“Now the Singapore hub issue is gone, there’s really only one impediment, and that’s the tax losses in the structure. Tax losses are just a function of time and profit that you can generate to use those.” –Shaw and Partners

“This [sale of US onshore business to energy major BP] also closes a very sad chapter in BHP’s history — a super-cycle, spending binge that came to almost naught.” –Shaw and Partners

“The ball is back in BHP’s court to respond at the upcoming result on 20 February.” –Citi

“There’s no question that a proposed corporate restructuring would enable shareholders to benefit from the more efficient release of Australian tax credits.” –RBC Capital Markets

“Assuming an ASX listing would drive a greater proportion of Australian tax payers to the BHP register, then you can see an argument for latent value here.” –Credit Suisse

“With US$11.4bn of franking credits as at Jun 30 last year, it would be hard to argue that impeding their use is a positive for shareholders.” –Credit Suisse

“Healthy discussion [is] never a bad thing.” –Credit Suisse

“We firmly believe a new, large cap E&P would be welcomed with open arms.” –Credit Suisse

“In our view, BHP has the highest upside potential in driving returns combined with a well-stocked pipeline of project options to choose from when the sector returns to focusing on growth…we elevate BHP as our top pick in the sector.” –Macquarie 

“We estimate that BHP has potential growth to the value of USD15bn over the next 10 years over and above any latent capacity which can be unlocked.” –Macquarie

“There has been some definite progress and a number of positive developments from BHP in recent months, all of which are hard to see having come to pass were it not for the catalyzing intervention of Elliott.” –Bernstein”

“BHP’s participation in NWS has always been an interesting proposition from a strategic perspective, and it isn’t clear if Oil and Gas is core to BHP’s go forward.” –Credit Suisse

We think it should be the entire petroleum business, not just the US shale business, that should be divested. However, the commitment to exit US shale…is certainly a welcome step in the right direction given our belief that oil is not a natural fit for the BHP portfolio.” –Bernstein

“BHP’s US onshore petroleum exit has been flagged under the new Chairman, but it is unclear how to quantify the risk this might extend to the conventional business. At the right price, they too would perhaps be interested in a sale” –Credit Suisse

“There is a clear sense that BHP management are attempting to perform a rear-guard action. They have given some ground and clearly feel that this will be sufficient to placate Elliott and other shareholders who share Elliott’s concerns. The appearance is that they have ‘thrown the dog a bone’ and hope that this will be sufficient to stop it from barking. At the same time, it is clear, at least to us, that BHP has not really engaged with any of the substantive points that Elliott have raised and until they do so, no number of promissory notes around future courses of action will be sufficient to create a long-lasting re-rating of the company.” –Bernstein

“If the board and strategy change hadn’t occurred of late, we probably wouldn’t flag a huge risk that BHP may look to exit the JV. Contributing ~25% of Petroleum EBITDA for BHP, and ~5% of the group in 2017, the stake remains somewhat material still to the group. So any exit price would be required to be large enough to offset the continued FCF generation/backfill FCF opportunity (albeit if they are just tolling, that is a material fall in FCF vs the current equity molecules).” –Credit Suisse

“We welcome the addition of two new board members as a positive change, bringing as it does further fresh, external influence to the company.” –Bernstein

“The US Onshore will be divested and work on Jansen will stop in CY18. This is a significant
shift in strategy and should create significant value for shareholders in our view.” –Deutsche

“Though BHP is staying in the Gulf, we see enough here to call this Elliott campaign a success.”
–Gordon Haskett

“[We] welcome this [BHP’s confirmed plans to sell shale] as a step in the right direction given
our belief that oil is not a natural fit for the BHP portfolio.” –Bernstein

“When investors were questioned on their feelings on what the best path forward would be for BHP, the response was decidedly one way, move on from the US onshore business and sell the acreage.” –Macquarie Research

“Investors were focused on returning the cash to BHP even if it meant a slightly less favourable price, before more capital was invested in the US onshore space by BHP.” –Macquarie Research

“In our view, we don’t think the market is paying anywhere near book value for BHP’s onshore position.” –Credit Suisse

“When you have bought something that hasn’t gone right, maybe the better decision is to exit.” –UBS

“Activist investor pressure to divest the shale assets continues to grow and is understandable given the continued cash investment required to sustain and grow production from shale.” –Macquarie

“Hurdles that prevent a change in perception at BHP. A return to growth capex, in particular the Jansen potash project, and renewed cash burn at US Onshore are the main risks. The enhanced scrutiny on capital allocation and arrival of a new chairman reduce those risks, in our view.” –Morgan Stanley

“The publication of a letter to management by activist investor Elliott in April has put a spotlight on BHP's decisions. We expect this to strengthen the group's focus on more balanced capital allocation and its poorly performing assets. BHP has the tools to do that.” –Morgan Stanley

“Each portfolio has its weakness. For BHP it is the US Onshore operations.” –Morgan Stanley

“We expect that a shift in strategy would help BHP rerate, after months of underperformance. Especially, a demerger of petroleum assets would enable an easier comparison to Rio Tinto in terms of commodity exposure, balance sheet strength and hopefully capital discipline.” –Bernstein

“Shareholder support is growing for Elliot Advisors’ three point plan” –Bernstein

“We have written in length already the reasons why we believe the oil business is not core for BHP, essentially, we see no operational synergies between mining and petroleum, we would see oil companies lining up to buy mining companies, but this is clearly not the case.” –Bernstein

“Benefits of separating the mining to petroleum assets will clearly be something that has to be addressed by Ken MacKenzie.” –Bernstein

“We would like to see a revamped strategy under new Chairman Ken MacKenzie focusing on returns, with targets… We think a sharper focus on returns would create significant value for shareholders.” –Deutsche Bank

“We believe BHP’s strategy and message under the current board and management has lacked clarity, metrics, and targets when compared to the strategies of key peers, making it more difficult to measure management’s performance.” –Deutsche Bank

“We continue our multi-year campaign recommending BHP to exit the low returning, sub-scale US Onshore assets” –Deutsche Bank

“Despite this world-class mining portfolio and commodity mix, BHP has underperformed. Over recent months BHP has lagged its peers in the sector, and more importantly has underperformed the commodities to which it is exposed. The company's price has strongly deviated from what we think is its intrinsic value.” –Bernstein

“We now see a clear catalyst for a re-rating of the stock, as we expect a shift in strategy at BHP, following the appointment of the successor to outgoing Chairman Jac Nasser. We believe the incoming chairman, Ken Mackenzie, will accede to shareholder requests for a broad portfolio review and restructuring, which could see a most-welcome demerger of the petroleum business. Following such a move we believe that the value upside in the core mining business will become more pronounced and also much easier to see.” –Bernstein

“We have long argued that BHP is not the natural owner of oil assets, as we see no obvious synergies between mining and petroleum production. Splitting the two businesses apart, on the other hand, could allow the disclosure of their full value.” –Bernstein

“If BHP collapses the DLC [dual listed company], exits from US shale or spins out the entire petroleum division, makes further divestment of non-core assets and/or revamps the capital allocation framework then the market is likely to positively react." –Evans and Partners

“A spinoff of Petroleum of sale of shale gas assets would be a positive.” –Jefferies

“We have long believed that the DLC structure has outlived its usefulness and that a simplified corporate structure would allow BHP more flexibility to optimise its portfolio of assets. For example, we believe that the main reason BHP retained the thermal coal operations in the Hunter Valley and Colombia is that these assets are owned by the Billiton plc side of the DLC. They should probably have been included in the S32 demerger, but were probably retained so that the earnings and cash flow balance between plc and Ltd didn’t become even more lopsided.” –Evans and Partners

“We are also sceptical on BHP’s claims that there are synergies between Petroleum and Minerals, or that diversification provides a benefit. We have long argued that BHP should consider spinning off the Petroleum Division.” –Evans and Partners

“Now that BHP has dropped Billiton from its name and re-branded back to BHP, it may be time to dispose of the remaining non-core Billiton assets and complete the process that was started with the demerger of South32.” –Evans and Partners

 “The key challenge for the incoming chair is determining whether the portfolio of assets and corporate strategy are correct. There is the potential for BHP to exit from US onshore shale” –UBS

“From our perspective, given BHP doesn’t operate either Bass Strait or NWS (the major contributors to their ex-US portfolio), the incorporation, or at least a review, of the entire petroleum portfolio is logical.” —Credit Suisse

“Is there 50% upside to NPV as BHP management suggests? No.” –UBS

“Activist investors, in our view, are placing pressure on mining executives to hold the capital discipline line for longer than the market thinks. This is likely to result in the miners moving into a period of value creation.” –Citi

“BHP Billiton: Bafflingly Hubristic Potash…? What does BHP actually stand for?” –Bernstein

“From a sentiment perspective we believe the exit of Onshore would have a more material impact on the share price, removing a non-tier 1 asset which has consumed cash over recent years; it would also accelerate the deleveraging so BHP can step up returns materially to shareholders immediately.” –UBS

“We think the current period of shareholder activism could result in a breakup and/or a significant alteration of the company’s structure. In the short term we believe the most value accretive option would be to spin-off the entire Petroleum business, but in the longer term, the company would still need to demonstrate a pathway to grow value.”– Citi

“We note the North American E&P producers trade at a premium to the global E&P producers, but this is because, international assets typically receive lower multiples than US onshore assets (see note). We see this as the potential value of the BHP’s Onshore business if listed.” –UBS

“BHP Billiton has traded at a discount to our calculated net present value (NPV) and to our calculated SOTP valuation for the past few years, which arguably has culminated in shareholder activism. While we recognize there could be 31% uplift from a full or partial breakup of the company – we are less convinced that this will drive sustaining value growth unless a breakup is coupled with a definitive change in strategy.”–Citi

“Everything triangulates back to oil and gas.” –Bernstein

“The recent intervention from Elliott has, we believed, precipitated this question: what does BHP really stand for? Elliott has clearly rattled the cage, and whilst BHP has come out strongly in opposition to Elliot’s proposals, the impact of those proposals will surely penetrate deeper. Our worry is that in response, BHP may make a strategic misstep in order to regain the upper-hand in the existential debate now swirling around the company.”–Bernstein

“Post the financial crisis; BHP has consistently traded at a discount to our calculated NPV – however critically the absolute NPV has also been falling from during this period from a peak of US$250bn in the beginning of 2011, to US$98bn today. In other words the market has been efficient in pricing in value destruction. So the discount being priced by the market today is suggesting to us that the company would destroy value in future”-Citi

We do not see a place for the oil business in the portfolio. In our view, over time BHP has become one of the most important suppliers to the global steel industry; it has exceptional iron ore and metallurgical coal assets, holds dominant positions in those markets, and until spinning-off South32 had a suite of steel alloying elements as well. It also has an oil business. And it is our firm belief that BHP should concentrate on its areas of strength (and we are in no doubt that those areas are indeed extremely strong), even if that means simply running as a cash cow and generating handsome returns for shareholders.”– Bernstein

“In terms of portfolio construction, it is difficult in our view to continue to justify the need to have the petroleum business within the portfolio. If we look at the cash flow being generated by the minerals business has in effect been subsiding capex, exploration and M&A in the petroleum business. Clearly this hasn’t always been the case with the development of the deep water GoM assets. However going forward we expect petroleum to be a drag on the company and it would be more appropriately valued in the market against oil peers versus mining peers.”-Citi

“There still remains some very fertile options for Elliott to pursue — realizing value in U.S. oil and gas and utilizing tax credits in Australia”–Shaw & Partners Ltd.

“The M&A track record of major mining companies has been disappointing to say the least given the number of deals that were down at the peak of the cycle and subsequently impaired and BHP is no exception to this. Moreover the buyback track record hasn’t been much better than M&A. If we look at the weighted average price that BHPB has bought back shares over the past decade it is currently 62% above the current share price.”-Citi

“While the S32 demerger significantly simplified BHP’s minerals assets down to the 4 key pillars, the Petroleum division still comprises a number of small and nonoperated assets that really should not belong in the portfolio”-Citi

“While our commodities team remains positive on the oil price, we believe that BHP’s oil business is barely generating free cash flow,”–Goldman Sachs

“A push for a spinoff of BHP’s U.S. petroleum assets may be achievable.”–CMC Markets

“Whatever the outcome, Elliott’s agitation should be good for BHP shareholders, in our view, if only to create greater transparency.” –Investec Asset Management

“You do need a chair that can think more creatively in terms of value creation with unbundlings and break-ups always options to consider.’”–Investec Asset Management

“BHP’s entire oil portfolio is non-core for a mining company and should be offloaded. The company should take the bold decision rather than suffer death by a thousand cuts.”–Bernstein

“[The letter] places a spotlight on BHP’s U.S. onshore business and its place in the broader group…Further debate on that issue is certainly relevant to shareholder concern.”–Macquarie

“It was a good time for BHP to be reshaping its US shale portfolio, particularly given its stated desire to focus more on oil production than gas in the US. Now that we are seeing signs of life in the oil market I think now is the right time for them to be pursuing opportunistic restructuring of US onshore and starting to pull the trigger on some of these greenfields prospects. Chunkier things like moving some of this Hawkville acreage, that will really step up that reshaping.”– Morgans

“What will commence is the chorus of shareholders seeking change and rejuvenation of the board.” –Shaw and Partners

Updated November 29, 2018