In February, BHP Billiton said in its results for the half year ended December 31, 2016, that its onshore US assets "are now free cash flow positive, reflecting continued improvements in both operating and capital efficiency".
BHP Billiton came under fresh pressure to restructure on Monday as activist hedge fund Elliott Advisors urged the miner to scrap its dual-corporate system, split off its USA oil arm and revise its capital return policy.
In its response, BHP said it regularly reviewed opportunities to create value, including the key elements of Elliott's proposal.
Yesterday, Elliott Associates chose to pick on BHP Billiton, whose shares trade in London and Sydney.
Elliott, run by billionaire Paul Singer, also urged BHP to demerge its petroleum business into a separate entity listed on the New York Stock Exchange and return more cash to shareholders through buy-backs.
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According to Elliott, most of that underperformance "has been driven by the incomplete status of management's streamlining and value-optimization of BHP's group structure and asset portfolio".
BHP stock closed at $25.73 today and could be in for a volatile day tomorrow as the buying has largely been triggered by a substantial shareholder talking up the company's valuation.
That said, BHP's share price performance matches that of its close competitor Rio Tinto, which has no oil earnings, over both one and 10 years. It also said it holds rights with its affiliates to acquire up to 0.4 per cent of the issued shares in BHP Billiton ltd.
A logo for mining company BHP Billiton adorns a sign outside the Perth Convention Centre where their annual general meeting was being held in Perth, Western Australia, November 19, 2015.
Elliott said it holds a long term economic interest of around 4.1 per cent of BHP's London-listed shares. Barclays Capital downgraded the shares of BHP in report on Tuesday, January 12 to "Underweight" rating.
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Since the formation of the dual listing in 2001, BHP says it has returned to shareholders $US23 billion in buybacks and $US56 billion in cash dividends. At present, BHP has a minimum underlying attributable profit payout ratio of 50 per cent.
Based on the value of the company being denominated in USA dollars, the rally has taken the stock to just shy of a major resistance area.
Elliott's letter was released late in the day and the jumped in the last half hour of trading on the Australian share market on Monday.
What the scheme would do is make some bankers and lawyers very busy indeed, without improving the operational efficiency of BHP. BHP will direct about three-quarters of capital expenditure over the next five years to the two favored commodities, according to Macquarie Group Ltd. forecasts.
BHP Billiton Plc is a global resources company.
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