BHP Billiton (BHP) Down On Weak Q4 Production Results

BHP Billiton (LON:BLT) Limited (NYSE:BHP) reported weak production results for fourth-quarter fiscal 2016. Output volumes of major products like petroleum, copper, iron ore and energy coal was lower than the values recorded in the year ago comparable quarter. However, metallurgical coal registered growth.

In the quarter, the company's aggregate petroleum production was 56 million barrels of oil equivalent (MMboe), down 11% year over year. Full-year output declined 6% year over year to 240 MMboe. Petroleum production has decreased due to deferral of onshore U.S. development activity.

Aggregate copper output was 0.4 million tons (Mt), down 5% year over year. Full-year production declined 8% year over year to 1.6Mt on account of lower grades accrued from the Escondida mine.

Gross production of iron ore in the quarter was 56 Mt, down 7% year over year. Full-year production was 227 Mt, down 2% year over year. The output volume of iron ore declined due to the postponement of Samarco mine operations.

Total energy coal output was 7 Mt, down 34% year over year. Full-year volume plunged 16% year over year to 34 Mt. The downside stemmed from factors like disinvestment of San Juan mine, operational rescheduling in certain mines and unfavorable climatic conditions.

However, metallurgical coal production during the quarter was 12 Mt, up 4% year over year. Full-year output was 43 Mt, up 1% from the year-ago tally. However, the production level of the commodity remained almost flat year over year. This was because of the termination of production at Crinum mine offset the productivity success accrued from the Queensland Coal mines.

Share Price Movements

Share price of BHP Billiton dipped 1.39% to $28.32 at the close of trading on Jul 20, 2016. We believe that the company’s relatively poor fourth-quarter production update might have been the reason behind the recent decline in the stock price.

According to reports, the company’ share price declined as the output of its major product, iron ore came in below its own projections. Full-year production of iron ore was 227 Mt, roughly 1% below the guidance provided by the company in Apr 2016. The shortfall had actually weakened investors’ confidence on the stock as iron ore prices have been recovering in the recent months on the back of increased demand from China.

Zacks Rank

BHP Billiton currently carries a Zacks Rank #2 (Buy). Despite the headwinds persisting in the industry, the company remains on track to boost its financials on the back of greater operational efficiency, innovative productivity enhancing technologies and new manufacturing projects.

Other Stocks to Consider

Other well-ranked stocks from the same space that are worth considering include Rio Tinto (LON:RIO) plc (NYSE:RIO) , Silvercorp Metals Inc. (OTC:SVMLF) and Mountain Province Diamonds Inc. (NASDAQ:MDM) . Both Rio Tinto and Silvercorp Metals Inc. sport a Zacks Rank #1 (Strong Buy), while Mountain Province Diamonds currently holds a Zacks Rank #2 (Buy).

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