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
February 19, 2019
| BHP GROUP LIMITED (ABN 49 004 028 077) (Exact name of Registrant as specified in its charter)
VICTORIA, AUSTRALIA (Jurisdiction of incorporation or organisation)
171 COLLINS STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA (Address of principal executive offices) |
BHP GROUP PLC (REG. NO. 3196209) (Exact name of Registrant as specified in its charter)
ENGLAND AND WALES (Jurisdiction of incorporation or organisation)
NOVA SOUTH, 160 VICTORIA STREET LONDON, SW1E 5LB UNITED KINGDOM (Address of principal executive offices) |
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Financial results Half year ended 31 December 2018 Western Australia Iron Ore
Disclaimer Forward-looking statements This presentation 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 including, but not limited to, ‘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 presentation. Readers are cautioned not to put undue reliance on forward-looking statements. For example, future revenues from our operations, projects or mines described in this presentation 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 US 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. 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. Presentation of data Unless specified otherwise: variance analysis relates to the relative performance of BHP and/or its operations during the December 2018 half year compared with the December 2017 half year; operations includes operated assets and non-operated assets; total operations refers to the combination of continuing and discontinued operations; continuing operations refers to data presented excluding the impacts of South32 from the 2014 financial year onwards, and Onshore US from the 2017 financial year onwards; copper equivalent production based on 2018 financial year average realised prices; references to Underlying EBITDA margin exclude third party trading activities; data from subsidiaries are shown on a 100 per cent basis and data from equity accounted investments and other operations is presented, with the exception of net operating assets, reflecting BHP’s share; medium term refers to our five year plan. Queensland Coal comprises the BHP Billiton Mitsubishi Alliance (BMA) asset, jointly operated with Mitsubishi, and the BHP Billiton Mitsui Coal (BMC) asset, operated by BHP. Numbers presented may not add up precisely to the totals provided due to rounding. All footnote content contained on slide 36. Alternative performance measures We use various alternative performance measures to reflect our underlying performance. For further information please refer to alternative performance measures set out on pages 58 to 67 of the BHP Results for the half year ended 31 December 2018. No offer of securities Nothing in this presentation 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 presentation 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 presentation should not be relied upon as a recommendation or forecast by BHP. BHP and its subsidiaries In this presentation, the terms ‘BHP’, ‘Group’, ‘BHP Group’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ are used to refer to BHP Group Limited, BHP Group Plc and, except where the context otherwise requires, their respective subsidiaries set out in note 13 ‘Related undertaking of the Group’ in section 5.2 of BHP’s Annual Report on Form 20-F. Notwithstanding that this presentation may include production, financial and other information from non-operated assets, non-operated assets are not included in the BHP Group and, as a result, statements regarding our operations, assets and values apply only to our operated assets unless otherwise stated. Financial results 19 February 2019 2
Financial results Half year ended 31 December 2018 BHP’s Onshore US assets have been presented as discontinued operations. Andrew Mackenzie Chief Executive Officer Trinidad and Tobago
BHP’s investment proposition We have the assets, options, capability and discipline to grow long-term shareholder value and returns Maximise cash flow Capital discipline Value and returns Low-cost producer US$10-15 bn net debt ROCE to ~20% efficiency, technology, culture range to be maintained by FY22 (at FY17 prices) Volume growth <US$8 bn capex Optimised portfolio productivity, project delivery per annum to FY20 post Onshore US divestment Constructive outlook Organic opportunities Shareholder returns for our commodities, rich option set across commodities >US$25 bn returned solid demand, disciplined supply and time periods Note: Disciplined supply: reflects lower levels of investment across the industry. ROCE: based on Global Metals, Mining and Steel Conference presentation on 15 May 2018. Shareholder returns: includes dividends determined since 1 January 2016 and Onshore US proceeds. Financial results 19 February 2019 4
H1 FY19 financial scorecard Returns to shareholders of ~US$13 billion over the last six months Profitability Free cash flow Net debt US$10.5 bn US$3.6 bn US$9.9 bn Underlying EBITDA and 52% margin free cash flow net debt diversified contribution >US$10 bn including down US$1 bn since June 2018 across the portfolio Onshore US proceeds Dividend Share buy-back ROCE 55 US cps US$5.2 bn 15% payout ratio of 75 % off-market buy-back ROCE additional 102 US cps special of BHP Group Limited shares down from 17% in H1 FY18; impacted by dividend paid in January 2019 successfully completed production outages and higher taxes Note: EBITDA, EBITDA margin, Free cash flow (except as noted), ROCE presented on a continuing operations basis. Other metrics presented on a total operations basis. Financial results 19 February 2019 5
Sustainability is one of our core values We will continue our work to improve safety at our operations Safety Health • Tragically, we had one fatality at Saraji (December 2018) • Occupational health exposures reduction projects progressing • TRIF at operated assets of 4.3 per million hours worked, • Mental Health Framework focused on culture, capacity to down 2% support, prevention and recovery 25%... 12% high potential injury frequency rate1 potential exposures above OEL2 Environment Samarco • BHP the only resources company to receive A rating in CDP’s • Committed to social and environmental rehabilitation assessment of climate disclosure and performance • Key milestones achieved in each of the three relocation • Release of inaugural water report programs • Escondida desalination plant continues to ramp up as part of • Turbidity levels of impacted river areas returned to historical long term strategy to reduce reliance on freshwater levels • Restart important but must be safe, economically viable and community supported Note: Presented on a total operations basis. Financial results 19 February 2019 6
Financial results Half year ended 31 December 2018 Peter Beaven Chief Financial Officer Queensland Coal
Financial performance Solid free cash flow generation and EBITDA margin above 50% Summary H1 FY19 Income Statement Strong margins through the cycle (US$ billion) (Underlying EBITDA margin4, %) Total operations (including Onshore US) 60 Underlying attributable profit 3.7 Net exceptional items 0.1 Attributable profit 3.8 Underlying basic earnings per share 70 US cpsï,” 8% Interim dividend per share 55 US cps 0% Continuing operations 35 Underlying EBITDA 10.5ï,” 3% Underlying EBITDA margin 52% Underlying EBIT 7.5ï,“ 2% Adjusted effective tax rate3 36.1% Adjusted effective tax rate incl. royalties 45.2% BHP Peer group range Underlying attributable profit 4.0ï,” 8% 10 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1 FY19 Financial results 19 February 2019 8
Group EBITDA waterfall EBITDA impacted by H1 unplanned outages; strong H2 expected; FY19 productivity expected to be broadly flat Underlying EBITDA variance (US$ billion) 15 External US$0.4 billion Controllable US$(0.7) billion 0.7 11.2 0.1 10.8 0.1 0.0 10.5 (0.2) (0.1) 10 (0.1) (0.6) (0.2) H1 FY19 productivity performance: US$(460) million (US$ million) 400 5 100 0 (200) (500) Productivity gains Inventory build Volumes and costs Unplanned outages 0 H1 FY18 Price 5 Foreign Inflation Sub-total Growth Productivity Controllable6 Fuel & Non-cash7 Other 8 H1 FY19 exchange volumes volumes cash costs energy Note: Presented on a continuing operations basis. Productivity of US$(460) million includes change in capitalised exploration. Financial results 19 February 2019 9
Segment performance Full-year unit cost guidance unchanged with stronger volumes anticipated in H2 Iron Ore10 Petroleum11 Coal Copper Record Jimblebar Strong uptime First coal from Caval Record ore milled at production volumes performance Ridge Southern Circuit Spence and Cerro Colorado % of Group EBITDA9 41% 22% 19% 18% EBITDA: US$4.3 bn US$2.3 bn US$2.0 bn US$1.9 bn EBITDA margin: 59% 70% 45% 43% ROCE: 29% 19% 26% 4% Unit cost: WAIO Conventional Queensland Coal Escondida (US$/t) (US$/boe) (US$/t) (US$/lb) 16 12 75 1.20 68-72 1.17 Cost <1.15 14 14.51 11 70 1.10 11.14 70 Cost at FX guidance <14 <11 FY19 guidanceï,” 3%ï,“ 10%ï,” 1%ï,“ 10% 12 10 65 1.00 H1 FY19 FY19e H1 FY19 FY19e H1 FY19 FY19e H1 FY19 FY19e C1 costs US$13.85/t (ex. 3rd party royalties)12 Performance • Derailment in H1 • Higher planned maintenance in H1 • Record stripping up 10% year • End of negotiation bonus paid in H1 drivers: • Higher H2 volumes • Stronger uptime in H1 on year • Expected grade decline of ~15% year • Maintenance schedules optimised • Higher planned maintenance in H1 on year • Higher H2 volumes • Increased equipment utilisation and labour productivity Note: Presented on a continuing operations basis. Financial results 19 February 2019 10
Cash generation Solid free cash flow generation despite higher tax payments and capital expenditure Operating cash flow Free cash flow (US$ billion) (Index, FY10=100) (US$ billion) (Index, FY10=100) 35 200.00 15 200 30 200 10 25 100 5 20 100.00 15 0 0 10 200 (5) 5 0 0.00 (10) (100) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1 FY19 FY19 Operating cash flow (H1) Onshore US Free cash flow (H1) Onshore US proceeds Operating cash flow (H2) Commodity basket index (RHS) 13 Free cash flow (H2) Commodity basket index (RHS)13 Note: Presented on a total operations basis. Financial results 19 February 2019 11
Capital allocation Disciplined adherence to our Capital Allocation Framework H1 FY19 Operating Capital productivity productivity Net operating cash flow US$7.3 bn Maintenance capital US$0.8 bn Strong balance sheet Minimum 50% payout ratio dividend14 US$2.5 bn Excess cash Includes US$0.6 bn of dividends paid to NCIs US$3.6 bn Excludes US$0.2 bn of exploration expensed Additional Organic Acquisitions/ Balance sheet Buy-backs dividends14 development (Divestments) US$1.8 bn US$0.9 bn US$5.2 bn US$2.7 bn US$(7.0) bn H2 FY18 • US$1.0 bn improvement • Onshore US sale • US$0.2 bn latent capacity • US$0.7 bn major projects • US$0.4 bn exploration • US$0.4 bn Onshore US Note: Presented on a total operations basis. Excess cash excludes exploration expense of US$0.2 bn which is classified as organic development in accordance with the Capital Allocation Framework and after dividends paid to NCIs15. Onshore US proceeds of US$7.0 billion received in H1 FY19 with the remaining US$3.5 billion to be received by April 2019 (less customary completion adjustments). Financial results 19 February 2019 12
Striking the right balance to maximise value and returns US$16 billion reduction in net debt; ~US$20 billion reinvested; US$25 billion returned to shareholders16 Net debt slightly below target range Disciplined investment Increased returns to shareholders (Net debt, US$ billion) (Capital and exploration expenditure, US$ billion) (Dividends determined and share buy-backs, US$ billion) 30 9 13 ~US$13 bn Onshore US proceeds 20 6 6 10 3 3 0 0 0 FY16 FY17 FY18 H1 FY19 FY16 FY17 FY18 FY19e FY20e FY16 FY17 FY18 H1 FY19 Actuals Net debt target Actuals Guidance Minimum dividend Additional amount Note: Presented on a total operations basis. Financial results 19 February 2019 13
Return on Capital Employed H1 FY19 ROCE 15%; tailored plans to improve ROCE at every asset ROCE by asset (%) Productivity, technology, latent capacity to drive Antamina17 further improvement 30 25 NSWEC High-return options 20 to slow field decline Cerrejón17 Queensland 15 Coal WAIO Increased equipment utilisation and labour 10 Conventional productivity Petroleum Recovery from Ramping up from fire at Spence 5 acid plant outage, Escondida Pampa Norte progressing SMA, BFX study 0 Potash Olympic Dam (5) 0 10 20 30 40 50 60 Average capital employed (US$ billion) Exploration18 ROCE to ~20% by FY22 (at FY17 prices) Note: Presented on a continuing operations basis. Financial results 19 February 2019 14
Financial results Half year ended 31 December 2018 Andrew Mackenzie Chief Executive Officer Olympic Dam
Market outlook Near-term uncertainty, attractive long-term fundamentals Short term Medium term Long term Growth in New demand Policy Growth Steeper New supply population, centres and uncertainty moderating cost curves wealth themes Decarbonisation Sentiment Prudently Sustainable Emerging and Technology mixed cautious productivity Asia electrification Note: Further information on BHP’s economic and commodity outlook can be found at www.bhp.com/prospects. Financial results 19 February 2019 16
Our strategic framework Leveraging our values, capabilities and resources to meet the evolving needs of markets Culture and capabilities that Commodities with high economic enables the execution of our rent potential that match our business strategy to create long- capabilities term value and returns Leading Highly Increasing options in our favoured culture and attractive Continuing to transform our commodities capabilities commodities business Value and • Copper • BHP Operating System • Oil • Value Chain Automation • World Class Functions returns Further simplifying our portfolio • Onshore US sale • Bruce/Keith sale World- class Assets that are resilient through the assets cycle, have embedded growth options, and match our capabilities Financial results 19 February 2019 17
Our strategy in action Continued progress against our six focus areas Cost efficiencies Technology Latent capacity H2 reduction Integration 4 in unit costs expected with improved CIO live in July 2019; projects progressing to plan; reliability and operational performance; VCA incorporated in asset 5-year plans; Caval Ridge Southern Circuit H1 impacted by production outages autonomous drill study for Escondida; conveyed first coal autonomous truck study progressing Major projects Exploration Onshore US 6 New additions Sale complete projects progressing to plan; in copper and oil: with US$10.4 bn of proceeds Greater Western Flank-B first production; SolGold, Stuart Shelf, returned to shareholders Atlantis Phase 3 approved Orphan Basin Note: 4 latent capacity projects include WAIO 290 Mtpa, West Barracouta, Olympic Dam Southern Mine Area and Escondida Water Supply Expansion; 6 major projects include Atlantis Phase 3, Mad Dog 2, Greater Western Flank-B, Spence Growth Option, South Flank and completion of the Jansen shafts. CIO—Copper Integrated Operations; VCA—Value Chain Automation. Financial results 19 February 2019 18
Minerals Australia Focusing on bottlenecks to release latent capacity across our operations Cost reductions at all assets anticipated in H2 Record stripping at Queensland Coal (Prime to product strip ratio) (Prime stripping, Index, FY13=100) • WAIO FY19 unit costs: <US$14/t, 12 160 Cost –ï,” ~10% from H1 efficiencies • Queensland Coal FY19 unit costs: US$68-72/t –ï,” 2% from H1 10 140 • Operations Services to accelerate productivity improvements Up 10% 8 120 Minerals Australia volumes up ~10% in H2 6 100 • WAIO: record production at Jimblebar FY16 FY17 H1 H2 H1 H2 FY20e FY21e Medium term Latent • Queensland Coal: first coal conveyed at CRSC FY18 FY18 FY19 FY19e capacity • Olympic Dam: 3rd decline now fully operational Strip ratio Prime stripping Record underground development at Olympic Dam (Development kilometres) (Metres per jumbo per day) 50 8 Ramping up technology roll-out • Investigating phased roll-out of autonomous trucks following improved truck utilisation and safety at Jimblebar Technology 25 6 • Eastern Ridge Innovation Mine to further trial integration and automation technologies 0 0% 42% 41% 49% 49% 54% 68% 75% 4 FY16 FY17 H1 H2 H1 H2 FY20e FY21e FY18 FY18 FY19 FY19e SMA % of development Total development Jumbo productivity Note: CRSC – Caval Ridge Southern Circuit; SMA – Southern Mine Area. Financial results 19 February 2019 19
Minerals Americas Major projects and exploration provide optionality Sustainable options with limited risk Spence productivity underpinned by maintenance excellence (Throughput, Mt) (Dry area availability, %) • EWSE on track to deliver first water in FY20 25 100 Latent • Reviewing power supply to increase renewables use capacity Increased equipment availability continues 20 90 • Spence record ore milled through maintenance program 15 80 • New labour agreements increased truck utilisation at Escondida 10 70 5 60 SGO on schedule and budget 0 50 • 34% complete, on track for first production in FY21 FY14 FY15 FY16 FY17 FY18 FY19e FY20e FY21e FY22e FY23e Major Jansen is a strategic option Availability Availability average Throughput projects • Current scope 82% complete, shafts excavation complete, work to finalise lining and progress essential surface New labour agreements drive Escondida truck performance infrastructure (Truck utilisation in the first hour of shift change, %) (Index, pre-agreement=100) 90 100 New copper drilling program in Stuart Shelf 98 • Potential new iron oxide, copper, gold mineralised system 80 Pre-agreement • Drilling program in H2 to determine the extension of the 70 96 Exploration mineralisation 94 11.2% interest in SolGold acquired 60 92 • Strategic position in the Cascabel copper exploration project 50 90 Feb Mar Apr May Jun Jul Aug Aug Sep Oct Nov Dec H1 H2 Truck utilisation Average mining unit cost (RHS) Note: EWSE – Escondida Water Supply Expansion; SGO – Spence Growth Option. Financial results 19 February 2019 20
Conventional Petroleum Major projects Current investments profitable well below US$50/bbl • Atlantis Phase 3 approved, first oil expected in FY21 • Mad Dog 2 on track, Greater Western Flank-B first production Pipeline of seven projects with average returns of ~25% • Ruby investment decision expected in CY19 • Scarborough processing options being evaluated Exploration Exploration program continues progressing well • Trion: 2DEL and ST encountered oil, 3DEL well sanctioned • GoM: Samurai-2 and ST delineation successful • Trinidad: Bongos-2 discovery accelerates Phase 3 drilling Further exploration options added to the portfolio • Acquired licences in the Orphan Basin (Eastern Canada) Bass Strait West Barracouta approved • First gas expected in CY21 ~30 improvement and infill well programs with average returns of >40% • Five projects to seek approval in the next 12 months • Continue to mature embedded options to offset decline Latent capacity Strong operating performance supported by promising short, medium and long-term growth options Note: GoM – Gulf of Mexico; ST – sidetrack. Exploration wells and success rate19 (Net exploration wells) (Successful wells/wells drilled, %) 0 50 100 0 3 6 FY17 FY18 FY19 (YTD) Net exploration wells Technical success rate (RHS) 19 February 2019 Financial results 21
We expect to deliver on our plans in FY19 Maximise cash flow Capital discipline Value and returns Cu Eq volumes Net debt 20% ROCE broadly flat in FY19, weighted to H2 to remain at lower end of target at spot prices range20 >US$9 bn <US$8 bn Minimum 50% free cash flow at spot prices capex of underlying earnings as dividends Unit cost Increasing optionality US$10.4 bn guidance maintained, continued development of latent of Onshore US proceeds returned with strong operational capacity and major projects, performance expected in H2 increased exploration portfolio Note: Spot prices as of 12 February 2019. Financial results 19 February 2019 22
BHP’s investment proposition We have the assets, options, capability and discipline to grow long-term shareholder value and returns Maximise cash flow Capital discipline Value and returns Low-cost producer US$10-15 bn net debt ROCE to ~20% efficiency, technology, culture range to be maintained20 by FY22 (at FY17 prices) Volume growth <US$8 bn capex Optimised portfolio productivity, project delivery per annum to FY20 post Onshore US divestment Constructive outlook Organic opportunities Shareholder returns for our commodities, rich option set across commodities >US$25 bn returned solid demand, disciplined supply and time periods Note: Disciplined supply: reflects lower levels of investment across the industry. ROCE: based on Global Metals, Mining and Steel Conference presentation on 15 May 2018. Shareholder returns includes dividends determined since 1 January 2016 and Onshore US proceeds. Financial results 19 February 2019 23
BHP
BHP Appendix
Samarco and Renova Foundation Committed to social and environmental rehabilitation Rehabilitation Compensation Samarco legal developments (Renova Foundation) (Renova Foundation) and restart Communities • More than 8,200 of about 19,200 general • Requires licensing approvals and the damages claims resolved funding needed for restart preparation works • Key milestones achieved in each of the three relocation programs • More than 260,000, or 98 per cent, of • State Prosecutors of Minas Gerais agreed to claims for water damages resolved in 2018 Samarco commencing construction work of River stabilisation Alegria Sul, a new tailings disposal site – preparation work started in October • River remediation efforts have seen 2018 and is progressing as planned turbidity levels of impacted areas returned to historical levels • Working towards restart but will only occur if safe, economically viable and community in support Bento Rodrigues resettlement Note: Water damages compensation does not include legal claims in court under dispute. Financial results 19 February 2019 26
Dams and tailings management Increased rigour of our assessment and management of tailings storage facilities since the failure of the Fundão dam at Samarco Facilities Safety Governance Centralised Canadian 115 20 External 93% dam Dam annual function Association tailings storage active tailings storage of >400 dam risk facilities facilities across all dam safety review actions within our Resource guidance applied in across all sites21 sites21 inspections completed23 Engineering Centre of Dam Safety Excellence Reviews New External Tailings 13 34 Emergency technology Engineers of Stewardship response active upstream inactive upstream Record Board advancing for construction dams construction dams plans in 22 21 monitoring and (all in Australia) across all sites place24 dewatering appointed for being rolled-out all dams across all operations25 We will review and apply lessons of the Brumandinho failure as they emerge We welcome a common, international and independent body to oversee integrity of construction and operation of all dams across the industry We support calls for greater transparency in disclosure to inform better stewardship of tailings storage facilities Financial results 19 February 2019 27
Broad suite of attractive opportunities Latent capacity average returns of >100%; major project average returns of ~17%; exploration offers upside potential Jansen current scope: 82% complete Petroleum Jansen Stage 1: study underway Copper Orphan Basin exploration: licences acquired Iron Ore Trion: Appraisal results inline with expectations Coal Mad Dog Phase 2: 37% complete Potash OD SMA: record underground development Atlantis Phase 3: approved February 2019 Ruby: decision expected in CY19 OD BFX: seeking Board approval mid-CY20 Wildling: assessing potential resource Northern T&T: phase 3 accelerated to H2 Stuart Shelf: drilling in H2 to define mineralisation Samurai: planning further appraisal and development Southern T&T: assessing potential resource extension Western GOM: OBN survey acquisition Ecuador: 11.2% of SolGold acquired CRSC: first coal conveyed October 2018 Greater Western Flank-B: first production achieved Queensland Coal debottlenecking: latent capacity SGO: 34% complete Scarborough: assessing development options EWSE: scheduled completion December 2019 WAIO to 290 Mtpa: June 2019 run-rate South Flank: 21% complete West Barracouta: approved December 2018 Note: Average returns includes all opportunities based on Global Metals, Mining and Steel Conference presentation on 15 May 2018. Only near-term opportunities shown on map. BXF – Brownfield Expansion; CRSC – Caval Ridge Southern Circuit; EWSE – Escondida Water Supply Expansion; SGO – Spence Growth Option; SMA – Southern Mine Area. Financial results 19 February 2019 28
The transformative power of Technology Systems approach to the integration and automation of our value chains to unlock resources and drive a step change in safety, volume and cost GEOSCIENCE & PLANNING MINING PROCESSING TRANSPORT MARKETING Optimised planning and Autonomous and higher Improved throughput Improved train Meet specific customer reduced resource productivity systems from advanced process scheduling with less demand while maximising uncertainty reduce variability control unplanned events realised price INTEGRATED PROGRAMS P • Machine Learning for O • Autonomous Drill O • Improved tracking of O • Monitored and • O Increased direct Exploration O • Autonomous Truck ore quality optimisation of rail shipping P • Real time resource P • P Automation and scheduling, track •P Customer product • Material movement characterisation integration conditions and port matching / targeting optimised for value • P Highly automated P • Dynamic live 4D model • P Next-generation • O Moisture Tracking O • Surveying drones & concentrator logistics O • Live Planning laser technology • O Brand Relativity O • Volumetric train P • P Energy efficient Evaluation Tool • Live Scheduling • P Precision mining Conveyors loadout (BRET) • P Drill & blast highly • O Autonomous automated • P Advanced Process control shiploader SYSTEMS WIDE O • Cyber Security Operations Centre • P Industrial Internet of Things • O Historian Platforms O • Robotic Process Automation O • Mobility Competency Centre • O One global ERP Stage of initiative: P Pilot / Study O Operational Financial results 19 February 2019 29
BHP guidance Group FY19e Capital and exploration expenditure (US$ bn) <8.0 Cash basis. Including: Maintenance 2.1 Includes non-discretionary capital expenditure to maintain asset integrity, reduce risks, and meet compliance requirements. Also includes capitalised deferred stripping of US$1.0 billion for FY19. Improvement 2.2 Includes North West Shelf Greater Western Flank-B, Conventional Petroleum infill drilling and South Flank. Includes Escondida Water Supply Extension, Caval Ridge Southern Circuit, Olympic Dam Southern Mine Area, Western Australia Iron Latent capacity 0.6 Ore to 290 Mtpa, West Barracouta. Major growth 1.8 Includes Spence Growth Option, Mad Dog Phase 2, Jansen, Atlantis Phase 3. Exploration 0.9 Includes US$750 million Petroleum and ~US$70 million Copper exploration program planned for FY19. Onshore US 0.4 Includes expenditure to the end of October 2018 to operate five rigs in Onshore US. Petroleum FY19e Total Conventional petroleum production (MMboe) 113 – 118 Infill drilling projects are more than offset by planned dry dock maintenance at Pyrenees and natural field decline across the portfolio. Capital expenditure (US$m) 730 Primarily focused on progressing the Mad Dog Phase 2 project and completing the North West Shelf Greater Western Flank-B project. Unit cost (US$/boe) <11 Excludes inventory movements, embedded derivatives movements, freight, third party product purchases and exploration expense. Based on exchange rates of AUD/USD 0.75. Exploration (US$m) 750 Focused on Mexico, the Gulf of Mexico and the Caribbean. Financial results 19 February 2019 30
BHP guidance (continued) Copper FY19e Total copper production (Mt) 1.645 – 1.740 Includes Escondida at 1.12—1.18 Mt, Olympic Dam at 170 – 180 kt, Spence at 160 – 175 kt, Cerro Colorado at 60 – 70 kt, Antamina 135 kt. Escondida Production (Mt, 100% basis) 1.12 – 1.18 Reflects significant decrease in average concentrator head grade consistent with the mine plan. Volumes expected to be towards lower end of range. Unit cash costs (US$/lb) <1.15 Excludes freight and treatment and refining charges; net of by-product credits; includes costs to settle labour negotiations; based on an exchange rate of USD/CLP 663. Iron Ore FY19e Total iron ore production (Mt) 241 – 250 A program of work to optimise maintenance schedules across our supply chain and improve port reliability and performance is planned for the first half of the 2019 financial year, with a corresponding impact expected on production and unit costs. Excludes production from Samarco. Western Australia Iron Ore Production (Mt, 100% basis) 273 – 283 Unit cash costs (US$/t) <14 Excludes freight and royalties; based on an exchange rate of AUD/USD 0.75. Sustaining capital expenditure (US$/t) 4 Medium term average; +/- 50% in any given year. Includes South Flank of US$45 per tonne. Coal FY19e Total metallurgical coal production (Mt) 43 – 46 An extensive maintenance program is planned for the first half of the 2019 financial year, with a corresponding impact also expected on unit costs. Total energy coal production (Mt) 28 – 29 Queensland Coal Production (Mt) 43 – 46 Unit cash costs (US$/t) 68 – 72 Excludes freight and royalties; based on an exchange rate of AUD/USD 0.75. Sustaining capital expenditure (US$/t) 8 Medium term average; +/- 50% in any given year. NSW Energy Coal Unit cash costs (US$/t) 43 – 48 Excludes freight and royalties; based on an exchange rate of AUD/USD 0.75. Sustaining capital expenditure (US$/t) 5 Medium term average; +/- 50% in any given year. Financial results 19 February 2019 31
Investing for the future Ongoing improvements in capital productivity are enabling us to thrive on lower levels of capex Capital and exploration expenditure H1 FY19 FY19e FY20e (US$ billion) US$ billion US$ billion US$ billion Petroleum 0.7 1.5 1.8 Copper 1.0 2.9 2.4 Iron Ore 0.8 1.8 2.4 20 Coal 0.3 0.6 0.7 Other26 0.7 1.2 0.7 Total 3.5 <8.0 <8.0 10 <US$8 bn <US$8 bn US$6.8 bn H2 H1 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19e FY20e Capital and exploration expenditure guidance unchanged at below US$8 billion per annum in FY19 and FY20 Note: Presented on a total operations basis. Financial results 19 February 2019 32
West Barracouta, Atlantis Phase 3, Ruby West Barracouta Atlantis Phase 3 Ruby Australia USA Gulf of Mexico Trinidad and Tobago Two well brownfield subsea tieback to New subsea production system from eight Oil and gas development consisting of five existing Bass Strait facilities to supply the wells that will tie back to existing Atlantis production wells tied back into existing Australian domestic market. facility unlocked through Advanced operated processing facilities in Trinidad Seismic Imaging. & Tobago. Operator Esso Australia BP BHP BHP ownership 50% 44% 68% IRR ~20% ~25% >25% Capex (US$m) ~120 ~700 ~330 Timing / phase Sanctioned in December 2018 Sanctioned in February 2019 Investment decision expected in CY19 First production FY21 FY21 FY22 Volumes (100% basis at peak) 104 MMscf/d 38,000 boe/d 16,000 bopd (oil) + 80 MMscf/d (gas) 2.5% private royalty 12.5% royalty (net revenue) 12.5% royalty Royalties and Tax 40% Petroleum Resource Rent Tax 21% income tax Production entitlements paid in-kind under 30% income tax PSA Note: Ruby ownership based on current participating interest per the Joint Operating Agreement. PSA – Production Sharing Agreement. Financial results 19 February 2019 33
Balance sheet Net debt of US$9.9 billion and gearing of 15.2% Movements in net debt Debt maturity profile28,29 (US$ billion) (US$ billion) 15 8 10.9 (10.6) 6 0.6 0.3 9.9 0.1 10 3.4 4 5.2 5 2 0 0 FY18 Free cash Share Dividends Dividends Non-cash Other H1 FY19 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Post flow buy-back paid paid fair value movements FY29 to NCI15 movement27 US$ Euro Sterling A$ C$ Bonds30 Bonds30 Bonds30 Bonds Bonds Subsidiaries H2 FY19 net debt will include US$5.2 bn of special dividend partially 40% 31% 13% 3% 3% 10% offset by US$3.5 bn still to be received from Onshore US divestment % of portfolio Capital markets 90% Asset financing 10% Note: Presented on a total operations basis. Financial results 19 February 2019 34
Key Underlying EBITDA sensitivities Approximate impact31 on FY19 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price32 225 US$1/bbl on oil price33 46 US$1/t on metallurgical coal price 40 US¢1/lb on copper price32 33 US$1/t on energy coal price32 15 US¢1/lb on nickel price 2 AUD (USË~1/A$) operations34 114 Financial results 19 February 2019 35
Footnotes 1. Slide 6: High potential injury frequency rate: injury events where there was the potential for a fatality. 2. Slide 6: Occupational Exposure Limits (OELs): as compared to Q4 FY18 reported exposures and discounting the protection afforded by respiratory protective equipment. 3. Slide 8: Adjusted effective tax rate: excludes the influence of exchange rate movements and exceptional items. 4. Slide 8: Underlying EBITDA margin: BHP data presented on a total operations basis up to FY14 , excludes South 32 assets from FY15 onwards and excludes Onshore US in H1 FY19: peer group comprises Anglo American, Rio Tinto and Vale. 5. Slide 9: Price: net of price-linked costs. 6. Slide 9: Controllable cash costs: reflects increased planned maintenance activity; costs related to unplanned production outages at WAIO, Olympic Dam, Nickel West and Spence; increased contractor stripping activity and rates at Queensland Coal; and lower concentrator head grade at Escondida, partially offset by favourable inventory movements across a number of assets. 7. Slide 9: Non-cash: includes net deferred stripping costs. 8. Slide 9: Other: includes one-off items and other items (including profit/loss from equity accounted investments). 9. Slide 10: Segment EBITDA: percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items. 10. Slide 10: Iron ore: unit cost, C1 unit cost excluding third party royalties, EBITDA margin and ROCE refer to Western Australia Iron Ore. 11. Slide 10: Petroleum: unit cost, EBITDA margin and ROCE refer to Conventional Petroleum. 12. Slide 10: WAIO C1 cost: excludes third party royalties, exploration expenses, depletion of production stripping, demurrage, exchange rate gains/losses, net inventory movements and other income. 13. Slide 11: Commodity basket index: represents equal-weighted average of oil, copper, iron ore and metallurgical coal prices. 14. Slide 12: Dividend: related to final dividend determined by the Board for FY18 and paid in September 2018. 15. Slide 12,34: NCIs: dividends paid to non-controlling interests of US$623 million predominantly relate to Escondida. 16. Slide 13: Shareholder returns: includes special dividend paid on 30 January 2019. 17. Slide 14: Antamina and Cerrejón: equity accounted investments; average capital employed represents BHP’s equity interest. 18. Slide 14: Conventional Petroleum exploration: ROCE truncated for illustrative purposes. 19. Slide 21: Exploration wells and success rate: refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. A successful well is an exploratory or extension well that is not a dry well or met its appraisal objective. Successful wells include wells in which hydrocarbons were encountered and the drilling or completion of which, has been suspended pending further drilling. Excludes wells that had mechanical issues (Burrokeet-1 and Wildling-1 in FY17 and Bongos-1 in FY19) where the opportunities were tested by a subsequent well. 20. Slide 22: Adoption of IFRS16 Leases is first effective for the Group from 1 July 2019 and potential impact is currently under review. 21. Slide 27: All sites include operated, closed, and non-operated sites (excluding the Bullmoose closed site non-operated joint venture). The number of tailings storage facilities is calculated based on the definition used by the Responsible Dam Engineers at our sites. We keep this definition under review. BHP’s tailings storage facilities are located at seven operated sites in Australia and Chile; there are a further seven closed sites throughout North America, and four non-operated joint ventures in North America and South America. 22. Slide 27: The 13 operational upstream tailings storage facilities are located at the following operated sites: one at Mt Whaleback (Western Australia), two at Olympic Dam (South Australia), two at Goonyella and one at Blackwater (Queensland), and seven at Nickel West (Western Australia). The number of tailings storage facilities is calculated based on the definition used by the Responsible Dam Engineers at our sites. We keep this definition under review. 23. Slide 27: Dam Risk Reviews were completed for active, inactive and closed tailings storage facilities across our business. The reviews identified no significant deficiencies to the stability or management of our tailings storage facilities. Improvement recommendations have been implemented with a minor number of actions remaining in progress, such as administrative actions and long lead items regarding closure and climate change. None of these actions are overdue. Dam Safety Reviews were then completed at significant tailings storage facilities following the guidelines recommended by the Canadian Dam Association. 24. Slide 27: Emergency response plans are in place for all significant tailings storage facilities. 25. Slide 27: The establishment of independent Tailings Stewardship Boards to undertake reviews for all active and many inactive and closed tailings dams including design, construction, operation and closure is underway to provide independent third party input. A trial of the stewardship program has been completed at our Olympic Dam asset in South Australia. 26. Slide 32: Other includes discontinued operations (Onshore US assets) in H1 FY19 and FY19. 27. Slide 34: Non-cash fair value movement: relates to foreign exchange variance due to the revaluation of local currency denominated cash and debt to USD and movements in interest rates. 28. Slide 34: Debt maturity profile: all debt balances are represented in notional USD values and based on financial years; as at 31 December 2018. 29. Slide 34: Debt maturity profile: subsidiary debt is presented in accordance with IFRS 10 and IFRS 11. 30. Slide 34: Debt maturity profile: includes hybrid bonds (26% of portfolio: 13% in USD, 9% in Euro, 4% in Sterling) with maturity shown at first call date. 31. Slide 35: EBITDA sensitivities: assumes total volume exposed to price; determined on the basis of BHP’s existing portfolio. 32. Slide 35: EBITDA sensitivities: excludes impact of equity accounted investments. 33. Slide 35: EBITDA sensitivities: excludes impact of change in input costs across the Group. 34. Slide 35: EBITDA sensitivities: based on average exchange rate for the period. Financial results 19 February 2019 36
BHP
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 Group Limited and BHP Group Plc | ||||||
| Date: February 19, 2019 | By: | /s/ Rachel Agnew | ||||
| Name: | Rachel Agnew | |||||
| Title: | Company Secretary | |||||