Mining giant BHP Billiton predicts a fall in petroleum production next year after racking up $3 billion in writedowns.
BHP, which spun off assets to focus on iron ore, petroleum, copper and coal, downgraded its petroleum production forecasts on Wednesday despite ambitions of growing the business to rival its iron ore division.
The company predicts 2016 full year production for its petroleum division will fall seven per cent to 237 million barrels of oil or equivalent (MMboe) while copper is tipped to decline by 12 per cent and Metallurgical coal is likely to drop six per cent.
Despite the downbeat outlook for three of its four key commodities, BHP said iron ore production would increase by six per cent to 247 million tonnes in fiscal 2016.
BHP beat its full year iron ore production guidance, shipping 254 million tonnes of iron ore during the 2014/15 financial year, above the 250 million tonne target it announced in May.
It also expects to cut production costs at its West Australian Iron Ore project to $US16 per tonne.
But the company will take a $US650 million ($A876.31 million) hit to its full year underlying profit due to writedowns and redundancy costs, mostly linked to its copper business.
The impairments come on top of $US2 billion ($A2.70 billion) in post-tax writedowns to its US shale oil business, which were announced last week.
Despite cutting annual shale investment by more than 50 per cent in its petroleum division, chief executive Andrew Mackenzie said BHP expected to maintain production in its Black Hawk and Permian liquids operations in the US in fiscal 2016.
"Although our decision to cut spending in the onshore US will mean deferring gas volumes in the near term, we expect to realise greater value by developing our acreage later," Mr Mackenzie said.
BHP lifted iron ore production by 13 per cent during the year, contributing to a nine per cent increase in total group production for the year, the company's June operational review said.
The company lifted petroleum production four per cent to 256 million barrels of oil equivalent (mmboe) thanks to an increase in output from its shale business.
But copper production was flat at 1.7 million tonnes, while metallurgical coal production was up 13 per cent to 43 million tonnes.
IG markets strategist Evan Lucas said BHP's iron ore business was likely to deliver a strong financial result next month but rumours of further petroleum writedowns and a subdued performance of its gas onshore fields were concerning.
"The forward guidance is the concern," Mr Lucas said.
"Petroleum clearly is an issue, considering chief executive Andrew Mackenzie is from that division.
"Part of the reason they got him into that role as CEO is something they could be scratching their heads about."
He said the copper outlook had been flagged and coal outlook was nothing to sing about.
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