Bhp Billiton Discussion Topic Review

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I have a different view on the ethics surrounding the valuation of BHPB’s assets and the timing of its announcement. The argument you have put forward supports the fact that the company met its legal obligations when disclosing its asset impairments (under the relevant Standards and regulations), but I feel that the company fell short of meeting its ethical obligations. I appreciate that other players in the oil and gas industry were also optimistic about market conditions, but the timing of the asset impairment announcement is a bit suspicious. The announcement was made one month after the close of FY2015, and BHPB’s management must have known that its US shale gas assets were underperforming before then.

Regarding your response to Q5, and referring to my initial discussion post, I also made a similar observation that there was no immediate reaction from the market following the announcement of BHPB’s asset impairment in July 2015. I did note that prior to December 2015, BHPB’s share price was greater than its book price per share. In December 2015, the company’s share price fell below its book price per share, indicating the market’s perception that the company was being overly optimistic when valuing its impairments.

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Bibliography

‘ASIC probes valuations amid write-downs’, Australian Financial Review, 18 February 2015 at 3:05 PM AEST.

Bartholomeusz, Stephen, “Drilling deeper into BHP’s shale write-down”, The Australian, Thursday 16 July 2015 at 4.31 PM AEST.

BHP Billiton Limited. 2015. Annual Report 2015. http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonannualreport2015.pdf

BHP Billiton Limited. 2015. Annual Report 2015. http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonannualreport2015.pdf

BHP Billiton Limited. 2016. Shareholder Information – Frequently Asked Questions. Accessed February 7, http://www.bhpbilliton.com/investors/shareholderinfo/faq.

Chambers, Matt, “BHP Billiton flags another US shale impairment”, The Australian, Thursday 16 July, 2015 at 12:00 AM AEST.

Conroy, John, “BHP Billiton flags $US5bn impairment on US assets”, The Australian, Friday 15 January, 2016 at 9:17 AM AEST.

Ker, Peter, “BHP posts $US4.9 billion oil and gas impairment”, The Sydney Morning Herald, Friday 15 January, 2016.

King, Agnes, ‘Expect more write-downs say academics’, The Australian Financial Review, 26 November, 2014 at 5:15 AM AEST.