Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Day (December 2013)
56 slides from Bhp's investor day presentation, Dec 10, 2013
Slide 1: Primed to deliver strong growth in free cash flow
Primed to deliver strong growth in free cash flow Andrew Mackenzie Chief Executive Officer 9 December 2013 bhpbilliton resourcing the future
Slide 2: Disclaimer
Disclaimer bhpbilliton resourcing the future Forward-looking statements This presentation includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding future events, conditions, circumstances and the future financial performance of BHP
Slide 3: Primed to deliver strong growth in free cash flow
Primed to deliver strong growth in free cash flow bhpbilliton resourcing the future Extending our strong track record The premier diversified resource portfolio Unchanged production guidance for our high margin businesses Our productivity agenda has strong momentum Intense competition for capital is
Slide 4: Extending our strong track record
Extending our strong track record bhpbilliton resourcing the future Our high quality, diversified resource portfolio and proven strategy has delivered outstanding results1 – average EBIT margin of 41% – a superior return on capital employed – a CAGR for our progressive ‘base’ dividend of 18% – US$59
Slide 5: The premier diversified resource portfolio
The premier diversified resource portfolio bhpbilliton resourcing the future FY13 to FY15 production growth contribution Other 2% Copper 10% Coal 19% Iron Ore 37% Petroleum 32% WAIO (Iron ore) FY13 to FY15 forecast production growth <5% >5% Queensland Coal (Metallurgical coal) Onshore US (Oil & gas)
Slide 6: Unchanged production guidance for our high margin businesses
Unchanged production guidance for our high margin businesses bhpbilliton resourcing the future Group production1 (FY04 = 100) 200 150 100 50 0 FY04 – FY13 CAGR: 4% CAGR 8% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14e FY15e Source: BHP Billiton analysis. 1. Calculated in copper equivalent
Slide 7: Iron Ore: targeting the capital efficient tonne
Iron Ore: targeting the capital efficient tonne bhpbilliton resourcing the future Tracking well to deliver 13% growth in production this year – FY14 production guidance for WAIO recently increased to 212 mt1 – first production achieved at Jimblebar in Q1 FY14, six months ahead of schedule Targeting
Slide 8: Coal: running at capacity at Queensland Coal
Coal: running at capacity at Queensland Coal bhpbilliton resourcing the future Unchanged production guidance – metallurgical coal production to grow by 9% to 41 mt1 – energy coal production to remain unchanged at 73 mt1 Queensland Coal continues to run at supply chain capacity Illawarra Coal’s Dendr
Slide 9: Copper: on track to produce 1.3 million tonnes at Escondida in FY15
Copper: on track to produce 1.3 million tonnes at Escondida in FY15 bhpbilliton resourcing the future Unchanged production guidance – 1.7 mt1 of total copper in FY14 – Escondida to deliver copper production of 1.1 mt2 in FY14 and 1.3 mt2 in FY15 Antamina is expected to achieve record production in H
Slide 10: Our productivity agenda has strong momentum
Our productivity agenda has strong momentum bhpbilliton resourcing the future Our productivity initiatives continue to deliver more volume from existing equipment and lower unit costs This is one of the most value accretive activities that we can undertake 100% of our operations are now on our uniqu
Slide 11: Our productivity agenda has strong momentum
Our productivity agenda has strong momentum bhpbilliton resourcing the future Our productivity initiatives continue to deliver more volume from existing equipment and lower unit costs This is one of the most value accretive activities that we can undertake 100% of our operations are now on our uniqu
Slide 12: Our productivity agenda has strong momentum
Our productivity agenda has strong momentum bhpbilliton resourcing the future Our productivity initiatives continue to deliver more volume from existing equipment and lower unit costs This is one of the most value accretive activities that we can undertake 100% of our operations are now on our uniqu
Slide 13: Competition for capital will increase returns and deliver strong growth in free cash flow
Competition for capital will increase returns and deliver strong growth in free cash flow bhpbilliton resourcing the future Our investment plans have been optimised for value Capital and exploration expenditure will decline by 25% in FY14 and further thereafter We will continue to invest selectively
Slide 14: Portfolio simplification will remain a key differentiator
Portfolio simplification will remain a key differentiator bhpbilliton resourcing the future The quality and breadth of our portfolio will enable us to further simplify our business whilst maintaining the benefits of diversification A focus on our four key pillars and their major operations will deli
Slide 15: Primed to deliver strong growth in free cash flow
Primed to deliver strong growth in free cash flow bhpbilliton resourcing the future Extending our strong track record The premier diversified resource portfolio Unchanged production guidance for our high margin businesses Our productivity agenda has strong momentum Intense competition for capital is
Slide 16: bhpbilliton resourcing the future
bhpbilliton resourcing the future
Slide 17: Shanghai Global energy outlook
Shanghai Global energy outlook Mark Swinnerton Vice President, Market Analysis 9 December 2013 bhpbilliton resourcing the future
Slide 18: Key themes
Key themes bhpbilliton resourcing the future Global GDP growth will be driven by the emerging economies China’s growth model is in transition and evidence of progress is building India’s economic growth will be cyclical and its energy demand will be significant Substitution in the energy complex all
Slide 19: A diversified energy portfolio is a key differentiator
A diversified energy portfolio is a key differentiator bhpbilliton resourcing the future Global energy demand forecast to grow at 1.3% CAGR1 between 2010 and 2030 Two thirds of growth to come from Asia, with China and India adding 1,870 GW of generation capacity Policy will impact the energy landsca
Slide 20: The emerging world will continue to increase its share of global GDP
The emerging world will continue to increase its share of global GDP bhpbilliton resourcing the future Developed economies underpinned global growth before 2000, however global energy demand per capita progressively contracted As China integrated into the global economy, per capita use of energy inc
Slide 21: Emerging economies are driving energy consumption growth
Emerging economies are driving energy consumption growth bhpbilliton resourcing the future Developed economies Per capita energy consumption has shown limited growth and is projected to decline as energy efficiency measures intensify Increase in energy consumption is driven by population growth more
Slide 22: The developed world will continue to push the productivity frontier
The developed world will continue to push the productivity frontier bhpbilliton resourcing the future Research and development continues to be driven by developed economies The developed world is home to some of the most innovative and productive companies Conditions for manufacturing in the United
Slide 23: China's growth model is in transition
China’s growth model is in transition bhpbilliton resourcing the future The share of investment in China’s economy is high This is in part driven by a high savings rate that generates significant funds for investment Over time, the savings rate will revert to more typical levels due to – demographic
Slide 24: The government in China is driving reform
The government in China is driving reform bhpbilliton resourcing the future The outcome of the 3rd Plenary Session of the 18th Communist Party of China Central Committee was positive with a list of comprehensive reforms announced The role of markets and the private sector will be prioritised to enab
Slide 25: India has lost momentum in the short term
India has lost momentum in the short term bhpbilliton resourcing the future GDP growth has slowed in recent years however it remains within the historical range The slowdown is attributable to capacity constraints and inflation Despite slower growth the economy has made progress in recent years – ca
Slide 26: India still has significant long term potential
India still has significant long term potential bhpbilliton resourcing the future India’s current wealth per capital is similar to China in 2000 Demographics are favourable for growth The industrial sector will be key to India’s development – as wealth rises, demand for industrial goods will increas
Slide 27: ASEAN members are performing well and will play a key role in future growth
ASEAN members are performing well and will play a key role in future growth bhpbilliton resourcing the future South East Asia has displayed strong growth over the past decade The largest four countries by population in ASEAN represent over 500 million people For these four countries, the combined av
Slide 28: Global energy consumption will be driven by electrification and transport
Global energy consumption will be driven by electrification and transport bhpbilliton resourcing the future Population with access to electricity (billion people) 9 8 +1.7 1.0 No access 7 Billion 1.3 1.5 Other 6 5 1.1 1.6 Africa 4 1.0 3 2 4.2 Asia 3.5 1 0 2010 2030 Asia Africa other no access Source
Slide 29: Asia represents the bulk of energy consumption growth
bhpbilliton resourcing the future Asia represents the bulk of energy consumption growth Primary energy demand is expected to grow by 1.3% p.a to 2030, presenting opportunities across multiple sectors, fuels and regions Energy demand growth in China and India to 2030 is equivalent to the amount of en
Slide 30: Substitution within the energy complex has allowed for a diverse base of supply
bhpbilliton resourcing the future Substitution within the energy complex has allowed for a diverse base of supply Economic drivers of the energy mix Technology factors have influenced demand and supply - electricity has substituted for biomass - hydraulic fracturing has altered competitiveness of ga
Slide 31: Choice of energy is influenced by availability of domestic resources
bhpbilliton resourcing the future Choice of energy is influenced by availability of domestic resources Energy balances by region (Btoe) Europe Former Soviet Union North America 2010 2030 2010 2030 Asia Pacific 2010 2030 Middle East 2010 2030 Africa South America 2010 2010 2030 2010 2030 2030 renewab
Slide 32: Choice of energy is also influenced by the type of end use consumption
bhpbilliton resourcing the future Choice of energy is also influenced by the type of end use consumption Types of end use consumption influence the selection of fuels - transport is reliant on oil - certain industries are limited to direct coal consumption, like steelmaking - biomass represents a la
Slide 33: Uncertainties exist in the energy complex
bhpbilliton resourcing the future Uncertainties exist in the energy complex A number of economic and policy decisions will significantly influence demand - such as demographics and the rate of economic growth Supply conditions can be unpredictable given the uncertain nature of the resource base Mana
Slide 34: BHP Billiton possesses a uniquely diversified energy portfolio
bhpbilliton resourcing the future BHP Billiton possesses a uniquely diversified energy portfolio Revenue by product Revenue by region Revenue by sector 2% 18% 24% 46% 8% 39% 26% 31% 28% 35% 37% 6% oil thermal coal US Asia transformation¹ buildings natural gas uranium Europe rest of World industry tr
Slide 35: Oil and gas form the foundation of the energy complex
bhpbilliton resourcing the future Oil and gas form the foundation of the energy complex Global energy demand growth is strong enough to drive increased consumption for all energy fuels Along with renewable electricity, natural gas is one of the fastest energy supply growth sectors Natural gas is the
Slide 36: Key themes
bhpbilliton resourcing the future Key themes Global GDP growth will be driven by the emerging economies China’s growth model is in transition and evidence of progress is building India’s economic growth will be cyclical and its energy demand will be significant Substitution in the energy complex all
Slide 37: bhpbilliton resourcing the future
bhpbilliton resourcing the future
Slide 38: Petroleum markets
Petroleum markets Brett Langley Vice President, Marketing 9 December 2013 bhpbilliton resourcing the future
Slide 39: Key themes
bhpbilliton resourcing the future Key themes Global crude market fundamentals remain robust US crude production growth will be absorbed by domestic refinery capacity Global gas markets will continue to converge over time Positive demand outlook for US gas and differentiated cost curve will support p
Slide 40: Global crude fundamentals remain robust
bhpbilliton resourcing the future Global crude fundamentals remain robust We forecast global liquids demand CAGR of 0.9% to 2030 - current consumption of 90 MMbbl/d - over 100 MMbbl/d forecast by 2030 - underpinned by a significant increase in Asian transport fuel consumption Supply side challenges
Slide 41: US refinery complex well positioned to manage increased shale oil supply
bhpbilliton resourcing the future US refinery complex well positioned to manage increased shale oil supply Shale oil development has underpinned a substantial recovery in US crude production - forecast to increase from a low of 5 MMbbl/d in 2008 to 7.5 MMbbl/d in 2016 Production growth will be absor
Slide 42: Fundamental change to the WTI-Brent spread
bhpbilliton resourcing the future Fundamental change to the WTI-Brent spread WTI historically traded at a premium to Brent to reflect transport costs from Gulf Coast to Cushing WTI traded at a discount from 2011 as growth in US production led to an oversupply at Cushing Investment in Cushing to Gulf
Slide 43: We target refinery configurations that match our crude portfolio
bhpbilliton resourcing the future We target refinery configurations that match our crude portfolio Regional crude pricing reflects quality and locational differentials - Australian crudes are indexed to Brent - Gulf of Mexico crudes are primarily indexed to SGC - Onshore US crudes trade at a discoun
Slide 44: Strong global gas demand outlook
bhpbilliton resourcing the future Strong global gas demand outlook Global gas demand CAGR of 2.3% forecast to 2030 - current consumption of 320 bcf/d - 480 bcf/d forecast by 2030 Asian demand forecast to double to 125 bcf/d by 2030 North American demand forecast to increase from 80 bcf/d to 115 bcf/
Slide 45: The US is the largest gas market in the world
bhpbilliton resourcing the future The US is the largest gas market in the world The US is the largest, most traded gas market in the world - currently consumes 70 bcf/d - over 95 bcf/d forecast by 2030 Current domestic consumption is evenly spread across key sectors - 36% power generation - 28% indu
Slide 46: Power generation provides gas price support
bhpbilliton resourcing the future Power generation provides gas price support US energy policy continues to favour gas fired power generation over coal Substantial retirements of sub-optimal coal plants are expected - ~47 GW out of 340 GW to be retired by 2017 - represents ~5 bcf/d of incremental ga
Slide 47: A resurgence is underway in the industrial sector
bhpbilliton resourcing the future A resurgence is underway in the industrial sector Industrial gas demand declined by 4 bcf/d between 2002-2009 The current gas price environment has incentivised a resurgence in industrial activity - incremental industrial demand of ~6 bcf/d expected by 2030 The majo
Slide 48: New markets provide further demand upside
bhpbilliton resourcing the future New markets provide further demand upside Natural Gas Vehicle (NGV) demand growth of ~4 bcf/d is forecast by 2030 The majority of demand growth is expected from heavy duty vehicles - 40% of the heavy trucking market could potentially switch to gas Regional corridors
Slide 49: As well as the emergence of US gas exports
bhpbilliton resourcing the future As well as the emergence of US gas exports Five US LNG non-FTA export projects have been approved by the Department of Energy (DoE) - total of 6.77 bcf/d approved - four are subject to Federal Energy Regulatory Commission (FERC) approval US gas exports to Mexico are
Slide 50: Continued investment required to meet demand
bhpbilliton resourcing the future Continued investment required to meet demand The largest US gas supply sources include Marcellus, Haynesville and Fayetteville Supply cost differentiation driven by a number of factors - Economic Ultimate Recovery (EUR) - production rate - liquids yield - proximity
Slide 51: Our US shale gas resources are well positioned to access key markets
bhpbilliton resourcing the future Our US shale gas resources are well positioned to access key markets The US gas market consists of multiple supply and demand centres Given their proximity to key southern and export markets our resources have a location advantage We forecast a long term benefit of
Slide 52: US exports will impact Asian LNG price formation
bhpbilliton resourcing the future US exports will impact Asian LNG price formation Asian LNG demand CAGR forecast of 4.5% to 2030 - supply will be met by a variety of competing sources US LNG export projects are targeting Asian customers - up to 5.8 bcf/d of DoE approved US exports are likely destin
Slide 53: Australian gas increasingly connected to LNG markets
bhpbilliton resourcing the future Australian gas increasingly connected to LNG markets LNG exports from Eastern Australia to commence in 2014 - over 70% of Eastern Australian supply to be exported by 2020 - 90% of Western Australian supply to be exported by 2020 We expect domestic pricing in Eastern
Slide 54: US NGL supply growth is incentivising a demand response
bhpbilliton resourcing the future US NGL supply growth is incentivising a demand response NGLs consist of ethane, propane, butane, iso-butane and natural gasoline - used for plastic production, refinery blending, fuel and as a heavy oil diluent Individual US NGL prices are quoted at Mont Belvieu (ad
Slide 55: Key themes
bhpbilliton resourcing the future Key themes Global crude market fundamentals remain robust US crude production growth will be absorbed by domestic refinery capacity Global gas markets will continue to converge over time Positive demand outlook for US gas and differentiated cost curve will support p
Slide 56: Signatures
bhpbilliton resourcing the future 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: December 9, 2013 By: