DBRS Confirms BHP Billiton Ltd. & BHP Billiton plc’s Issuer Rating at A (low), Changes Trend to Positive

DBRS Limited (DBRS) confirmed the Issuer Rating of BHP Billiton Ltd. & BHP Billiton plc (collectively, BHP or the Company) at A (low) and changed the trend to Positive from Stable. During the fiscal year ending June 30, 2017 (F2017), BHP’s key credit metrics recovered strongly, driven by the rebound in the prices of its principal commodities, and are now robust for its rating. Also during F2017, the Company determined that its U.S. Onshore unconventional petroleum assets were non-core and would be divested. As such, DBRS believes that: (1) the sale of these assets should strengthen BHP’s business model, because it will allow BHP to focus management time, and potentially a portion of the proceeds, on its conventional petroleum assets, and (2) a portion of the proceeds from the sale could potentially be used for additional debt reduction, leading to further improvement in its metrics. This, together with the overall strengthened metrics as described above, have led DBRS to change the trend to Positive from Stable.

For F2018, DBRS expects a modest improvement in the Company’s key credit metrics, as higher production of iron ore, copper and metallurgical coal and the Company’s cost-cutting measures are expected to more than compensate for lower commodity prices – especially iron ore and metallurgical coal – compared to F2017, based on Bloomberg consensus price forecasts (as of November 28, 2017). DBRS’s expectations assume that the Company’s 50%-owned Samarco operations will not restart in F2018, although Samarco recently received the first licences required to prepare an old open pit for use in storing tailings and could receive its final licences for restarting in mid-2018, so the situation will continue to be monitored.

DBRS views BHP’s liquidity as strong, with $14.2 billion in cash and $6.0 billion in availability under the Company’s credit facility at the end of F2017. On September 22, 2017, the Company completed a $2.9 billion debt tender for maturities from 2020 to 2024 and DBRS believes that BHP has sufficient liquidity to fund any cash flow deficits and, potentially, further debt tenders. DBRS also notes that the completion of the sale of the U.S. Onshore petroleum assets should provide additional liquidity pending the re-deployment of the proceeds. As such, if the proceeds from the sale of the U.S. Onshore assets are used for further material debt reductions or are used to acquire accretive assets, then a positive rating action could result. Conversely, if the prices of the Company’s principal commodities are much lower than DBRS’s expectations and result in a material deterioration in BHP’s key credit metrics, a negative rating action could result.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies used were Rating Companies in the Mining Industry (August 2017), DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (January 2016) and Rating Companies in the Oil and Gas Industry (September 2016). DBRS used Rating Companies in the Mining Industry as the primary rating methodology, since the Company is engaged in the production of commodities such as iron ore, energy and metallurgical coal, copper, uranium and others (80% of F2017 underlying EBITDA). DBRS used Rating Companies in the Oil and Gas Industry as the secondary rating methodology, since BHP is also engaged in the production of conventional and non-conventional petroleum products (20% of F2017 underlying EBITDA).

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

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