (FY16: US$750 million).
During the 2017 financial year, the BHP Board approved the Mad
Dog Phase 2 project in the deepwater Gulf of Mexico and both the Bass Strait Longford Gas Conditioning Plant and the Escondida Water Supply projects were completed. At Jansen, excavation and lining of the shafts are steadily progressing. Both shafts
have been safely excavated and lined through the Blairmore aquifer. With a later market window now anticipated, the Jansen project will not be brought to the Board in the 2018 calendar year. In the meantime, we are considering multiple options to
maximise the value of the Jansen project, including further improvements to capital efficiency, further optimisation of design and diluting our interest by bringing in a partner. Board approval will be sought for the project only if it passes our
strict capital allocation framework tests.
6
BHP Results for the year ended 30 June 2017
At the end of the 2017 financial year, BHP had three major projects under development with a combined budget of US$5.1 billion over the life of the projects.
All major projects under development remain on time and on budget. On 17 August 2017, BHP’s Board approved an investment of US$2.5 billion for the development of the Spence Growth Option.
Capital
Project and expenditure(1) Date of initial
Business ownership Capacity(1) US$M production Progress Budget Actual Target Projects completed during the 2017 financial year
Petroleum Bass Strait Longford Designed to process approximately 400 MMcf/d 520 Q4 CY16 CY16 Completed in Gas Conditioning of high CO2 gas. May 2017 Plant (Australia) 50% (non-operator) Copper Escondida Water New desalination facility to ensure continued 3,430 Q1 CY17 CY17 Completed in Supply (Chile) water supply to Escondida. June 2017 57.5%
Projects in execution at the end of the 2017 financial year
Petroleum North West Shelf To
maintain LNG plant throughput from the North 314 CY19 47% complete Greater Western West Shelf operations.
Flank-B (Australia) 16.67%
(non-operator)
Petroleum Mad Dog Phase 2 New floating
production facility with the capacity 2,154 CY22 3% complete (US Gulf of Mexico) to produce up to 140,000 gross barrels of crude 23.9% (non-operator) oil per day.
Other projects in progress at the end of the 2017 financial year
Potash(2) Jansen Potash
Investment to finish the excavation and lining of 2,600 70% complete (Canada) the production and service shafts, and to 100% continue the installation of essential surface infrastructure and utilities.
(1) Unless noted otherwise, references to capacity are on a 100 per cent basis, references to capital expenditure from subsidiaries are reported on a 100 per cent basis
and references to capital expenditure from joint operations reflects BHP’s share.
(2) Potash capital expenditure of approximately US$300 million is
expected for the 2018 financial year.
Income statement
Underlying
attributable profit and Underlying EBITDA are presented below.
2017 2016 Year ended 30 June US$M US$M
Underlying attributable profit 6,732 1,215 Exceptional items (after taxation) – refer to pages 10 and 38 (1,006) (7,651)
Non-controlling interest in exceptional items 164 51
Attributable profit/(loss) 5,890 (6,385)
Profit attributable to non-controlling interests 332 178
Profit/(loss) after tax 6,222 (6,207)
2017 2016 Year ended 30 June US$M
US$M
Underlying EBITDA 20,296 12,340 Depreciation and amortisation (7,719) (8,661) Impairments of property, plant and equipment financial assets and intangibles
(188) (210) Exceptional items (before net finance costs and taxation)(1) – refer to pages 10 and 38 (636) (9,704)
Profit/(loss) from operations 11,753 (6,235)
Net finance costs (1,431) (1,024) Total taxation (expense)/benefit (4,100) 1,052
Profit/(loss) after tax 6,222 (6,207)
(1) Exceptional items of US$(636) million excludes net
finance costs of US$(127) million included in the total US$(381) million related to the Samarco dam failure. Total exceptional items before tax inclusive of the US$(127) million net finance costs are US$(763) million.
7
News Release
Profit/(loss) from operations has
increased as a result of higher revenue driven by favourable realised price movements across all key commodities and lower expenses primarily due to impairments recognised on our Onshore US assets and the initial recognition of the Samarco dam
failure provision in the 2016 financial year.
Underlying EBITDA
The following
table and commentary describes the impact of the principal factors(iii) that affected Underlying EBITDA for the 2017 financial year compared with the 2016 financial year:
US$M Year ended 30 June 2016 12,340
Net price impact:
Change in sales prices 8,987 Higher average realised prices for our key commodities. Price-linked costs (779) Increased royalties reflect higher realised prices.
8,208 Change in volumes:
Productivity 340 Ongoing efficiency improvements and the release of
latent capacity across the Group, excluding impacts from the industrial action at Escondida, power outage at Olympic Dam and Cyclone Debbie at Queensland Coal which are reported as one-off items. Growth (267))
Deferral of development activity in Onshore US and expected natural field decline.
73
Change in controllable cash costs(iii):
Operating cash costs 1,131 Lower costs reflect a
decrease in labour and contractor costs at WAIO, favourable impacts from inventory movements across the mineral assets and a change in estimated recoverable copper in the Escondida sulphide leach pad. These are partially offset by additional WAIO
rail maintenance costs and closure and rehabilitation adjustments in Petroleum.
Exploration and business development (170) Higher petroleum exploration
expense reflecting expensing of the Burrokeet wells in Trinidad and Tobago and the Wilding-1 well in the Gulf of Mexico.
961 Change in other costs:
Exchange rates (516) Impact of the stronger
Australian dollar and Chilean peso against the US dollar. Inflation (308) Impact of inflation on the Group’s cost base.
Fuel and energy (7)
Non-cash (357)() Increased depletion of capitalised stripping and lower strip ratio consistent with the Escondida mine plan.
One-off items (602) Impacts from the industrial action at Escondida (volume), power outage at Olympic Dam, Cyclone Debbie at Queensland
Coal and royalty matters.
(1,790)
Asset sales 176 Divestment of 50 per
cent interest in Scarborough and non-core asset sales in Onshore US.
Ceased and sold operations
(61) Cessation of production from the Crinum metallurgical coal mine and the divestment of IndoMet Coal and the San Juan and Navajo energy coal assets.
Other
items 389 Higher average realised prices received by our equity accounted investments and cost savings from towage service activities, partially offset by the suspension of Samarco operations.
Year ended 30 June 2017 20,296
The following table reconciles relevant factors with
changes in the Group’s productivity:
Year ended 30 June 2017 US$M
Change in controllable cash costs 961 Change in volumes attributed to productivity 340
Change in productivity in Underlying EBITDA 1,301
Change in capitalised exploration (21)
Change attributable to productivity initiatives 1,280
8
BHP Results for the year ended 30 June 2017
Prices and exchange rates
The average realised prices achieved for our major
commodities are summarised in the following table:
FY17 Jun H17 Jun H17 vs vs vs Average realised prices(1) Jun H17 Dec H16 FY17 FY16 FY16 Jun H16 Dec H16
Oil (crude and condensate) (US$/bbl) 50 45 48 39 23% 35% 11% Natural gas (US$/Mscf)(2) 3.48 3.21 3.34 2.83 18% 27% 8% US natural gas (US$/Mscf) 2.98 2.79 2.88 2.16
33% 52% 7% LNG (US$/Mscf) 7.37 6.35 6.84 7.71 (11%) 4% 16% Copper (US$/lb) 2.70 2.41 2.54 2.14 19% 25% 12% Iron ore (US$/wmt, FOB) 62 55 58 44 32% 41% 13% Hard coking coal (HCC) (US$/t) 180 179 180 83 117% 117% 1% Weak coking coal (WCC) (US$/t) 121
122 121 69 75% 73% (1%) Thermal coal (US$/t)(3) 75 74 75 48 56% 63% 1% Nickel metal (US$/t) 9,799 10,581 10,184 9,264 10% 11% (7%) (1) Based on provisional, unaudited estimates. Prices exclude third party product and internal sales, and represent
the weighted average of various sales terms (for example: FOB, CIF and CFR), unless otherwise noted. Includes the impact of provisional pricing and finalisation adjustments. In Copper, the adjustment increased Underlying EBITDA by US$27 million
in the 2017 financial year.
(2) Includes internal sales.
(3) Export sales
only; excludes Cerrejón. Includes thermal coal sales from metallurgical coal mines.
The following exchange rates relative to the US dollar have been applied
in the financial information:
Average Average
Year ended Year ended As at As
at As at Currency 30 June 2017 30 June 2016 30 June 2017 30 June 2016 30 June 2015
Australian dollar(1) 0.75 0.73 0.77 0.75 0.77 Chilean
peso 662 688 663 661 635 (1) Displayed as US$ to A$1 based on common convention.
Depreciation, amortisation and impairments
Depreciation, amortisation and impairments declined by US$964 million to US$7.9 billion, reflecting lower production at our coal, copper and petroleum operations and a
reduction in the depreciable asset base resulting from previously recorded impairment charges in Onshore US.
Net finance costs
Net finance costs increased by US$407 million to US$1.4 billion reflecting higher benchmark interest rates, costs related to the March 2017 bond repurchase program and
increased discounting charges to provisions and other liabilities, primarily relating to the Samarco dam
failure which was reported as an exceptional item (US$127
million). This was partially offset by a lower average debt balance following the repayment on maturity of Group debt and the bond repurchase program.
Taxation
expense
Total taxation expense, including royalty-related taxation, exceptional items and exchange rate movements, was US$4.1 billion, representing a
statutory effective tax rate of 39.7 per cent. In the 2016 financial year, there was a tax benefit primarily due to the impairment of our Onshore US assets resulting in the Group recording a loss before taxation of US$7.3 billion.
The Group’s adjusted effective tax rate(iii), which excludes the influence of exchange rate movements and exceptional items, was 34.0 per cent (2016:
35.8 per cent). The decrease in the 2017 financial year was largely due to the relative lower proportion of profit from Australian petroleum assets, which are subject to a higher rate of tax due to the Petroleum Resource Rent Tax, in the
Group’s overall profit compared to the prior year. The adjusted effective tax rate is expected to be in the range of 32 to 37 per cent for the 2018 financial year.
9
News Release
Year ended 30 June 2017 2016
Profit/(loss) Income tax Profit/(loss) Income tax before taxation (expense)/benefit before taxation (expense)/benefit
US$M US$M % US$M US$M % Statutory effective tax rate 10,322 (4,100) 39.7 (7,259) 1,052 –
Adjusted for:
Exchange rate movements—88 –
125 Exceptional items 763 243 9,704 (2,053)
Adjusted effective tax rate 11,085 (3,769) 34.0 2,445 (876) 35.8
Other royalty and excise arrangements which are not profit based are recognised as operating costs within Profit/(loss) before taxation. These amounted to US$2.0 billion
during the period (2016: US$1.3 billion).
Exceptional items
The following
table sets out the exceptional items for the 2017 financial year. Additional commentary is included below and on page 38.
Gross Tax Net Year ended 30 June
2017 US$M US$M US$M Exceptional items by category
Samarco dam failure(1) (381)—(381) Escondida industrial action (546) 179 (367) Cancellation of the Caroona
exploration licence 164 (49) 115 Withholding tax on Chilean dividends—(373) (373)
Total (763) (243) (1,006)
Attributable to non-controlling interests – Escondida industrial action (232) 68 (164) Attributable to BHP shareholders (531) (311)
(842) (1) Financial impact of US$(381) million from the Samarco dam failure relates to US$(134) million share of loss from US$(134) million funding provided during the period, US$(82) million direct costs incurred by BHP Billiton Brasil Ltda and
other BHP entities, US$(127) million net finance costs and US$(38) million other movements in the Samarco dam failure provision including foreign exchange. Refer to note 1 Exceptional items and note 6 Significant events – Samarco dam failure of
the Financial Information for further information.
BHP reported an exceptional loss representing the ongoing financial impact of the November 2015 Samarco dam
failure.
Idle capacity costs associated with the Escondida strike action in the March 2017 quarter are reported as an exceptional item as, unlike previous
industrial actions, this strike action resulted in a total shutdown of operations over a 44-day period, including work on key expansion projects, which together with the significant costs incurred, is
considered material to the Financial Statements.
A net exceptional gain has been recognised following the Group’s agreement with the New South Wales
Government in August 2016 to cancel the exploration license of the Caroona Coal project.
A one-off intra-group dividend was
paid in April 2017 while a concessional tax rate was available in Chile, resulting in an exceptional withholding tax payment.
Dividend
Our Board today determined to pay a final dividend of 43 US cents per share. The final dividend to be paid by BHP Billiton Limited will be fully franked for Australian taxation
purposes.
Events in respect of the final dividend Date
Currency conversion
into RAND 1 September 2017 Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE) 5 September 2017 Ex-dividend Date JSE 6 September 2017
Ex-dividend Date Australian Securities Exchange (ASX), London Stock Exchange (LSE) and 7 September 2017 New York Stock Exchange (NYSE) Record Date (including currency conversion and currency election
dates for ASX and LSE) 8 September 2017 Payment Date 26 September 2017
10
BHP Results for the year ended 30 June 2017
BHP Billiton Plc shareholders registered on the South African section of the register will not be able to dematerialise or rematerialise their shareholdings
between the dates of 6 September and 8 September 2017 (inclusive), nor will transfers between the UK register and the South African register be permitted between the dates of 1 September and 8 September 2017 (inclusive). American
Depositary Shares (ADSs) each represent two fully paid ordinary shares and receive dividends accordingly. Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges following conversion and
will appear on the Group’s website.
Debt management and liquidity
During
the 2017 financial year, the Group continued to focus on debt reduction with no new debt issued and US$3.25 billion of senior debt repaid at maturity. In addition, the Group paid US$2.5 billion on a bond repurchase program which concluded
on 23 March 2017. The total cost in relation to the repurchase program was US$107 million, which has been reported in net finance costs. This program was funded by BHP’s strong cash position and targeted short dated US dollar bonds
maturing before 2023. The early repayment of the bonds has extended BHP’s average debt maturity profile and enhanced BHP’s capital structure. The decision not to refinance maturing debt and the bond repurchase program contributed to a
US$5.9 billion overall decrease in the Group’s gross debt, from US$36.4 billion at 30 June 2016 to US$30.5 billion at 30 June 2017.
At the subsidiary level, Escondida issued US$1.5 billion of new long-term debt to refinance US$0.8 billion of short-term debt and US$0.4 billion of
maturing long-term debt, and to fund capital expenditure associated with key projects.
The Group has a US$6.0 billion commercial paper program backed by a
US$6.0 billion revolving credit facility which expires in May 2021. As at 30 June 2017, the Group had no outstanding US commercial paper, no drawn amount under the revolving credit facility and US$14.2 billion in cash and cash
equivalents.
Corporate governance
On 16 February 2017, we announced the
appointment of Grant King to the Board as an independent, Non-executive Director, effective 1 March 2017. We also announced that Pat Davies would be retiring from the Board with effect from 6 April
2017.
On 16 June 2017, the BHP Board elected Ken MacKenzie to succeed Jac Nasser as Chairman. Mr MacKenzie will assume the role of Chairman and Chairman of
the Nomination and Governance Committee with effect 1 September 2017, following Mr Nasser’s retirement as Chairman, Non-executive Director and Chairman of the Nomination and Governance Committee.
Malcolm Broomhead has also been appointed to the Nomination and Governance Committee with effect from 1 October 2017.
As of 1 September 2017, the members
of the Board’s committees will be:
Risk and Audit Nomination and Governance Remuneration Sustainability Committee Committee Committee Committee
Lindsay Maxsted (Chairman) Ken MacKenzie (Chairman) Carolyn Hewson (Chairman) Malcolm Brinded (Chairman) Anita Frew Carolyn Hewson Malcolm Brinded Grant King Malcolm Broomhead
Shriti Vadera Shriti Vadera Ken MacKenzie Wayne Murdy Wayne Murdy Malcolm Broomhead
As previously disclosed, BHP conducted an audit tender during the period. After
a comprehensive tender process, the Board has selected EY to be appointed as the Group’s auditor from the financial year beginning 1 July 2019, subject to shareholder approval. The Board intends to put EY forward for shareholder approval
at the Annual General Meetings in 2019.
KPMG, BHP’s current external auditor, did not participate in the tender due to the EU
regulations and the UK Competition and Markets Authority rules which require a new external auditor to be in place by 1 July 2023. KPMG will continue in its role and will undertake the audit of BHP for the 2017, 2018 and 2019 financial years,
subject to reappointment by shareholders at the 2017 and 2018 Annual General Meetings.
11
News Release
Segment summary(1)
A summary of performance for the 2017 and 2016 financial years is presented below.
Year ended
Net
30 June 2017 Underlying Underlying Exceptional operating Capital Exploration Exploration US$M Revenue(2) EBITDA(8) EBIT items(7) assets expenditure
gross(3) to profit(4)
Petroleum 6,872 4,063 566—23,181 1,472 805 575 Copper 8,335 3,545 2,006 (546) 24,100 1,484 44 44 Iron Ore 14,624 9,077 7,197 (203)
19,175 805 94 70 Coal 7,578 3,784 3,050 164 10,136 246 9 9 Group and unallocated items(5) 977 (173) (430) (51) 2,446 245 16 16 Inter-segment adjustment(6) (101) — — — -
Total Group 38,285 20,296 12,389 (636) 79,038 4,252 968 714
Year ended Net
30 June 2016 Underlying Underlying Exceptional operating Capital Exploration Exploration US$M Revenue(2) EBITDA(8) EBIT items assets expenditure gross(3) to profit(4)
Petroleum 6,894 3,658 (537) (7,184) 25,168 2,517 590 288 Copper 8,249 2,619 1,042—23,844 2,786 64 64 Iron Ore 10,538 5,599 3,740 (2,388) 20,541 1,061 92 74
Coal 4,518 635 (349)—10,651 298 18 18 Group and unallocated items(5) 853 (171) (427) (132) 2,723 284 1 1 Inter-segment adjustment(6) (140) — — — -
Total Group 30,912 12,340 3,469 (9,704) 82,927 6,946 765 445
(1) Group and segment level
information is reported on a statutory basis which, in relation to Underlying EBITDA, includes depreciation, amortisation and impairments, net finance costs and taxation (expense)/benefit of US$540 million (2016: US$444 million) related to
equity accounted investments. It excludes exceptional items of US$172 million (2016: US$1,227 million) related to share of profit/(loss) from equity accounted investments.
Group profit/(loss) before taxation comprised Underlying EBITDA, exceptional items of US$636 million (2016: US$9,704 million), depreciation, amortisation and impairments of
US$7,907 million (2016: US$8,871 million) and net finance costs of US$1,431 million (2016: US$1,024 million).
(2) Revenue is based on Group realised
prices and includes third party products. Sale of third party products by the Group contributed revenue of US$1,207 million and Underlying EBITDA of US$50 million (2016: US$1,068 million and US$55 million).
(3) Includes US$356 million capitalised exploration (2016: US$335 million).
(4) Includes
US$102 million of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2016: US$15 million).
(5) Group and unallocated items includes Functions, other unallocated operations including Potash, Nickel West and consolidation adjustments. Revenue not
attributable to reportable segments comprises the sale of freight and fuel to third parties. Exploration and technology activities are recognised within the relevant segments.
Year ended Net
30 June 2017 Underlying Underlying operating Capital Exploration
Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Potash—(108) 10 (118) 3,094 162 —Nickel West 952 44 87 (43) (337) 56 16
16
Year ended Net
30 June 2016 Underlying Underlying operating Capital
Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Potash—(149) 6 (155) 2,888 190 —Nickel West 819 (114) 76
(190) (223) 89 1 1
(6) Comprises revenue of US$83 million generated by Petroleum (2016: US$118 million) and US$18 million generated by Iron Ore (2016:
US$22 million).
(7) Exceptional items of US$(636) million excludes net finance costs of US$(127) million included in the total US$(381) million related to the
Samarco dam failure. Total exceptional items before tax inclusive of the US$(127) million net finance costs are US$(763) million. Exceptional items of US$(51) million reported in Group and Unallocated also related to the Samarco dam failure. Refer
to note 1 Exceptional items for further information.
(8) We use various alternate performance measures to reflect our underlying performance. Refer to page 7 for a
reconciliation of Underlying EBITDA to our statutory results and page 26 for the definition and calculation methodology of alternate performance measures used in reporting our performance.
12
BHP Results for the year ended 30 June 2017
Petroleum
Underlying EBITDA for Petroleum increased by US$405 million to
US$4.1 billion in the 2017 financial year.
US$M Underlying EBITDA for the year ended 30 June 2016 3,658
Net price impact(1) 774 Change in volumes: growth (267) Change in controllable cash costs (307) Profit on sale of assets 190 Other(2) 15
Underlying EBITDA for the year ended 30 June 2017 4,063
(1) Average realised price: crude
and condensate oil US$48/bbl (2016: US$39/bbl); natural gas US$3.34 /Mscf (2016: US$2.83/Mscf); LNG US$6.84 /Mscf (2016: US$7.71/Mscf).
(2) Other includes:
exchange rate; inflation; ceased and sold operations; other items. Other items includes Onshore US rig termination charges of US$6 million (2016: US$76 million) and impact from revaluation of embedded derivatives in Trinidad and Tobago gas
contract of US$37 million loss (2016: US$14 million gain).
Total petroleum production for the 2017 financial year decreased by 13 per cent to 208
MMboe reflecting the deferral of development activity in Onshore US for value and natural field decline.
Total petroleum production for the 2018 financial year is
expected to decrease to between 180 and 190 MMboe, comprising Conventional volumes between 119 and 123 MMboe and Onshore US volumes between 61 and 67 MMboe. The expanded rig program is forecast to deliver Onshore US production growth of
approximately 35 per cent in the 2019 financial year, with investment plans subject to market conditions.
Controllable cash costs increased by
US$307 million reflecting higher exploration expenses, attributable to expensing the Burrokeet wells in Trinidad and Tobago and the Wildling-1 well in the Gulf of Mexico.
Conventional unit cash costs increased by two per cent to US$8.82 per barrel due to lower volumes, however a reduction in workover scopes, lower lifting expenses and optimised
maintenance programs resulted in unit costs being 12 per cent below guidance. Unit costs for the 2018 financial year are expected to be approximately US$10 per barrel reflecting the impact of lower volumes, partially offset by productivity
improvements.
During the period, gains on asset divestments of US$190 million were recognised, with the majority related to the sale of 50 per cent of
BHP’s interest in the undeveloped Scarborough area gas fields to Woodside Energy Limited as well as some acreage sales in Onshore US.
Petroleum capital
expenditure for the 2017 financial year declined by 42 per cent to US$1.5 billion. This included US$554 million of Onshore US drilling and development expenditure. Our
Onshore US operated rig count was five as at 30 June 2017, with three rigs in the Haynesville, one in the Black Hawk and one in the Permian.
FY17 Liquids focused areas Gas focused areas
(FY16) Eagle Ford Permian Haynesville
Fayetteville Total
Capital expenditure(1) US$ billion 0.3 (0.8) 0.2 (0.4) 0.1 (0.0) 0.0 (0.0) 0.6 (1.2) Rig allocation At period end 1 (2) 1 (2) 3 (-)—(-) 5
(4) Net wells drilled and completed(2) Period total 51 (89) 21 (30) 5 (5) 2 (11) 79 (136) Net productive wells At period end 963 (929) 126 (107) 394 (411) 1,044 (1,086) 2,527 (2,533) (1) Includes land acquisition, site preparation, drilling,
completions, well site facilities, mid-stream infrastructure and pipelines.
(2) Can vary between periods based on changes
in rig activity and the inventory of wells drilled but not yet completed at period end (18 net drilled and uncompleted wells at the end of the 2017 financial year).
During the second half of the 2017 financial year, Onshore US drilling and completion costs per well increased in most fields primarily as a result of changes to
the basis of well design to longer laterals and larger frac jobs. By changing the well design, we anticipate increased recoveries and improved well returns despite higher costs. For example, in the Permian we anticipate increased recoveries of more
than 60 per cent over the full well life, including a 20 per cent increase in the first year of production. Our Onshore US assets were free cash flow positive for the 2017 financial year, reflecting improvements in both operating and
capital efficiency.
13
News Release
Cost per well (US$M) H2 FY17 H1 FY17
FY17 FY16
Black Hawk: Drilling cost 2.4 1.8 2.0 2.3 Black Hawk: Completion cost 2.6 2.7 2.7 3.1 Permian: Drilling cost 3.1 2.9 2.9 3.4 Permian: Completion cost 4.3
2.2 2.8 2.9 Haynesville: Drilling cost 3.1 3.5 3.3 n/a Haynesville: Completion cost 3.2 2.7 3.0 n/a
As part of our ongoing review of our portfolio, the Board and
management have determined that our Onshore US assets are non-core and options to exit these assets are being actively pursued. We will be flexible with our plans and commercial in our approach. We are
examining multiple alternatives but will only divest for value. Execution of these options may take time which we will use to continue to complete our well trials, acreage swaps and investigate mid-stream
solutions to increase the value, profitability and marketability of our Onshore US acreage. In the near term, the sale of a portion of the Hawkville is progressing and is anticipated to be executed in the September 2017 quarter.
Petroleum capital expenditure of approximately US$2.0 billion is planned in the 2018 financial year. This includes Conventional capital expenditure of US$0.8 billion
which is focused on high-return infill drilling opportunities in the Gulf of Mexico, a life extension project at North West Shelf along with investments related to the recently approved Mad Dog Phase 2 project.
Onshore US capital expenditure is expected to be up to US$1.2 billion for the 2018 financial year. Our focus in the liquids fields is to maximise value by completing trials to
increase investable inventory, while in the Haynesville our hedging strategy allows us to reduce price risk and secure average rates of return in excess of 20 per cent. Our plans consider up to five additional rigs,
subject to market conditions. In July 2017, one rig commenced operations in the Hawkville and one additional rig is expected to commence in the Haynesville in the September 2017 quarter. Evaluation of trials in the Black Hawk are expected to be
completed in the September 2017 quarter and, subject to approval, one additional rig will commence toward the end of that quarter. In the Permian, two additional rigs also commencing in the September 2017 quarter will focus on completion trials,
which will inform a transition to full pad development as early as the 2019 financial year. At this point we do not anticipate any operated development in the Fayetteville, however we continue to work with joint venture partners to assess the
potential of the Moorefield horizon through non-operated activity.
Petroleum exploration expenditure for the 2017 financial
year was US$805 million, of which US$473 million was expensed. Activity for the period was largely focused on our core areas in the deepwater Gulf of Mexico, both the US and Mexican side, the Caribbean and the Northern Beagle sub-basin off the coast of Western Australia.
In the Gulf of Mexico, positive drilling results were reported following the
discovery of oil in multiple horizons at the Wildling-2 appraisal well in August 2017. Evaluation is ongoing to assess the scale of the resource following the successful Shenzi North and Caicos wells. The
Scimitar exploration well is expected to commence drilling in the September 2017 quarter.
In Mexico, BHP was the successful bidder to acquire a 60 per cent
participating interest in, and operatorship of, the Trion discovered resource. A contract with Pemex has been executed and a Minimum Work Program consisting of one appraisal well, one exploration well and the acquisition of additional seismic data
is expected to be completed by the end of the 2019 financial year. Trion exploration expenditure for the 2018 financial year is expected to be approximately US$75 million.
In Trinidad and Tobago, we continued appraisal work to assess the potential commercialisation of the gas discovery at LeClerc and to prepare for deepwater oil exploration in Phase
2, which is expected to commence in the second half of the 2018 financial year.
In Australia, BHP has completed its evaluation of the WA-480-P permit in the Northern Beagle sub-basin and has elected to exit this exploration permit. Acquisition of the seismic survey in
the Exmouth sub-basin was completed on
1 May 2017. Processed data will be delivered during the June 2018 quarter.
14
BHP Results for the year ended 30 June 2017
A
US$715 million exploration program is now planned for the 2018 financial year, a decrease of US$125 million from prior guidance primarily driven by optimisation of the drilling program. This program includes one well in the US Gulf of
Mexico and three wells in Trinidad and Tobago.
Petroleum reserves
BHP has
confirmed the addition of 446 MMboe to proved oil, NGL and gas reserves during the 2017 financial year, which represents a reserves replacement of 209 percent.
In Onshore US, 314 MMboe was added as a result of improved commodity prices, reduced operating costs, and an increase in planned drilling over the next five years.
A further 105 MMboe of proved undeveloped reserves was added following the approval of the Mad Dog Phase 2 project in the Gulf of Mexico. As of 30 June 2017 Petroleum proved reserves totalled 1,535 MMboe on a net interest basis.
During the 2017 financial year, several large development projects were completed that converted a total of 177 MMboe of proved undeveloped reserves to proved developed producing
reserves. The largest of these conversions occurred in Australia where 111 MMboe was converted to proved developed in the Kipper-Tuna-Turrum fields in the Bass Strait with the start-up of the Longford gas
conditioning plant. The start-up and first gas from the Tidepole field in the North West Shelf Greater Western Flank-A project also converted 10 MMboe to proved
developed. In Trinidad and Tobago, 23 MMboe was converted to proved developed for the completion of Angostura Phase 3 development. In the US, drilling and completion activities resulted in the conversion of 15 MMboe to proved developed in the Eagle
Ford field, 9 MMboe in the Atlantis and 8 MMboe in the Mad Dog (Spar A) fields in the Gulf of Mexico.
Developed(1) Undeveloped(1) Total(1) Proved oil, condensate,
NGL and gas reserves at 30 June 2016 (MMboe) 967 335 1,303
Production (213 MMboe, including 5 MMboe of fuel) (213)—(213) Other movements—Australia
124 (121) 4 Other movements—United States 138 292 430 Other movements—Other regions(2) 36 (24) 12
Proved Oil, condensate, NGL and gas reserves at
30 June 2017 (MMboe) 1,052 483 1,535
(1) Rounded to the nearest MMboe.
(2) Other regions include Algeria, Trinidad & Tobago, and UK.
Petroleum’s reserves are as of 30 June 2017 and have been estimated with deterministic methodology, with the exception of the North West Shelf gas
operation in Australia where probabilistic methodology has been utilised to estimate and aggregate reserves for the reservoirs dedicated to the gas project only. The probabilistic based portion of these reserves totals 39 MMboe (total boe conversion
is based on the following: 6,000 scf of natural gas equals 1 boe) and represents approximately three per cent of our total reported proved reserves. Aggregation of proved reserves beyond the field/project level has been performed by arithmetic
summation. Due to portfolio effects, aggregates of proved reserves may be conservative. The custody transfer point(s) or point(s) of sale applicable for each field or project are the reference point for reserves. Reserves replacement was calculated
by dividing net additions of 446 MMboe (excluding sales of 0.6 MMboe) by annual production of 213 MMboe. Proved reserves at 30 June 2017 included 80 MMboe anticipated to be consumed as fuel during operations, while production included 5 MMboe
in non-sales amounts.
The Petroleum Reserves Group (PRG) is a dedicated group that provides oversight of the reserves
assessment and reporting processes. The manager of the PRG, Abhijit Gadgil, is a full-time employee of BHP and is the individual responsible for overseeing and supervising the preparation of the reserve estimates and compiling the information for
inclusion in this Results Announcement. He has an advanced degree in engineering and more than 35 years of diversified industry experience in reservoir engineering, reserves assessment, field development and technical management and is a 35-year member of the Society of Petroleum Engineers (SPE). He has also served on the Society of Petroleum Engineers Oil and Gas Reserves Committee. Mr Gadgil has the qualifications and experience required to act as
a qualified petroleum reserves evaluator under the Australian Securities Exchange (ASX) Listing Rules. The estimates of petroleum reserves are based on, and fairly represent, information and supporting documentation prepared under the supervision of
Mr Gadgil and he has reviewed and agrees with the reserves information included herein and has given his prior written consent for its publication. No part of the individual compensation for members of the PRG is dependent on reported reserves.
15
News Release
Financial information for Petroleum
for the 2017 and 2016 financial years is presented below.
Year ended Net
30 June 2017 Underlying Underlying operating Capital Exploration Exploration US$M Revenue(1) EBITDA D&A EBIT assets expenditure gross(2) to profit(3)
Australia Production Unit(4) 601 451 275 176 924 15 Bass Strait 1,096 824 261 563 2,981 154 North West Shelf 1,190 1,013 199 814 1,630 209 Atlantis 677 551 471 80
1,486 174 Shenzi 509 402 204 198 956 37 Mad Dog 202 155 57 98 722 113 Eagle Ford 1,266 771 1,255 (484) 6,223 274 Permian 332 143 302 (159) 996 242 Haynesville 272 11 139 (128) 2,866 50 Fayetteville 273 79 85 (6) 871 9 Trinidad/Tobago 110 26 33 (7)
422 81 Algeria 212 167 34 133 22 13 Exploration —(473) 159 (632) 896—Other(5)(6) 133 (42) 26 (68) 3,029 101 Total Petroleum from Group
6,873 4,078 3,500
578 24,024 1,472 805 575 production Closed mines(7)—(16)—(16) (843) — -Third party products 16 4—4 — Total Petroleum 6,889 4,066 3,500 566 23,181 1,472 805 575 Adjustment for equity accounted (8) (17) (3) (3) — —
-investments
Total Petroleum statutory result 6,872 4,063 3,497 566 23,181 1,472 805 575
Year ended Net
30 June 2016 Underlying Underlying operating Capital Exploration
Exploration US$M Revenue(1) EBITDA D&A EBIT assets(10) expenditure gross(2) to profit(3)
Australia Production Unit(4) 707 542 349 193 1,166 246 Bass Strait 930
690 174 516 3,082 226 North West Shelf 1,171 830 182 648 1,576 180 Atlantis 652 481 485 (4) 1,795 328 Shenzi 499 386 245 141 1,133 55 Mad Dog 123 84 44 40 697 128 Eagle Ford 1,508 687 1,710 (1,023) 7,193 781 Permian 260 52 279 (227) 1,114 365
Haynesville 299 (67) 305 (372) 2,994 44 Fayetteville 246 20 154 (134) 945 49 Trinidad/Tobago(9) 123 95 22 73 467 (26) Algeria 144 41 33 8 44 86 Exploration—(273) 97 (370) 901—Other(5)(6) 119 56 119 (63) 2,916 55 Total Petroleum from Group
6,781 3,624 4,198 (574) 26,023 2,517 590 288 production Closed mines(7)—20—20 (855) — -Third party products 128 17—17 — Total Petroleum
6,909 3,661 4,198 (537) 25,168 2,517 590 288 Adjustment for equity accounted (8) (15) (3) (3) ——-investments
Total Petroleum statutory result 6,894 3,658
4,195 (537) 25,168 2,517 590 288
16
BHP Results for the year ended 30 June 2017
(1) Petroleum revenue from Group production includes: crude oil US$3,625 million (2016: US$3,566 million), natural gas US$1,796 million (2016: US$1,761
million), LNG US$858 million (2016: US$864 million), NGL US$442 million (2016: US$383 million) and other US$135 million (2016: US$192 million).
(2)
Includes US$332 million of capitalised exploration (2016: US$317 million).
(3) Includes US$102 million of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (2016: US$15 million).
(4) Australia Production Unit includes Macedon, Pyrenees, Minerva and
Stybarrow (ceased production June 2015).
(5) Predominantly divisional activities, business development, Pakistan (divested in December 2015), UK, Neptune and
Genesis. Also includes the Caesar oil pipeline and the Cleopatra gas pipeline which are equity accounted investments. The financial information for the Caesar oil pipeline and the Cleopatra gas pipeline presented above, with the exception of net
operating assets, reflects BHP’s share.
(6) Goodwill associated with Onshore US of US$3,022 million is included in Other net operating assets (2016:
US$3,026 million).
(7) Comprises closed mining and smelting operations in Canada and the United States. Petroleum manages the closed mine sites due to their
geographic location.
(8) Total Petroleum segment Revenue excludes US$17 million (2016: US$15 million) revenue related to the Caesar oil pipeline and the
Cleopatra gas pipeline. Total Petroleum segment Underlying EBITDA includes US$3 million (2016: US$3 million) D&A related to the Caesar oil pipeline and the Cleopatra gas pipeline.
(9) Negative capital expenditure reflects movements in capital creditors.
(10) Petroleum net
operating assets have been restated for North West Shelf, Trinidad and Tobago, Exploration and Other to reflect the reallocation of exploration sundry receivable and sundry creditor balances on a consistent basis with the 2017 financial year. There
is no change to the overall net operating asset position.
17
News Release
Copper
Underlying EBITDA for the 2017 financial year increased by US$926 million to US$3.5 billion.
US$M Underlying EBITDA for the year ended 30 June 2016 2,619
Net price impact(1) 1,048
Change in volumes: productivity 60 Change in controllable cash costs 731 Change in other costs: Exchange rates (139) Inflation (131) Non-cash(2) (304) One-off
items(3) (492) Other(4) 153
Underlying EBITDA for the year ended 30 June 2017 3,545
(1) Average realised price: copper US$2.54/lb (2016: US$2.14/lb). (2) Non-cash includes: development stripping capitalisation and depletion.
(3) One-off items reflects industrial action at Escondida (214 kt volume impact) and the power outage at Olympic Dam.
(4) Other includes: fuel and energy; asset sales; other items (including profit from equity accounted investments).
Total copper production for the 2017
financial year decreased by 16 per cent to 1,326 kt primarily due to reduced volumes following industrial action at Escondida, and the power outage and unplanned maintenance at Olympic Dam.
Production is forecast to increase to between 1,655 and 1,790 kt in the 2018 financial year.
ï,— Escondida production is expected to increase to between 1,130 and 1,230 kt following the ramp-up of the Los
Colorados Extension (LCE) project during the September 2017 quarter, which will enable utilisation of three concentrators.
ï,— Pampa Norte production is
expected to be higher than the prior year following completion of the Spence Recovery Optimisation project in the December 2016 quarter.
ï,— Olympic Dam
production is expected to decrease to 150 kt as a major smelter maintenance campaign is phased through August to November 2017. Following completion of the maintenance campaign, improved operating performance will underpin an expected increase in
production to approximately 215 kt in the 2019 financial year. ï,— Antamina production is expected to decrease to 125 kt as mining continues through a zinc rich zone.
We continue to release latent capacity across our copper assets. The Spence Recovery Optimisation project was completed in the December 2016 quarter and the Escondida LCE project
is expected to ramp-up in the September 2017 quarter. At Olympic Dam, development into the Southern Mining Area is progressing well with first ore expected in the September 2017 quarter. In the medium term,
the Olympic Dam Brownfield Expansion project has the potential to increase capacity to 280 kt.
On 17 August 2017, BHP’s Board approved the development of
the Spence Growth Option (SGO) which will extend the mine life by more than 50 years. The development includes
building a 95 ktpd concentrator with first
production expected in the 2021 financial year. In the first 10 years, we anticipate average incremental production of approximately 185 ktpa of payable copper in concentrate and 4 ktpa of payable molybdenum. The project is expected to cost
US$2.5 billion, based on updated foreign exchange rate assumptions, and at mid-case consensus prices has an expected internal rate of return of 16 per cent. The current copper cathode stream will
continue until the 2025 financial year. In addition, SGO will require a new 1,000 litre per second desalination plant located at Mejillones Bay and a 154 km water pipeline from the plant to the Spence mine site. These will be built and operated by a
third party under a Build, Own, Operate and Transfer contract.
18
BHP Results for the year ended 30 June 2017
Controllable cash costs decreased by US$731 million mainly due to a US$203 million planned build of mined ore ahead of the commissioning of the LCE
project, a US$160 million ore inventory drawdown as a result of extending the operation of Los Colorados by four months in the 2016 financial year and a US$77 million benefit related to the increase in estimated recoverable copper
contained in the sulphide leach pad following commissioning of the Escondida Bioleach Pad Extension project. In addition, there was a US$103 million benefit due to an inventory drawdown at Olympic Dam in the prior year.
Non-cash costs increased by US$304 million reflecting lower capitalised development stripping at Escondida and Pampa Norte consistent
with the optimised mine plans.
One-off items reduced Underlying EBITDA by US$492 million and reflects
US$387 million in lost volume from the 44 days of industrial action at Escondida and US$105 million due to the state-wide power outage and resultant shutdown at Olympic Dam. The idle capacity and other strike related costs incurred as a
result of the Escondida industrial action were reported as exceptional and therefore not included in one-off items.
Unit
cash costs at our operated copper assets decreased by four per cent to US$1.15 per pound, in line with revised guidance, excluding the idle capacity and other strike-related costs incurred as a result of the industrial action at Escondida. In the
2018 financial year, unit cash costs at our copper operated assets are expected to remain broadly unchanged at approximately US$1.15 per pound.
Escondida unit cash
costs decreased by 17 per cent to US$0.93 per pound, excluding the impact of the industrial action which was reported as an exceptional item. This was seven per cent lower than guidance due to continued productivity improvements and favourable
inventory movements. If costs related to the industrial action were included, unit costs would have been
US$1.13 per pound. Escondida unit cash costs are expected
to rise to approximately US$1.00 per pound in the 2018 financial year, reflecting an expected 10 per cent mine-plan grade decline, to approximately 0.90 per cent, higher price-linked commodity input costs and an increase in usage of higher
cost desalinated water. Notwithstanding, a lower mining cost per tonne of material moved is expected as a result of continued productivity improvements.
Escondida
unit costs (US$M) H2 FY17 H1 FY17 FY17 FY16 Revenue 2,077 2,467 4,544 4,881 Underlying EBITDA 1,140 1,257 2,397 1,743
Cash costs (gross) 937 1,210 2,147 3,138
Less: by-product credits 91 122 213 222 Less: freight 29 31 60 75 Less: treatment and refining charges 117 185 302 356 Cash costs (net) 700 872 1,572 2,485 Sales (kt, equity share) 330 437 767 1,002 Sales
(Mlb, equity share) 728 963 1,691 2,209
Cash cost per pound (US$) 0.96 0.91 0.93 1.12 Cash cost per pound including industrial action (US$)(1) 1.42—1.13 -
(1) Exceptional item relating to the industrial action of US$546 million comprises US$334 million of cash costs and US$212 million of depreciation
expense. Industrial action cash cost per pound for the 2017 financial year calculated as: cash costs of US$334 million divided by sales of 1,691 Mlb = US$0.20 per pound.
19
News Release
Financial information for Copper for
the 2017 and 2016 financial years is presented below.
Year ended Net
30 June 2017 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Escondida(1) 4,544 2,397 996 1,401 14,972 999 Pampa Norte(2) 1,401 620 314 306 1,662 213 Antamina(3) 1,119 664 114 550 1,265 188 Olympic Dam 1,287 284 224 60 6,367 267
Other(3)(4)—(118) 7 (125) (166) 5 Total Copper from 8,351 3,847 1,655 2,192 24,100 1,672 Group production Third party products 1,103 23—23 —
Total
Copper 9,454 3,870 1,655 2,215 24,100 1,672 44 44 Adjustment for equity (5) (1,119) (325) (116) (209)—(188) —accounted investments
Total Copper
8,335 3,545 1,539 2,006 24,100 1,484 44 44 statutory result
Year ended Net
30 June 2016 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Escondida(1) 4,881 1,743 930 813 14,449 2,268 Pampa Norte(2) 1,098 401 401—1,786 321 Antamina(3) 891 439 114 325 1,349 198 Olympic Dam 1,432 385 237 148 6,339 197
Other(3)(4)—(158) 10 (168) (79) -Total Copper from 8,302 2,810 1,692 1,118 23,844 2,984 Group production Third party products 838 46—46 —
Total
Copper 9,140 2,856 1,692 1,164 23,844 2,984 65 65 Adjustment for equity (5) (891) (237) (115) (122)—(198) (1) (1) accounted investments
Total Copper
8,249 2,619 1,577 1,042 23,844 2,786 64 64 statutory result
(1) Escondida is
consolidated under IFRS 10 and reported on a 100 per cent basis. (2) Includes Spence and Cerro Colorado.
(3) Antamina and Resolution are equity accounted
investments and their financial information presented above with the exception of net operating assets reflects BHP’s share.
(4) Predominantly comprises
divisional activities, greenfield exploration and business development. Includes Resolution.
(5) Total Copper segment Revenue excludes US$1,119 million (2016:
US$891 million) revenue related to Antamina. Total Copper segment Underlying EBITDA includes US$116 million (2016: US$115 million) D&A and US$209 million (2016: US$122 million) net finance costs and taxation (expense)/benefit related
to Antamina and Resolution that are also included in Underlying EBIT. Copper segment Capital expenditure excludes US$188 million (2016: US$198 million) and US$ nil (2016: US$1 million) Exploration expenditure related to Antamina.
20
BHP Results for the year ended 30 June 2017
Iron Ore
Underlying EBITDA for the 2017 financial year increased by
US$3.5 billion to US$9.1 billion.
US$M Underlying EBITDA for the year ended 30 June 2016 5,599
Net price impact(1) 3,168 Change in volumes: productivity 242 Change in controllable cash costs 291 Change in other costs: Exchange rates (151) Inflation (65) Other(2) (7)
Underlying EBITDA for the year ended 30 June 2017 9,077
(1) Average
realised price: iron ore US$58/wmt, FOB (2016: US$44/wmt, FOB).
(2) Other includes: fuel and energy; non-cash; asset sales;
other items. Other items includes profit/(loss) from the equity accounted investment in Samarco prior to the dam failure, but does not include any financial impacts following the Samarco dam failure which has been reported as an exceptional item.
Total iron ore production for the 2017 financial year increased by four per cent to 231 Mt(ix) following record annual production at Western Australia Iron Ore
(WAIO) which reflected strong productivity improvements across the supply chain as well as the commissioning of a new primary crusher and additional conveying capacity at Jimblebar. WAIO production is expected to increase to between 239 and 243
Mt(ix), or between 275 and 280 Mt(ix) on a 100 per cent basis, in the 2018 financial year. This reflects continued productivity improvements and improved reliability across the supply chain. Volumes are expected be weighted to the last three
quarters of the financial year, as scheduled port debottlenecking activities and lower stockpile levels, following the fire at the Mt Whaleback screening plant in June 2017, will impact the September 2017 quarter. BHP will continue to work with the
relevant authorities in relation to the necessary approvals to increase system capacity to 290 Mtpa (100 per cent basis).
Mining and processing operations at
Samarco remain suspended following the failure of the Fundão tailings dam and Santarém water dam on 5 November 2015.
In June 2017, BHP approved
initial funding of US$184 million (BHP share) for the South Flank sustaining mine project. The initial funding will be used primarily for the expansion of accommodation facilities to support construction and future operational workforce
requirements. The capital cost for South Flank is expected to be in the range of US$30 to US$40 per tonne, with expenditure fitting within WAIO’s previously indicated average annual sustaining capital expenditure of US$4 per tonne over the next
five years.
WAIO unit cash costs decreased by three per cent to US$14.60 per tonne, underpinned by reductions in labour and contractor costs and increased
equipment productivity. This was partially offset by a stronger Australian dollar, a stock write-off at Yandi of US$0.15 per tonne and additional costs related to the accelerated rail renewal and maintenance
program of US$0.20
per tonne, which was completed in May 2017. In the 2018 financial year, unit costs are expected to decline further to below US$14 per tonne.
WAIO unit costs (US$M) H2 FY17 H1 FY17 FY17 FY16 Revenue 7,587 6,808 14,395 10,333 Underlying EBITDA 4,884 4,117 9,001 5,492 Cash costs (gross) 2,703 2,691 5,394
4,841 Less: freight 517 466 983 764 Less: royalties 556 479 1,035 740 Cash costs (net)(1) 1,630 1,746 3,376 3,337 Sales (kt, equity share) 115,200 116,008 231,208 221,578
Cash cost per tonne (US$) 14.15 15.05 14.60 15.06
(1) Includes exploration expense of US$0.30
per tonne (2016: US$0.34 per tonne).
21
News Release
Financial information for Iron Ore
for the 2017 and 2016 financial years is presented below.
Year ended Net
30 June 2017 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Western Australia Iron Ore 14,395 9,001 1,873 7,128 20,040 716 Samarco(1) — — (1,049)—Other(2) 148 53 7 46 184 89 Total Iron Ore from 14,543 9,054 1,880 7,174 19,175
805 Group production Third party products(3) 81 23—23 —
Total Iron Ore 14,624 9,077 1,880 7,197 19,175 805 94 70 Adjustment for equity accounted
(4) — — — —investments
Total Iron Ore
14,624 9,077 1,880 7,197 19,175 805 94 70 statutory result
Year ended Net
30 June 2016 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Western Australia Iron Ore 10,333 5,492 1,855 3,637 21,641 969 Samarco(1) 442 196 46 150 (1,193) 42 Other(2) 121 (19) 4 (23) 93 86 Total Iron Ore from 10,896 5,669 1,905 3,764
20,541 1,097 Group production Third party products(3) 84 (8)—(8) —
Total Iron Ore 10,980 5,661 1,905 3,756 20,541 1,097 92 74 Adjustment for equity
accounted (4) (442) (62) (46) (16)—(36) —investments
Total Iron Ore
10,538 5,599 1,859 3,740 20,541 1,061 92 74 statutory result
(1) Samarco is
an equity accounted investment and its financial information presented above with the exception of net operating assets reflects BHP Billiton Brasil Ltda’s share. Includes
BHP Billiton Brasil Ltda’s share of operating profit prior to the Samarco dam failure but does not include any financial impacts following the dam failure which has been
reported as an exceptional item.
(2) Predominantly comprises divisional activities, towage services, business development and ceased operations. (3) Includes
inter-segment and external sales of contracted gas purchases.
(4) Total Iron Ore segment Revenue excludes US$ nil (2016: US$442 million) revenue related to
Samarco. Total Iron Ore segment Underlying EBITDA includes US$ nil (2016: US$46 million) D&A and US$ nil (2016: US$16 million) net finance costs and taxation (expense)/benefit related to Samarco that are also included in Underlying EBIT. Iron
Ore segment Capital expenditure excludes US$ nil (2016: US$36 million) related to Samarco.
22
BHP Results for the year ended 30 June 2017
Coal
Underlying EBITDA for the 2017 financial year increased by
US$3.1 billion to US$3.8 billion.
US$M Underlying EBITDA for the year ended 30 June 2016 635
Net price impact(1) 3,165 Change in volumes: productivity 42 Change in controllable cash costs 159 Change in other costs: Exchange rates (115) Inflation (52) One-off items(2) (109) Ceased and sold operations (75) Other(3) 134
Underlying EBITDA for the year ended 30 June 2017
3,784
(1) Average realised price: hard coking coal US$180/t (2016: US$83/t); weak coking coal US$121/t (2016: US$69/t); thermal coal US$75/t (2016: US$48/t).
(2) One-off items reflects: Cyclone Debbie impacts and royalty matters.
(3) Other includes: fuel and energy; asset sales; other items (including profit/(loss) from equity accounted investments).
Metallurgical coal production decreased by six per cent to 40 Mt(ix) and energy coal production increased by seven per cent to 29 Mt(ix) in the 2017 financial year.
ï,— Metallurgical coal production decreased as a result of damage caused by Cyclone Debbie to third party rail infrastructure, partially offset by record annual
production at Peak Downs and Saraji.
ï,— Energy coal production increased following a stronger performance at Cerrejón and as New South Wales
Energy Coal (NSWEC) benefitted from a lower strip ratio and additional bypass coal.
Metallurgical coal production is expected to increase to between 44 and 46
Mt(ix) and energy coal production is expected to remain broadly unchanged at approximately 29 to 30 Mt(ix) in the 2018 financial year.
Queensland Coal unit cash
costs increased by eight per cent to US$60 per tonne as a result of lower sales volumes due to the impacts of Cyclone Debbie and a stronger Australian dollar. In the 2018 financial year, unit costs are expected to be US$59 per tonne, which includes
additional contractor stripping fleet costs given forecast higher strip ratios and planned debottlenecking activities. NSWEC unit costs of US$41 per tonne(vii) were in line with the prior year as a reduction in labour costs and favourable inventory
movements were offset by a stronger Australian dollar. Unit costs are expected to increase to approximately US$46 per tonne in the 2018 financial year as mining progresses through geological constraints (the monocline transition), strip ratios rise
and pit design initiatives are implemented to reduce costs in future periods. These initiatives are expected to mitigate the impacts of the monocline and reduce unit costs from the 2020 financial year onwards.
Queensland Coal unit costs (US$M) H2 FY17 H1 FY17 FY17 FY16 Revenue 2,935 3,381 6,316 3,351 Underlying EBITDA 1,433 1,823 3,256 584 Cash costs (gross) 1,502 1,558 3,060 2,767 Less:
freight 57 54 111 86 Less: royalties 296 335 631 316 Cash costs (net) 1,149 1,169 2,318 2,365 Sales (kt, equity share) 18,130 20,716 38,846 42,809
Cash cost per
tonne (US$) 63.38 56.43 59.67 55.25
Average annual sustaining capital expenditure is forecast to be approximately US$8 per tonne for Queensland Coal and US$5 per
tonne for NSWEC over the next five years. In August 2016, BHP agreed with the New South Wales Government to cancel the exploration licence and cease progression of the Caroona Coal project for A$220 million.
23
News Release
Financial information for Coal for
the 2017 and 2016 financial years is presented below.
Year ended Net
30 June 2017 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Queensland Coal 6,316 3,256 605 2,651 8,202 235 New Mexico(1) 3 (6) 3 (9)—1 New South Wales Energy Coal(2) 1,351 525 154 371 1,080 11 Colombia(2) 749 363 96 267 873 34
Other(3) 8 (57) 4 (61) (19) -Total Coal from 8,427 4,081 862 3,219 10,136 281 Group production Third party products -— — -
Total Coal 8,427 4,081 862
3,219 10,136 281 9 9 Adjustment for equity (4) (849) (297) (128) (169)—(35) —accounted investments
Total Coal
7,578 3,784 734 3,050 10,136 246 9 9 statutory result
Year ended Net
30 June 2016 Underlying Underlying operating Capital Exploration Exploration US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
Queensland Coal 3,351 584 723 (139) 8,423 246 New Mexico(1) 320 114 43 71 45 5 New South Wales Energy Coal(2) 914 133 155 (22) 1,181 15 Colombia(2) 525 134 96 38 863 31 Other(3) 23
(88) 95 (183) 139 36 Total Coal from 5,133 877 1,112 (235) 10,651 333 Group production Third party products 6 -— —
Total Coal 5,139 877 1,112 (235)
10,651 333 18 18 Adjustment for equity (4) (621) (242) (128) (114)—(35) —accounted investments
Total Coal
4,518 635 984 (349) 10,651 298 18 18 statutory result
(1) Includes the Navajo mine (divested
in July 2016) and San Juan mine (divested in January 2016).
(2) Newcastle Coal Infrastructure Group and Cerrejón are equity accounted investments and their
financial information presented above with the exception of net operating assets reflects BHP’s share.
(3) Predominantly comprises divisional activities and
IndoMet Coal (divested in October 2016).
(4) Total Coal segment Revenue excludes US$849 million (2016: US$621 million) revenue related to Newcastle Coal
Infrastructure Group and Cerrejón. Total Coal segment Underlying EBITDA includes US$96 million (2016: US$96 million) D&A and US$116 million (2016: US$46 million) net finance costs and taxation (expense)/benefit related to
Cerrejón, that are also included in Underlying EBIT. Total Coal segment Underlying EBITDA excludes US$32 million (2016: US$32 million) D&A and US$53 million (2016: US$68 million) total EBIT related to Newcastle Coal
Infrastructure Group, that is excluded from Underlying EBIT to reconcile the consolidated business total to the statutory result. Coal segment Capital expenditure excludes US$35 million (2016: US$35 million) related to Newcastle Coal
Infrastructure Group and Cerrejón.
24
BHP Results for the year ended 30 June 2017
Group and unallocated items
Underlying EBITDA loss increased by
US$2 million to US$173 million in the 2017 financial year as a strong performance at Nickel West was offset by unfavourable exchange rate impacts on corporate provision balances and increased spend on technology projects.
Nickel West returned to positive Underlying EBITDA of US$44 million as production rates increased across the supply chain following the triennial statutory shutdowns in the
prior year. The benefit of higher prices was offset by a stronger Australian dollar. Debottlenecking activities at the Kwinana refinery delivered record refined metal production.
25
News Release
The financial information on pages 31
to 47 has been prepared in accordance with IFRS. This news release including the financial information is unaudited. Variance analysis relates to the relative financial and/or production performance of BHP and/or its operations during the 2017
financial year compared with the 2016 financial year, unless otherwise noted.
The following abbreviations may have been used throughout this report: barrels (bbl);
billion cubic feet (bcf); barrels of oil equivalent (boe); cost and freight (CFR); cost, insurance and freight (CIF), dry metric tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms per tonne (kg/t); kilometre (km); metre (m);
million barrels of oil equivalent (MMboe); million barrels of oil equivalent per day (MMboe/d); thousand cubic feet equivalent (Mcfe); million cubic feet per day (MMcf/d); million ounces per annum (Mozpa); million pounds (Mlb); million tonnes (Mt);
million tonnes per annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent (Mboe); thousand ounces (koz); thousand ounces per annum (kozpa); thousand standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum
(ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).
The following footnotes apply to this Results Announcement:
(i) We use other financial measures (each of which is calculated with reference to IFRS measures) to assess our performance, which are defined below: ï,· Free cash flow
– comprises net operating cash flows less net investing cash flows.
ï,· Gearing ratio – represents the ratio of net debt to net debt plus net
assets.
ï,· Net debt – comprises Interest bearing liabilities less Cash and cash equivalents for the total operations within the Group at the
reporting date.
(ii) We use various alternate performance measures to reflect our underlying performance. Our two primary measures of performance are Underlying
attributable profit and Underlying EBITDA.
We believe these alternate performance measures provide useful information, but should not be considered as an
indication of, or as a substitute for, Attributable profit/(loss) and other statutory measures as an indicator of actual operating performance or as an alternative to cash flow as a measure of liquidity.
We consider Underlying attributable profit to be a key measure that provides insight on the amount of profit available to distribute to shareholders, which aligns to our purpose as
outlined in Our Charter. Underlying attributable profit is also the key performance indicator against which short-term incentive outcomes for our senior executives are measured and, in our view, is a relevant measure to assess the financial
performance of BHP for this purpose.
Underlying EBITDA is the key alternate performance measure that management uses internally to assess the performance of the
Group’s segments and make decisions on the allocation of resources. In the Group’s view, this is more relevant to capital intensive industries with long-life assets.
Prior to FY2016, we reported Underlying EBIT as a key alternate performance measure of operating results. Management believes focusing on Underlying EBITDA more closely reflects
the operating cash generative capacity and hence the underlying performance of the Group’s business. Management also uses this measure because financing
structures and tax regimes differ across the Group’s assets and substantial components of the Group’s tax and interest charges are levied at a Group level rather than an operational level.
ï,· Underlying attributable profit is Profit/(loss) after taxation attributable to BHP shareholders (also referred to as ‘Attributable profit/(loss)’)
excluding discontinued operations and any exceptional items attributable to BHP shareholders.
ï,· Underlying EBITDA is Earnings before net finance
costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and exceptional items. Underlying EBITDA includes net finance costs and taxation (expense)/benefit, depreciation, amortisation and impairments related to
equity accounted investments of US$540 million (2016: US$444 million) and excludes exceptional items of US$172 million (2016: US$1,227 million) related to share of profit/(loss) from equity accounted investments. ï,· Underlying
EBIT is Underlying EBITDA, including depreciation, amortisation and impairments of US$7,907 million for the 2017 financial year (2016: US$8,871 million). Underlying EBIT includes net finance costs and taxation (expense)/benefit of
US$325 million (2016: US$184 million) related to equity accounted investments and excludes exceptional items of US$172 million (2016: US$1,227 million) related to share of profit/(loss) from equity accounted investments.
(iii) Further alternate performance measures are defined as follows and comparatives exclude discontinued operations unless otherwise stated: ï,· Adjusted effective tax
rate – comprises Total taxation (expense)/benefit excluding exceptional items and exchange rate movements included in taxation (expense)/benefit divided by Profit/(loss) before taxation and exceptional items. Management believes this measure
provides useful information regarding the tax impacts from underlying operations.
ï,· Net operating assets – represents operating assets net of
operating liabilities including the carrying value of equity accounted investments and predominantly excludes cash balances, loans to associates, interest bearing liabilities and deferred tax balances. The carrying value of investments accounted for
using the equity accounted method represents the balance of the Group’s investment in equity accounted investments, with no adjustment for any cash balances, interest bearing liabilities and deferred tax balances of the equity accounted
investment.
ï,· Operating assets free cash flow – comprises net operating cash flows adjusted for dividends received, net interest received/(paid)
and net income tax and royalty-related taxation refunded/(paid) less net investing cash flows. Dividends received, net interest and net income tax and royalty-related taxation are not allocated to operating asset free cash flow as financing
structures and tax regimes differ across the Group’s assets and substantial components of the Group’s interest and tax charges are levied at a Group level rather than an operational level.
ï,· Underlying basic earnings per share – represents underlying attributable profit divided by the weighted average number of basic shares. ï,·
Underlying EBITDA margin – comprises Underlying EBITDA excluding third party product EBITDA, divided by revenue excluding third party product revenue.
ï,· Underlying return on capital employed (ROCE) – represents annualised attributable profit after tax excluding exceptional items and net finance
costs (after tax) divided by average capital employed. Average capital employed is calculated as the average of net assets less net debt for the last two financial years.
The method of calculation of the Principal factors that Underlying EBITDA is as follows:
ï,· Change in sales prices – Change in average realised price for each operation from the corresponding period to the current period, multiplied
by current period volumes.
ï,· Price-linked costs – Change in price-linked costs for each operation from the corresponding period to the current
period, multiplied by current period volumes.
ï,· Productivity volumes – Change in volumes for each operation not included in the Growth category
from the corresponding period to the current period, multiplied by the prior year Underlying EBITDA margin. Used to determine changes in productivity in footnote (iv).
26
BHP Results for the year ended 30 June 2017
ï,· Growth volumes – Volume – Growth comprises Underlying EBITDA for operations that are new or acquired in the current period minus
Underlying EBITDA for operations that are new or acquired in the corresponding period, change in volumes for operations identified as a Growth project from the corresponding period to the current period multiplied by the prior year Underlying EBITDA
margin, and change in volume for our petroleum assets from the corresponding period to the current period multiplied by the prior year Underlying EBITDA margin.
ï,· Controllable cash costs – comprises operating cash costs and exploration and business development costs. Management believes this measure
provides useful information regarding the Group’s financial performance because it considers these expenses to be the principal operating and overhead expenses that are most directly under the Group’s control. Used to determine changes in
productivity in footnote (iv).
ï,· Operating cash costs – Change in total costs, other than price-linked costs, exchange rates, inflation on
costs, fuel and energy costs, non-cash costs and one-off items as defined below for each operation from the corresponding period to the current period.
ï,· Exploration and business development – Exploration and business development expense in the current period minus exploration and business development expense in
the corresponding period.
ï,· Exchange rates – Change in exchange rate multiplied by current period local currency revenue and expenses. The
majority of the Company’s selling prices are denominated in US dollars and so there is little impact of exchange rate changes on Revenue.
ï,·
Inflation – Change in inflation rate applied to expenses, other than depreciation and amortisation, price-linked costs, exploration and business development expenses, expenses in ceased and sold operations and expenses in new and acquired
operations.
ï,· Fuel and energy – Fuel and energy expense in the current period minus fuel and energy expense in the corresponding period.
ï,· Non-cash—Includes non-cash items mainly depletion of stripping capitalised.
ï,· One-off items – Change in costs exceeding a pre-determined threshold associated
with an unexpected event that had not occurred in the last two years and is not reasonably likely to occur within the next two years.
ï,· Asset sales
– Profit/loss on the sale of assets or operations in the current period minus profit/loss on sale in the corresponding period. ï,· Ceased and sold operations – Underlying
EBITDA for operations that ceased or were sold in the current period minus Underlying EBITDA for operations that ceased or were sold in the corresponding period.
ï,· Other – Share of operating profit from equity accounted investments for the period minus share of operating profit from equity accounted investments in the
corresponding period and variances not explained by the above factors.
(iv) Represents changes in controllable cash costs (refer to footnote (iii)), changes in
volumes attributed to productivity (refer to definition of ‘productivity volumes’ in footnote (iii)) and changes in capitalised exploration. Changes in capitalised exploration is capitalised exploration in the current period less
capitalised exploration in the prior period.
(v) Capital and exploration expenditure represents purchases of property, plant and equipment plus exploration
expenditure from the Consolidated Cash Flow Statement.
(vi) Operating cost per copper equivalent tonne presented on a continuing operations basis excluding
royalties and BHP’s share of volumes from equity accounted investments; copper equivalent production based on 2017 financial year average realised prices.
(vii) Conventional petroleum unit cash costs exclude inventory movements, freight, and third party and exploration expense; WAIO, Queensland Coal and NSWEC unit
cash costs exclude freight and royalties; Escondida unit cash costs include the grade decline and exclude freight and treatment and refining charges and are net of by-product credits. 2018 financial year unit
cost guidance is based on exchange rates of AUD/USD 0.75 and USD/CLP 663. Other forward-looking guidance is based on internal exchange rate assumptions.
(viii)
Maintenance capital includes non-discretionary spend for the following purposes: deferred development and production stripping; risk reduction, compliance and asset integrity.
(ix) Iron ore production and guidance excludes production from Samarco; Energy Coal production and guidance excludes production from New Mexico Coal following divestments;
Metallurgical coal production and guidance excludes production from Haju following the divestment of IndoMet Coal.
Forward-looking statements
This release contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies
and objectives of management; closure or divestment of certain operations or facilities (including associated costs); anticipated production or construction commencement dates; capital costs and scheduling; operating costs and shortages of materials
and skilled employees; anticipated productive lives of projects, mines and facilities; provisions and contingent liabilities; tax and regulatory developments.
Forward-looking statements can be identified by the use of terminology such as ‘intend’, ‘aim’, ‘project’, ‘anticipate’,
‘estimate’, ‘plan’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘continue’, ‘annualised’ or similar words. These statements discuss future expectations
concerning the results of operations or financial condition, or provide other forward-looking statements.
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 release. Readers are cautioned not to put undue reliance on forward-looking statements.
For example, our future revenues from our operations, projects or
mines described in this release will be based, in part, upon the market price of the minerals, metals or petroleum produced, which may vary significantly from current levels. These variations, if materially adverse, may
affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing operations.
Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or
facilities include our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we
produce; activities of government authorities in some of the countries where we are exploring or developing these projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty;
labour unrest; and other factors identified in the risk factors discussed in BHP’s filings with the U.S. Securities and Exchange Commission (the “SEC”) (including in Annual Reports on Form 20-F)
which are available on the SEC’s website at www.sec.gov.
27
News Release
Except as required by applicable
regulations or by law, the Group does not undertake any obligation to publicly update or review any forward-looking statements, whether as a result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
Non-IFRS financial information
BHP results are reported under International Financial Reporting Standards (IFRS). This release
may also include certain non-IFRS (also referred to as alternate performance measures) and other measures including Underlying attributable profit, Underlying EBITDA, Underlying EBIT, Adjusted effective tax
rate, Controllable cash costs, Free cash flow, Gearing ratio, Net debt, Net operating assets, Operating assets free cash flow, Principal factors that affect Underlying EBITDA, Underlying basic earnings per share, Underlying EBITDA margin and
Underlying return on capital employed (ROCE). These measures are used internally by management to assess the performance of our business and segments, make decisions on the allocation of our resources and assess operational management. Non-IFRS and other measures have not been subject to audit or review and should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance or liquidity.
No offer of securities
Nothing in this release should be construed as either
an offer, or a solicitation of an offer, to buy or sell BHP securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by BHP.
Reliance on third party information
The views expressed in this release
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 release should not be
relied upon as a recommendation or forecast by BHP.
No financial or investment advice – South Africa
BHP does not provide any financial or investment ‘advice’ as that term is defined in the South African Financial Advisory and Intermediary Services Act, 37 of 2002, and
we strongly recommend that you seek professional advice.
28
BHP Results for the year ended 30 June 2017
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29
News Release
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30
BHP
Financial Information Year ended
30 June 2017
Financial Information
Contents
Financial Information Page
Consolidated Income Statement for the year ended 30 June 2017
33 Consolidated Statement of Comprehensive Income for the year ended 30 June 2017 34 Consolidated Balance Sheet as at 30 June 2017 35 Consolidated Cash Flow Statement for the year ended 30 June 2017 36 Consolidated
Statement of Changes in Equity for the year ended 30 June 2017 37 Notes to the Financial Information 38
1. Exceptional items 38
2. Interests in associates and joint venture entities 39
3. Net finance costs
40
4. Earnings per share 40
5. Dividends 40
6. Significant events – Samarco dam failure 41
7. Subsequent events
47
The financial information included in this document for the year ended 30 June 2017 is unaudited and has been derived from the draft financial report of the
Group for the year ended 30 June 2017. The financial information does not constitute the Group’s full statutory accounts for the year ended 30 June 2017, which will be approved by the Board, reported on by the auditors, and
subsequently filed with the UK Registrar of Companies and the Australian Securities and Investments Commission.
The financial information set out on pages 31 to 47
for the year ended 30 June 2017 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2016 financial statements contained within the Annual Report of the Group.
The comparative figures for the financial years ended 30 June 2016 and 30 June 2015 are not the statutory accounts of the Group for those financial
years. Those accounts have been reported on by the company’s auditor and delivered to the Registrar of Companies. The reports of the auditor were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the reports and (iii) did not contain a statement under Section 498(2) or (3) of the UK Companies Act 2006.
All amounts are expressed in US dollars unless otherwise stated. The Group’s presentation currency and the functional currency of the majority of its operations is US dollars
as this is the principal currency of the economic environment in which it operates. Amounts in this financial information have, unless otherwise indicated, been rounded to the nearest million dollars.
32
BHP Results for the year ended 30 June 2017
Consolidated Income Statement for the year ended 30 June 2017
Notes 2017
2016 2015 US$M US$M US$M
Continuing operations
Revenue 38,285 30,912 44,636
Other income 736 444 496 Expenses excluding net finance costs (27,540) (35,487) (37,010) Profit/(loss) from equity accounted investments, related impairments and expenses 2 272 (2,104) 548
Profit/(loss) from operations 11,753 (6,235) 8,670
Financial expenses (1,574) (1,161) (702)
Financial income 143 137 88 Net finance costs 3 (1,431) (1,024) (614)
Profit/(loss) before taxation 10,322 (7,259) 8,056 Income tax
(expense)/benefit (3,933) 1,297 (2,762) Royalty-related taxation (net of income tax benefit) (167) (245) (904) Total taxation (expense)/benefit (4,100) 1,052 (3,666)
Profit/(loss) after taxation from Continuing operations 6,222 (6,207) 4,390
Discontinued
operations
Loss after taxation from Discontinued operations - - (1,512)
Profit/(loss) after taxation from Continuing and Discontinued operations 6,222 (6,207) 2,878 Attributable to
non-controlling interests 332 178 968 Attributable to BHP shareholders 5,890 (6,385) 1,910
Basic
earnings/(loss) per ordinary share (cents) 4 110.7 (120.0) 35.9 Diluted earnings/(loss) per ordinary share (cents) 4 110.4 (120.0) 35.8 Basic earnings/(loss) from Continuing operations per ordinary share (cents) 4 110.7 (120.0) 65.5 Diluted
earnings/(loss) from Continuing operations per ordinary share (cents) 4 110.4 (120.0) 65.3
Dividends per ordinary share – paid during the period (cents) 5
54.0 78.0 124.0 Dividends per ordinary share – determined in respect of the period (cents) 5 83.0 30.0 124.0
The accompanying notes form part of this
financial information.
33
Financial Information
Consolidated Statement of
Comprehensive Income for the year ended 30 June 2017
2017 2016 2015 US$M US$M US$M
Profit/(loss) after taxation from Continuing and Discontinued operations 6,222 (6,207) 2,878 Other comprehensive income
Items that may be reclassified subsequently to the income statement: Available for sale investments:
Net valuation (losses)/gains taken to equity (1) 2 (21) Net valuation losses/(gains) transferred to the income statement - 1 (115) Cash flow hedges: Gains/(losses) taken to equity
351 (566) (1,797) (Gains)/losses transferred to the income statement (432) 664 1,815 Exchange fluctuations on translation of foreign operations taken to equity (1) (1) (2) Exchange fluctuations on translation of foreign operations transferred to
income statement - (10) -Tax recognised within other comprehensive income 24 (30) 29 Total items that may be reclassified subsequently to the income statement (59) 60 (91) Items that will not be reclassified
to the income statement: Remeasurement gains/(losses) on pension and medical schemes 36 (20) (28) Tax recognised within other comprehensive income (26) (17) (17) Total items that will not be reclassified to the income statement 10 (37) (45) Total
other comprehensive (loss)/income (49) 23 (136)
Total comprehensive income/(loss) 6,173 (6,184) 2,742 Attributable to
non-controlling interests 332 176 973 Attributable to BHP shareholders 5,841 (6,360) 1,769
The accompanying notes form part
of this financial information.
34
BHP Results for the year ended 30 June 2017
Consolidated Balance Sheet as at 30 June 2017
2017 2016 US$M US$M
ASSETS Current assets
Cash and cash equivalents 14,153 10,319 Trade and other
receivables 2,836 3,155 Other financial assets 72 121 Inventories 3,673 3,411 Current tax assets 195 567 Other 127 141
Total current assets 21,056 17,714 Non-current assets
Trade and other receivables 803 867 Other financial assets 1,281 2,680 Inventories 1,095 764 Property, plant
and equipment 80,497 83,975 Intangible assets 3,968 4,119 Investments accounted for using the equity method 2,448 2,575 Deferred tax assets 5,788 6,147 Other 70 112
Total non-current assets 95,950 101,239 Total assets 117,006 118,953
LIABILITIES Current liabilities
Trade and other payables 5,551 5,389 Interest bearing
liabilities 1,241 4,653 Other financial liabilities 394 5 Current tax payable 2,119 451 Provisions 1,959 1,765 Deferred income 102 77
Total current liabilities
11,366 12,340 Non-current liabilities
Trade and other payables 5 13 Interest bearing liabilities 29,233 31,768 Other
financial liabilities 1,106 1,778 Deferred tax liabilities 3,765 4,324 Provisions 8,445 8,381 Deferred income 360 278
Total
non-current liabilities 42,914 46,542 Total liabilities 54,280 58,882 Net assets 62,726 60,071
EQUITY
Share capital – BHP Billiton Limited 1,186 1,186 Share capital – BHP Billiton Plc 1,057 1,057 Treasury shares (3) (33) Reserves 2,400 2,538 Retained earnings 52,618
49,542
Total equity attributable to BHP shareholders 57,258 54,290 Non-controlling interests 5,468 5,781
Total equity 62,726 60,071
The accompanying notes form part of this financial information.
35
Financial Information
Consolidated Cash Flow
Statement for the year ended 30 June 2017
2017 2016 2015 US$M US$M US$M Operating activities
Profit/(loss) before taxation from Continuing operations 10,322 (7,259) 8,056 Adjustments for: Non-cash or
non-operating exceptional items 350 9,645 3,196 Depreciation and amortisation expense 7,719 8,661 9,158 Impairments of property, plant and equipment, financial assets and intangibles 188 210 828 Net finance
costs 1,304 1,024 614 Share of operating profit of equity accounted investments (444) (276) (548) Other 290 459 503 Changes in assets and liabilities: Trade and other receivables 315 1,714 1,431 Inventories (679) 527 151 Trade and other payables 337
(1,661) (990) Provisions and other assets and liabilities (325) (373) (779) Cash generated from operations 19,377 12,671 21,620 Dividends received 636 301 740 Interest received 164 128 86 Interest paid (1,149) (830) (627) Settlement of cash
management related instruments (140) - -Net income tax and royalty-related taxation refunded 501 641 348 Net income tax and royalty-related taxation paid (2,585) (2,286) (4,373)
Net operating cash flows from Continuing operations 16,804 10,625 17,794 Net operating cash flows from Discontinued operations—- 1,502
Net operating cash flows 16,804 10,625 19,296 Investing activities
Purchases of property,
plant and equipment (4,252) (6,946) (11,947) Exploration expenditure (968) (765) (816) Exploration expenditure expensed and included in operating cash flows 612 430 670 Net investment and funding of equity accounted investments (234) 40 117 Proceeds
from sale of assets 648 107 74 Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash 186 166 256 Other investing (153) (277) 144
Net investing cash flows from Continuing operations (4,161) (7,245) (11,502) Net investing cash flows from Discontinued operations—- (1,066) Cash disposed on demerger of
South32—- (586)
Net investing cash flows (4,161) (7,245) (13,154) Financing activities
Proceeds from interest bearing liabilities 1,577 7,239 3,440 Proceeds/(settlements) from debt related instruments 36 156 (33) Repayment of interest bearing liabilities (7,120)
(2,788) (4,135) Proceeds from ordinary shares - - 9 (Distributions)/contributions to/from non-controlling interests (16) - 53 Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (108) (106) (355)
Dividends paid (2,921) (4,130) (6,498) Dividends paid to non-controlling interests (581) (87) (554)
Net financing cash
flows from Continuing operations (9,133) 284 (8,073) Net financing cash flows from Discontinued operations—- (203)
Net financing cash flows (9,133) 284
(8,276) Net increase/(decrease) in cash and cash equivalents from Continuing operations 3,510 3,664 (1,781) Net increase in cash and cash equivalents from Discontinued operations—- 233 Cash and cash equivalents, net of overdrafts, at beginning
of the financial year 10,276 6,613 8,752 Cash disposed on demerger of South32 - - (586) Foreign currency exchange rate changes on cash and cash equivalents 322 (1) (5)
Cash and cash equivalents, net of overdrafts, at end of the financial year 14,108 10,276 6,613
The accompanying notes form part of this financial information.
36
BHP Results for the year ended 30 June 2017
Consolidated Statement of Changes in Equity for the year ended 30 June 2017
US$M Attributable to BHP shareholders Share capital Treasury shares
Total equity
BHP BHP BHP BHP attributable to Non-
Billiton Billiton Billiton Billiton Retained BHP
controlling Total Limited Plc Limited Plc Reserves earnings shareholders interests equity Balance as at 1 July 2016 1,186 1,057 (7) (26) 2,538 49,542 54,290 5,781 60,071 Total comprehensive income — — (59) 5,900 5,841 332 6,173
Transactions with owners:
Purchase of shares by ESOP Trusts — (105) (3) — (108)—(108) Employee share awards exercised net — 110 28 (167) 29
— -of employee contributions Employee share awards forfeited — — (18) 18 — -Accrued employee entitlement for — —unexercised awards 106—106—106 Distribution to
non-controlling interests — — ——(16) (16)
Dividends — ——(2,871) (2,871) (601) (3,472)
Divestment of subsidiaries, operations and joint operations — — ——(28) (28) Balance as at 30 June 2017 1,186 1,057 (2) (1) 2,400 52,618
57,258 5,468 62,726
Balance as at 1 July 2015 1,186 1,057 (19) (57) 2,557 60,044 64,768 5,777 70,545 Total comprehensive loss — — 60 (6,420) (6,360)
176 (6,184)
Transactions with owners:
Purchase of shares by ESOP Trusts
— (106) ——(106)—(106) Employee share awards exercised net of employee contributions — 118 31 (193) 46 2—2 Employee share awards forfeited — — (26) 26 — -Accrued employee entitlement for unexercised awards
— — 140—140—140 Dividends — ——(4,154) (4,154) (172) (4,326) Balance as at 30 June 2016 1,186 1,057 (7) (26) 2,538 49,542 54,290 5,781 60,071
Balance as at 1 July 2014 1,186 1,069 (51) (536) 2,927 74,548 79,143 6,239 85,382
Total
comprehensive income — — (96) 1,865 1,769 973 2,742 Transactions with owners:
Shares cancelled—(12)—501 12 (501) –—–Purchase of
shares by ESOP Trusts — (232) (123) — (355)—(355) Employee share awards exercised net of employee contributions and other adjustments — 264 99 (461) 101 3—3 Employee share awards forfeited — — (13) 13 —
–Accrued employee entitlement for unexercised awards — — 247—247—247 Distribution to option holders — — (1)—(1) (1) (2) Dividends — ——(6,596) (6,596) (639) (7,235) In specie dividend on demerger
— ——(9,445) (9,445)—(9,445) Equity contributed — — 1—1 52 53 Transfers within equity on demerger — — (59) 59 — -Conversion of controlled entities to equity accounted investments ——2 —
2 (847) (845) Balance as at 30 June 2015 1,186 1,057 (19) (57) 2,557 60,044 64,768 5,777 70,545
The accompanying notes form part of this financial
information.
37
Financial Information
Notes to the Financial
Information
1. Exceptional items
Exceptional items are those items where
their nature, including the expected frequency of the events giving rise to them, and amount is considered material to the Financial Statements. Such items included within the Group’s profit for the year are detailed below:
Year ended 30 June 2017 Gross Tax Net US$M US$M US$M Exceptional items by category
Samarco dam failure (381)—(381) Escondida industrial action (546) 179 (367) Cancellation of Caroona exploration license 164 (49) 115 Withholding tax on Chilean dividends—(373) (373)
Total (763) (243) (1,006)
Attributable to
non-controlling interests – Escondida industrial action (232) 68 (164) Attributable to BHP shareholders (531) (311) (842)
Samarco Mineração S.A. (Samarco) dam failure
The FY2017 exceptional loss of
US$381 million related to the Samarco dam failure in November 2015 comprises the following:
Year ended 30 June 2017 US$M
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure (82) Loss from equity accounting investments, related impairments and expenses: Share of loss relating to the Samarco dam failure (134) Samarco dam failure provision (38) Net finance costs (127)
Total(1) (381)
(1) Refer to
note 6 Significant events – Samarco dam failure for further information.
Escondida industrial action
Our Escondida asset in Chile began negotiations with Union N°1 on a new collective agreement in December 2016, as the existing agreement was expiring on 31 January 2017.
Negotiations, including government-led mediation, failed and the union commenced strike action on 9 February 2017 resulting in a total shutdown of operations, including work on the expansion of key
projects. On 24 March 2017, following a 44-day strike and a revised offer being presented to union members, Union N°1 exercised its rights under Article 369 of the Chilean Labour Code to extend the
existing collective agreement for 18 months.
Industrial action through this period resulted in a reduction to FY2017 copper production of 214 kt and gave rise to
idle capacity charges of US$546 million, including depreciation of US$212 million.
Cancellation of the Caroona exploration licence
Following the Group’s agreement with the New South Wales Government in August 2016 to cancel the exploration license of the Caroona Coal project, a net gain of
US$115 million (after tax expense) has been recognised.
Withholding tax on Chilean dividends
BHP Billiton Chile Inversiones Limitada paid a one-off US$2.3 billion dividend to its parent in April 2017 while a concessional tax
rate was available, resulting in withholding tax of US$373 million.
Year ended 30 June 2016 Gross Tax Net US$M US$M US$M Exceptional items by category
Samarco dam failure (2,450) 253 (2,197) Impairment of Onshore US assets (7,184) 2,300 (4,884) Global taxation matters (70) (500) (570)
Total (9,704) 2,053 (7,651)
Attributable to
non-controlling interests – Impairment of Onshore US assets (80) 29 (51) Attributable to BHP shareholders (9,624) 2,024 (7,600)
38
BHP Results for the year ended 30 June 2017
1. Exceptional items (continued)
Year ended
30 June 2015 Gross Tax Net US$M US$M US$M Exceptional items by category
Impairment of Onshore US assets (2,787) 829 (1,958) Impairment of Nickel West assets
(409) 119 (290) Repeal of Minerals Resource Rent Tax legislation – (698) (698)
Total (3,196) 250 (2,946)
Attributable to non-controlling interests – Repeal of Minerals Resource
– (12) (12) Rent Tax legislation Attributable to BHP shareholders (3,196) 262 (2,934)
2.
Interests in associates and joint venture entities
The Group’s major shareholdings in associates and joint venture entities, including their profit/(loss),
are listed below:
Ownership interest at the Profit/(loss) from equity accounted Group’s reporting date(1) investments, related impairments and expenses 2017
2016 2015 2017 2016 2015
% % % US$M US$M US$M
Share of operating
profit/(loss) of equity accounted investments:
Carbones del CerrejÏŒn LLC 33.33 33.33 33.33 129 (24) (20) Compañia Minera
Antamina SA 33.75 33.75 33.75 341 203 229 Samarco Mineração SA(2)(3)(4) 50.00 50.00 50.00 (134) (1,091) 371 Other (26) (39) (32)
Share of operating profit/(loss) of equity accounted investments 310 (951) 548 Samarco dam failure provision expense(2)(5) (38) (628) –Impairment of Samarco
Mineração SA(5) - (525) –
Profit/(loss) from equity accounted investments, related impairments and expenses 272 (2,104) 548
(1) The ownership interest at the Group’s and the associates and joint venture entities’ reporting dates are the same.
(2) Refer to note 6 Significant events – Samarco dam failure for further information. Financial impact of US$(381) million from the Samarco dam failure relates to US$(134)
million share of loss from US$(134) million funding provided during the period, US$(82) million direct costs incurred by BHP Billiton Brasil Ltda and other BHP entities, US$(127) million amortisation of discounting impacting net finance costs and
US$(38) million other movements in the Samarco dam failure provision including foreign exchange.
(3) As the carrying value has been previously written down to US$
nil, any additional share of Samarco’s losses are only recognised to the extent BHP Billiton Brasil Ltda has an obligation to fund the losses or investment funding is provided. BHP Billiton Brasil Ltda has provided US$(134) million funding
during the period and recognised additional share of losses of US$(134) million.
(4) At 30 June 2016, US$(1,091) million represents
US$(1,227) million share of loss relating to the Samarco dam failure (exceptional item) and US$136 million share of operating profit prior to the dam failure.
(5) At 30 June 2016, BHP Billiton Brasil Ltda adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million
impairment) and at 30 June 2016 recognised a provision of US$(1,200) million for obligations under the Framework Agreement (defined on page 43). US$(572) million of the US$(1,200) million provision represented an additional share of loss from
Samarco with the remaining US$(628) million recognised as provision expense.
39
Financial Information
3. Net finance costs
2017 2016 2015 US$M US$M US$M
Financial expenses
Interest on bank loans, overdrafts and all other borrowings 1,131 971 526 Interest capitalised at 3.25% (2016: 2.61%; 2015: 1.94%)(1) (113) (123) (148) Discounting on provisions
and other liabilities 462 313 333 Fair value change on hedged loans (1,185) 1,444 372 Fair value change on hedging derivatives 1,244 (1,448) (358) Exchange variations on net debt (23) (24) (63) Other financial expenses 58 28 40 1,574 1,161 702
Financial income
Interest income (143) (137) (88)
Net finance costs 1,431 1,024 614
(1) Interest has been capitalised at the rate of interest
applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is
approximately US$34 million (2016: US$37 million; 2015: US$42 million)
4. Earnings per share
2017 2016 2015 Earnings/(loss) attributable to BHP shareholders (US$M)
- Continuing operations
5,890 (6,385) 3,483
- Total 5,890 (6,385) 1,910
Weighted average number of
shares (Million)
- Basic(1) 5,323 5,322 5,318
- Diluted(2) 5,336 5,322 5,333
Basic earnings/(loss) per ordinary share (US cents)(3)
- Continuing
operations 110.7 (120.0) 65.5
- Total 110.7 (120.0) 35.9
Diluted
earnings/(loss) per ordinary share (US cents)(3)
- Continuing operations 110.4 (120.0) 65.3
- Total 110.4 (120.0) 35.8
(1) The calculation of the number of ordinary shares used in the
computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares of BHP Billiton Limited and BHP Billiton Plc outstanding during the period after deduction of the number of shares held by the Billiton
Employee Share Ownership Plan Trust and the BHP Billiton Limited Employee Equity Trust.
(2) For the purposes of calculating diluted earnings per share, the effect
of 13 million of dilutive shares has been taken into account for the year ended
30 June 2017 (2016: nil; 2015: 15 million shares). The Group’s
only potential dilutive instruments are share awards granted under employee share ownership plans. Diluted earnings per share calculation excludes instruments which are considered antidilutive.
The conversion of options and share rights would decrease the loss per share for the year ended 30 June 2016 and therefore its impact has been excluded from the diluted
earnings per share calculation.
At 30 June 2017, there are no instruments which are considered antidilutive (2015: 160,116 antidilutive shares). (3) Each
American Depositary Share represents twice the earnings for BHP ordinary shares.
5. Dividends
Year ended Year ended Year ended
30 June 2017 30 June 2016 30 June 2015 US
cents US$M US cents US$M US cents US$M
Dividends paid during the period (per share)(1)
Prior year final dividend 14.0 749 62.0 3,299 62.0 3,292 Interim dividend 40.0 2,130 16.0 855 62.0 3,304 54.0 2,879 78.0 4,154 124.0 6,596
(1) 5.5 per cent dividend on 50,000 preference shares of £1 each determined and paid annually (2016: 5.5 per cent; 2015: 5.5 per cent).
At 30 June 2017, BHP Billiton Limited had 3,212 million ordinary shares on issue and held by the public and BHP Billiton Plc had 2,112 million ordinary shares on
issue and held by the public. No shares in BHP Billiton Limited were held by BHP Billiton Plc at 30 June 2017 (2016: nil, 2015: nil).
40
BHP Results for the year ended 30 June 2017
5. Dividends (continued)
The Dual Listed Company
merger terms require that ordinary shareholders of BHP Billiton Limited and BHP Billiton Plc are paid equal cash dividends on a per share basis. Each American Depositary Share (ADS) represents two ordinary shares of BHP Billiton Limited or BHP
Billiton Plc. Dividends determined on each ADS represent twice the dividend determined on BHP ordinary shares.
Dividends are determined after period-end and contained within the announcement of the results for the period. Interim dividends are determined in February and paid in March. Final dividends are determined in August and paid in September.
Dividends determined are not recorded as a liability at the end of the period to which they relate. Subsequent to year-end, on 22 August 2017, the BHP Parents determined a final dividend of 43.0 US cents
per share (US$2,289 million), which will be paid on 26 September 2017 (2016: final dividend of 14.0 US cents per share—US$746 million, 2015: final dividend of 62.0 US cents per share—US$3,301 million).
BHP Billiton Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.
2017 2016 2015 US$M US$M US$M
Franking credits as at
30 June 10,155 9,640 11,295 Franking credits/(debits) arising from the payment/(refund) of current tax 1,239 81 (428)
Total franking
credits available(1) 11,394 9,721 10,867
(1) The payment of the final 2017 dividend determined after 30 June 2017 will reduce the franking account balance by
US$592 million.
6. Significant events – Samarco dam failure
On
5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure that resulted in a release of mine tailings, flooding the communities of Bento Rodrigues,
Gesteira and Paracatu and impacting other communities downstream (the Samarco dam failure).
Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton
Brasil) and Vale S.A. (Vale). BHP Billiton Brasil’s 50 per cent interest is accounted for as an equity accounted joint venture investment. BHP Billiton Brasil does not separately recognise its share of the underlying assets and liabilities
of Samarco, but instead records the investment as one line on the balance sheet. Each period, BHP Billiton Brasil recognises its 50 per cent share of Samarco’s profit or loss and adjusts the carrying value of the investment in Samarco
accordingly. Such adjustment continues until the investment carrying value is reduced to US$ nil, with any additional share of Samarco losses only recognised to the extent that BHP Billiton Brasil has an obligation to fund the losses, or when future
investment funding is provided. After applying equity accounting, any remaining carrying value of the investment is tested for impairment.
Any charges relating to
the Samarco dam failure incurred directly by BHP Billiton Brasil or other BHP entities are recognised 100 per cent in the Group’s results.
The financial
impacts of the Samarco dam failure on the Group’s income statement, balance sheet and cash flow statement for the year ended 30 June 2017 are shown in the table below and have been treated as an exceptional item. The table below does not
include BHP Billiton Brasil’s share of the results of Samarco prior to the Samarco dam failure, which is disclosed in note 2 Interests in associates and joint ventures, along with the summary financial information related to Samarco as at
30 June 2017.
41
Financial Information
6.
Significant events – Samarco dam failure (continued)
Year ended Year ended
30 June 2017 30 June 2016 Financial impacts of Samarco dam failure US$M US$M Income statement
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil and other
BHP entities in relation to the
(1)(2) (82) (70)
Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure(2)(3) (134) (655) Impairment of the carrying value of the investment in Samarco(3) - (525)
Samarco dam failure provision(2)(3) (38) (1,200) Loss from operations (254) (2,450) Net finance costs (127) –Loss before taxation (381) (2,450) Income tax benefit - 253
Loss after taxation (381) (2,197)
Balance sheet movement
Trade and other payables (3) (11) Investments accounted for using the equity method - (1,180) Deferred tax assets - (158) Provisions 143 (1,200) Deferred tax liabilities - 411
Net assets/(liabilities) 140 (2,138)
Year ended Year ended
30 June 2017 30 June 2016 US$M US$M
Cash flow statement
Loss before taxation (381) (2,450)
Comprising:
Costs incurred directly by BHP Billiton Brasil and other BHP entities in relation to the
(1)(2) (82) (70)
Samarco dam failure
Share of loss relating to the Samarco dam failure(2)(3) (134) (655) Impairment of the carrying value of the investment in Samarco(3) - (525) Samarco dam failure provision(2)(3)
(38) (1,200) Net finance costs (127)—
Non-cash or non-operating exceptional
items 302 2,391
Net operating cash flows (79) (59) Net investment and funding of equity accounted investments(4) (442) -
Net investing cash flows (442) -Net decrease in cash and cash equivalents (521) (59)
(1)
Includes legal and advisor costs incurred.
(2) Financial impacts of US$(381) million from the Samarco dam failure relates to US$(134) million share of loss from
US$(134) million funding provided during the period, US$(82) million direct costs incurred by BHP Billiton Brasil Ltda and other BHP entities, US$(127) million amortisation of discounting impacting net finance costs and US$(38) million other
movements in the Samarco dam failure provision including foreign exchange.
(3) At 30 June 2016, BHP Billiton Brasil Ltda adjusted its investment in Samarco to
US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million impairment) and recognised a provision of US$(1,200) million for obligations under the Framework Agreement (defined on the next page). US$(572) million of the
US$(1,200) million provision
represents an additional share of loss from Samarco with the remaining US$(628) million recognised as provision expense.
(4) Includes US$(134) million funding provided during the period and US$(308) million utilisation of the Samarco dam failure provision, of which US$(278) million allowed for the
continuation of reparatory and compensatory programs in relation to the Framework Agreement and a further US$(30) million for dam stabilisation.
42
BHP Results for the year ended 30 June 2017
6. Significant events – Samarco dam failure (continued)
Equity accounted investment in Samarco
BHP Billiton Brasil’s investment in Samarco
remains at US$ nil. BHP Billiton Brasil provided US$134 million funding under a working capital facility during the period and recognised additional share of losses of US$134 million. No dividends have been received by BHP Billiton Brasil
from Samarco during the period. Samarco currently does not have profits available for distribution and is legally prevented from paying previously declared and unpaid dividends.
Provision for Samarco dam failure
Year ended Year ended
30 June 2017 30 June 2016 US$M US$M
At the beginning of the financial year 1,200 -
Provision recognition, comprising:
Share of loss relating to the Samarco dam
failure - 572 Samarco dam failure provision expense - 628 Movement in provision (143) -
Comprising:
Utilised (308)—Adjustments charged to the income statement: Amortisation of discounting impacting net finance costs 127 - Other(1) 38 -
At the end of the financial year 1,057 1,200 Comprising: Current 310 300 Non-current 747 900
At the end of the financial year 1,057 1,200
(1) US$38 million relates to other movements
in the Samarco dam failure provision including foreign exchange.
Dam failure provisions and contingencies
As at 30 June 2017, BHP Billiton Brasil has identified provisions and contingent liabilities arising as a consequence of the Samarco dam failure as follows:
Environment and socio-economic remediation
Framework Agreement
On 2 March 2016, BHP Billiton Brasil, together with Samarco and Vale, entered into a Framework Agreement with the Federal Government of Brazil, the states of Espírito
Santo and Minas Gerais and certain other public authorities to establish a Foundation (Renova Foundation) that will develop and execute environmental and socio-economic programs to remediate and provide compensation for damage caused by the Samarco
dam failure. On 5 May 2016, the Framework Agreement was ratified by the Federal Court of Appeal.
The Federal Prosecutor’s Office appealed the
ratification of the Framework Agreement and on 30 June 2016, the Superior Court of Justice in Brazil issued a preliminary order (Interim Order) suspending the 5 May 2016 ratification of the Framework Agreement.
BHP Billiton Brasil, Vale and Samarco have appealed the Interim Order before the Superior Court of Justice. While a final decision on ratification is pending, and negotiations,
under the Preliminary Agreement (defined on the next page), towards a settlement of the R$20 billion (approximately US$6.1 billion) public civil claim and R$155 billion (approximately US$47 billion) Federal Public Prosecution Office claim
(noted on page 46) are ongoing, the Framework Agreement remains binding between the parties and the Foundation will continue to implement the programs under the Framework Agreement.
43
Financial Information
6.
Significant events – Samarco dam failure (continued)
The term of the Framework Agreement is 15 years, renewable for periods of one
year successively until all obligations under the Framework Agreement have been performed. Under the Framework Agreement, Samarco is responsible for funding the Foundation with calendar year contributions as follows: ï,· R$2 billion
(US$599 million) in 2016; ï,· R$1.2 billion (approximately US$365 million) in 2017; ï,· R$1.2 billion (approximately US$365 million) in 2018; ï,· R$500 million (approximately US$150 million) for a
special project to be spent on sewage treatment and landfill works from 2016 to 2018.
Annual contributions for each of the years 2019, 2020 and 2021 will be in the
range of R$800 million (approximately US$245 million) and R$1.6 billion (approximately US$485 million), depending on the remediation and compensation projects which are to be undertaken in the particular year. Annual contributions may be
reviewed under the Framework Agreement. To the extent that Samarco does not meet its funding obligations under the Framework Agreement, each of Vale and BHP Billiton Brasil has funding obligations under the Framework Agreement in proportion to its
50 per cent shareholding in Samarco.
Mining and processing operations remain suspended following the dam failure. Samarco is currently progressing plans to
resume operations, however significant uncertainties surrounding the nature and timing of ongoing future operations remain. In light of these uncertainties and based on currently available information, at 30 June 2017, BHP Billiton Brasil has
recognised a provision of US$1.1 billion before tax and after discounting (30 June 2016: US$1.2 billion), in respect of its obligations under the Framework Agreement.
The measurement of the provision requires the use of estimates and assumptions and may be affected by, amongst other factors, potential changes in scope of work and funding amounts
required under the Framework Agreement including further technical analysis required under the Preliminary Agreement, the outcome of the ongoing negotiations with Federal Prosecutors, costs incurred in respect of programs delivered, resolution of
uncertainty in respect of operational restart, updates to discount and foreign exchange rates, resolution of existing and potential legal claims and the status of the Framework Agreement. As a result, future actual expenditures may differ from the
amounts currently provided and changes to key assumptions and estimates could result in a material impact to the amount of the provision in future reporting periods.
As at 30 June 2017, BHP Billiton Brasil has paid US$278 million to allow for the continuation of reparatory and compensatory programs in relation to the
Framework Agreement and a further US$30 million for dam stabilisation, with the total US$308 million offset against the provision for the Samarco dam failure.
On 30 June 2017, BHP Billiton Brasil approved a further US$174 million to support the Foundation, in the event Samarco does not meet its funding obligations under the
Framework Agreement. Any support to the Foundation provided by BHP Billiton Brasil will be offset against the provision for the Samarco dam failure.
Preliminary
Agreement
On 18 January 2017, BHP Billiton Brasil, together with Samarco and Vale, entered into a Preliminary Agreement with the Federal Prosecutors’
Office in Brazil, which outlines the process and timeline for further negotiation towards a settlement regarding the R$20 billion (approximately US$6.1 billion) public civil claim and R$155 billion (approximately US$47 billion) Federal
Public Prosecution Office claim relating to the dam failure.
The Preliminary Agreement provides for the appointment of experts to advise the Federal Prosecutors in
relation to social and environmental remediation and the assessment and monitoring of programs under the Framework Agreement. The expert advisors’ conclusions will be considered in the negotiation of a final settlement arrangement with the
Federal Prosecutors.
44
BHP Results for the year ended 30 June 2017
6. Significant events – Samarco dam failure (continued)
Under the Preliminary Agreement, BHP Billiton Brasil, Vale and Samarco agreed interim security (Interim Security) comprising R$1.3 billion (approximately US$395 million) in
insurance bonds, R$100 million (approximately US$30 million) in liquid assets, a charge of R$800 million (approximately US$245 million) over Samarco’s assets, and R$200 million (approximately US$60 million) to be allocated within
the next four years through existing Framework Agreement programs in the Municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.
On
24 January 2017, BHP Billiton Brasil, Vale and Samarco provided the Interim Security to the Court which was to remain in place until the earlier of 30 June 2017 and the date that a final settlement arrangement was agreed between the
Federal Prosecutors, and BHP Billiton Brasil, Vale and Samarco. On 29 June 2017, the Court extended the final date for negotiation of a settlement until 30 October 2017, allowing for the continuation of the Interim Security arrangements
and the provision of ongoing expert advice to the Federal Prosecutors in respect of the Programs. The parties will use best efforts to achieve a final settlement arrangement by 30 October 2017 under the timeframe established in the Preliminary
Agreement.
Legal
The following matters are disclosed as contingent
liabilities:
BHP Billiton Brasil is among the companies named as defendants in a number of legal proceedings initiated by individuals, non-governmental organisations (NGOs), corporations and governmental entities in Brazilian federal and state courts following the Samarco dam failure. The other defendants include Vale, Samarco and Renova
Foundation. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies, including rehabilitation costs, compensation to
injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. It is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future
exposures for BHP Billiton Brasil.
In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous
agencies of the Brazilian government and are ongoing.
Ultimately, all the legal matters disclosed as contingent liabilities could have a material adverse impact on
BHP’s business, competitive position, cash flows, prospects, liquidity and shareholder returns.
Public civil claim
Among the claims brought against BHP Billiton Brasil, is a public civil claim commenced by the Federal Government of Brazil, states of Espírito Santo, Minas Gerais and other
public authorities on 30 November 2015, seeking the establishment of a fund of up to R$20 billion (approximately US$6.1 billion) in aggregate for clean-up costs and damages.
On 2 March 2016, BHP Billiton Brasil, together with Samarco and Vale, entered into the Framework Agreement. Ratification of the Framework Agreement by the Federal Court of
Appeal on 5 May 2016 suspended this public civil claim. However, it was reinstated on 30 June 2016 upon issue of the Interim Order by the Superior Court of Justice in Brazil.
While a final decision by the Court on the issue of ratification of the Framework Agreement is pending, the Preliminary Agreement suspends a R$1.2 billion (approximately
US$365 million) injunction order under the public civil claim. The Preliminary Agreement also requests suspension of the public civil claim with a decision from the Court pending. The R$1.2 billion (approximately US$365 million) injunction
order may be reinstated if a final settlement arrangement is not agreed by 30 October 2017.
45
Financial Information
6.
Significant events – Samarco dam failure (continued)
As noted above, BHP Billiton Brasil has recognised a provision as of 30 June
2017 of US$1.1 billion before tax and after discounting (30 June 2016: US$1.2 billion) in respect of its obligations under the Framework Agreement. While a final decision on ratification of the Framework Agreement is pending, and
negotiation of a settlement of the R$20 billion (approximately US$6.1 billion) public civil claim and R$155 billion (approximately US$47 billion) Federal Public Prosecution Office claim (noted below) under the Preliminary Agreement are
ongoing, the Framework Agreement remains binding between the parties and the Foundation will continue to implement the programs under the Framework Agreement.
Given the status of these proceedings, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures
for BHP Billiton Brasil.
Federal Public Prosecution Office claim
BHP Billiton
Brasil is among the defendants named in a claim brought by the Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately US$47 billion) for reparation, compensation and moral damages in relation to the Samarco
dam failure.
With regard to the Preliminary Agreement the 12th Federal Court suspended the Federal Public Prosecution Office claim, including a R$7.7 billion
(approximately US$2.3 billion) injunction request.
However, proceedings may be resumed if a final settlement arrangement is not agreed by 30 October 2017.
Given the status of these proceedings it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures
for BHP Billiton Brasil.
Class action complaint—shareholders
In
February 2016, a putative class action complaint (Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of American Depository
Receipts of BHP Billiton Limited and BHP Billiton Plc between 25 September 2014 and 30 November 2015 against BHP Billiton Limited and BHP Billiton Plc and certain of its
current and former executive officers and directors. The Complaint asserts claims under U.S. federal securities laws and indicates that the plaintiff will seek certification to proceed as a class action.
The amount of damages sought by the plaintiff on behalf of the putative class is unspecified. On 14 October 2016, the defendants moved to dismiss the Complaint. That motion is
pending before the Court.
Given the preliminary status of this matter, it is not possible at this time to provide a range of possible outcomes or a reliable
estimate of potential future exposures to the BHP Parents.
Class action complaint – bond holders
On 14 November 2016, a putative class action complaint (Complaint) was filed in the U.S District Court for the Southern District of New York on behalf of all purchasers of
Samarco’s ten-year bond notes due 2022-2024 between 31 October 2012 and 30 November 2015 against Samarco and the former chief executive officer of Samarco. The Complaint asserts claims under the
U.S. federal securities laws and indicates that the plaintiff will seek certification to proceed as a class action.
On 6 March 2017, the Complaint was amended
to include BHP Billiton Limited, BHP Billiton Plc, BHP Billiton Brasil Ltda and Vale S.A. and officers of Samarco, including four of Vale S.A. and BHP Billiton Brasil Ltda’s nominees to the Samarco Board. On 5 April 2017, the plaintiff
dismissed the claims against the individuals. The remaining corporate defendants filed a joint motion to dismiss the plaintiff’s Complaint on 26 June 2017.
The amount of damages sought by the plaintiff on behalf of the putative class is unspecified. Given the preliminary status of this matter, it is not possible at
this time to provide a range of possible outcomes or a reliable estimate of potential future exposures to BHP Billiton Limited, BHP Billiton Plc and BHP Billiton Brasil Ltda.
46
BHP Results for the year ended 30 June 2017
6. Significant events – Samarco dam failure (continued)
Criminal charges
The Federal Prosecutors’ Office has filed criminal charges against BHP
Billiton Brasil, Samarco and Vale and certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP Billiton Brasil filed its preliminary defences.
BHP Billiton Brasil rejects outright the charges against the company and the Affected Individuals and will defend the charges and fully support each of the Affected Individuals in their defence of the charges.
Under the criminal charges against BHP Billiton Brasil, Vale and Samarco and certain individuals, a R$20 billion (approximately US$6.1 billion) asset freezing order
application was made by the Federal Prosecutors. In July 2017, the Federal Court of Ponte Nova denied the Federal Prosecutors’ application for an asset freezing order.
Given the status of this matter, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP Billiton
Brasil.
Other claims
The civil public actions filed by State Prosecutors in
Minas Gerais (claiming damages of approximately R$7.5 billion, US$2.3 billion), State Prosecutors in Espírito Santo (claiming damages of approximately R$2 billion, US$605 million) and public defenders in Minas Gerais (claiming
damages of approximately R$10 billion, US$3 billion), have been consolidated before the 12th Federal Court. All of those civil public actions except the latter have also been suspended by the 12th Federal Court. Given the preliminary status of
these proceedings, and the duplicative nature of the damages sought in these proceedings and the R$20 billion (approximately US$6.1 billion) and R$155 billion (approximately US$47 billion) claims it is not possible at this time to provide
a range of possible outcomes or a reliable estimate of potential future exposures for BHP Billiton Brasil. Additional lawsuits and government investigations relating to the Samarco dam failure may be brought against BHP Billiton Brasil and possibly
other BHP entities in Brazil or other jurisdictions. BHP’s potential liabilities, if any, resulting from other pending and future claims, lawsuits and enforcement actions relating to the Samarco dam failure, together with the potential cost of
implementing remedies sought in the various proceedings, cannot be reliably estimated at this time and therefore a provision has not been recognised and nor has any contingent liability been quantified for such matters.
BHP insurance
BHP has third party liability insurance for claims related to the Samarco dam
failure made directly against BHP Billiton Brasil or other BHP entities. External insurers have been advised of the Samarco dam failure and a formal claim has been prepared and submitted. At 30 June 2017 an insurance receivable has not been
recognised for any potential recoveries under insurance arrangements.
Commitments
Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does not have an existing obligation to fund Samarco. For the year ended 30 June 2017, BHP Billiton
Brasil has provided US$134 million funding to support Samarco’s operations and a further US$30 million for dam stabilisation, with undrawn amounts of US$67 million expiring as at 30 June 2017. On 30 June 2017, BHP
Billiton Brasil made available a new short-term facility of up to US$76 million to carry out remediation and stabilisation work and support Samarco’s operations. Funds will be released to Samarco only as required and subject to the
achievement of key milestones with amounts undrawn expiring at 31 December 2017.
Any additional requests for funding or future investment provided would be
subject to a future decision, accounted for at that time.
7. Subsequent events
Other than the matters outlined elsewhere in this financial information, no matters or circumstances have arisen since the end of the financial year that have
significantly affected, or
may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods.
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BHP Billiton Limited and BHP Billiton Plc | ||||||
| Date: August 22, 2017 | By: | /s/ Rachel Agnew | ||||
| Name: | Rachel Agnew | |||||
| Title: | Company Secretary | |||||