BHP Group Regulatory News (BHP)

BHP BILLITON OPERATIONAL REVIEW

FOR THE QUARTER ENDED 30 SEPTEMBER 2015

· Production guidance maintained across all businesses.

· Petroleum capital expenditure of US$2.9 billion now planned for the 2016 financial year, a 6% decline from prior guidance of US$3.1 billion.

· Four major projects under development are tracking to plan.

· The Group continues to pursue high-quality oil plays with additional prospective acreage acquired in the Beagle sub-basin in Western Australia and the Western Gulf of Mexico.

· Approval received for the extension of operational permits for Cerro Colorado until 2023.

· In October, BHP Billiton priced multi-currency hybrid notes in the Euro, Sterling and US Dollar markets.

BHP Billiton Chief Executive Officer, Andrew Mackenzie, said: "BHP Billiton remains on track to meet full-year production and cost guidance after a solid operational performance this quarter. In Petroleum, we continue to reduce costs in both our Onshore US and Conventional businesses, and will meet our production targets with US$200 million less capital investment. We successfully acquired prospective oil acreage in Western Australia and the Western Gulf of Mexico and will continue to invest through the cycle to create value for shareholders."

Summary

Operational performance

Production for the September 2015 quarter and 2016 financial year guidance are summarised in the table below.

Major development projects

At the end of the September 2015 quarter, BHP Billiton had four major projects under development in Petroleum, Copper and Potash, with a combined budget of US$7.0 billion.

Corporate update

On 14 and 15 October, BHP Billiton priced multi-currency hybrid notes in the Euro, Sterling and US Dollar markets. The Group priced EUR2.0 billion of subordinated fixed rate reset notes in the Euro market across two tranches, GBP600 million of subordinated fixed rate reset notes in the Sterling market and US$3.25 billion of subordinated fixed rate reset notes in the US Dollar market across two tranches. The proceeds will be used for general corporate purposes, including refinancing existing near-term debt maturities.

Petroleum

Production

Total petroleum production - Total petroleum production for the September 2015 quarter decreased by four per cent to 64.5 MMboe. Guidance for the 2016 financial year remains unchanged at 237 MMboe, despite lower planned capital investment across our operations.

Crude oil, condensate and natural gas liquids - Crude oil, condensate and natural gas liquids production for the September 2015 quarter decreased by one per cent to 30.7 MMboe.

Onshore US liquids volumes for the September 2015 quarter rose by 17 per cent to 13.5 MMboe, underpinned by continued momentum in the Black Hawk and Permian where liquids production increased by 25 per cent and 103 per cent, respectively. A 17 per cent decline in Black Hawk and Permian liquids production from the June 2015 quarter reflected lower capital spend. However, we continue to expect annual volumes from these liquids-rich fields to be stable year on year.

In our Conventional business, an 11 per cent decrease in liquids production reflects the impact of industrial action at Bass Strait and natural field decline across the portfolio.

Natural gas - Natural gas production for the September 2015 quarter declined by seven per cent to 203 bcf.

The decline primarily reflected lower Onshore US gas volumes as a result of the decision to defer development activity for longer-term value. This was partially offset by higher seasonal demand at Bass Strait.

Projects

Petroleum capital expenditure of approximately US$2.9 billion is now planned in the 2016 financial year, a six per cent decline from prior guidance of US$3.1 billion, and includes Onshore US capital expenditure of US$1.4 billion. Conventional capital expenditure is expected to account for US$1.5 billion, and remains focused on high-return infill drilling opportunities in the Gulf of Mexico and Australia, as well as life extension projects at Bass Strait and North West Shelf.

Onshore US development activity

Onshore US drilling and development expenditure for the September 2015 quarter was US$463 million. Our operated rig count decreased from 10 to seven during the period as we continued to improve drilling efficiency and defer development activity to preserve value. Completions activity will be tailored to market conditions and we will exercise further flexibility should there be greater value in deferral.

(i) Includes land acquisition, site preparation, drilling, completions, well site facilities, mid-stream infrastructure and pipelines.

(ii) Can vary between periods based on changes in rig activity and the inventory of wells drilled but not yet completed at period end.

(iii) Change includes reduction associated with the divestment of assets in North Louisiana (Haynesville) and Pecos (Permian).

Petroleum exploration

Exploration and appraisal wells drilled during the September 2015 quarter are summarised below.

Our Petroleum exploration is focused in the deepwater Gulf of Mexico, the Caribbean and the Beagle sub-basin in Western Australia. We are pursuing high-quality oil plays in these three key focus areas. In August 2015, BHP Billiton was the apparent highest bidder on 26 blocks in the Western Gulf of Mexico Lease Sale with a 100 per cent working interest. Of these leases, nine have been awarded and 17 remain subject to regulatory approval. The Group also captured approximately 13,000 square kilometres in the Beagle sub-basin in Western Australia during the period.

Petroleum exploration expenditure for the September 2015 quarter was US$171 million, of which US$78 million was expensed. A US$600 million exploration program is planned for the 2016 financial year, largely focused on acreage access and seismic data acquisition across our three key focus areas that we expect to test over the next three years.

Copper

Production

Copper - Total copper production for the September 2015 quarter decreased by three per cent to 377 kt as strong operating performance across the business was offset by grade decline at Escondida, as anticipated. Guidance for the 2016 financial year remains unchanged at 1.5 Mt.

Escondida copper production for the September 2015 quarter decreased by 14 per cent to 230 kt as record material mined, supported by a six per cent improvement in truck utilisation, was more than offset by a 17 per cent decline in grade.

Production guidance for Escondida remains unchanged at approximately 940 kt of copper for the 2016 financial year as increased throughput, enabled by the completion of the Escondida Organic Growth Project 1 and operational improvements, will only partly offset an anticipated 27 per cent decline in grade. In the medium term, completion of the Escondida Water Supply project and a potential life extension of Los Colorados may enable utilisation of three concentrators to offset grade decline and support a strong recovery in production.

Pampa Norte copper production for the September 2015 quarter was broadly unchanged at 57 kt as higher grade and recoveries at Spence offset lower grades and recoveries at Cerro Colorado. On 29 September 2015, the Regional Environmental Committee of the Tarapacá Region approved the extension of operational permits for Cerro Colorado until 2023. Production at Pampa Norte for the 2016 financial year is expected to remain broadly unchanged from the prior year.

Olympic Dam copper production increased by 40 per cent from the September 2014 quarter to 55 kt, and reflects completion of planned smelter maintenance in the prior period. An increase in production is anticipated in the 2016 financial year following a mill outage in the prior year.

Antamina copper production for the September 2015 quarter increased by 37 per cent to 35 kt as higher grades and recoveries were further supported by debottlenecking initiatives at the mill. Higher grades at Antamina are expected to contribute to an increase in copper volumes in the 2016 financial year.

Projects

Iron Ore

Production

Iron ore - Total iron ore production for the September 2015 quarter increased by seven per cent to a record 61 Mt. Guidance for the 2016 financial year remains unchanged at 247 Mt.

Western Australia Iron Ore (WAIO) production increased by eight per cent in the September 2015 quarter to a record 67 Mt (100 per cent basis), supported by the ramp-up of the Jimblebar mining hub and improved ore handling plant utilisation at Newman. WAIO also achieved record sales volumes of 67 Mt (100 per cent basis) as a result of an increase in direct to ship ore and continued optimisation of the port facilities.

Production at WAIO is forecast to increase to 270 Mt (100 per cent basis) in the 2016 financial year with better productivity the sole source of volume growth. Work has commenced on the installation of a new primary crusher and additional conveying capacity at Jimblebar, and associated costs are included within WAIO's average annual sustaining capital expenditure of approximately US$5 per tonne. The ramp-up of additional capacity at the Jimblebar mining hub along with further productivity improvements, will deliver an increase in system capacity to 290 Mtpa over time.

Samarco production for the September 2015 quarter increased by nine per cent to 7.5 Mt (100 per cent basis) underpinned by the ramp-up of the fourth pellet plant to full capacity during the March 2015 quarter.

Coal

Production

Metallurgical coal - Metallurgical coal production for the September 2015 quarter was in line with the prior period. Guidance for the 2016 financial year remains unchanged at 40 Mt.

At Queensland Coal, record production at the Daunia and South Walker Creek mines was supported by an increase in wash-plant utilisation and yield. This was offset by planned longwall moves at the Broadmeadow and Crinum mines and wash-plant shutdowns at the Goonyella and Peak Downs mines. At current mining rates, operations at Crinum are expected to cease in the first quarter of the 2016 calendar year as the mine approaches the end of its economic reserve life.

First production from the Haju mine in Indonesia was achieved during the quarter.

Energy coal - Energy coal production for the September 2015 quarter was broadly in line with the prior period. Guidance for the 2016 financial year remains unchanged at 40 Mt(1).

Production at Cerrejón continues to be constrained by drought conditions, although volumes were seven per cent higher than the September 2014 quarter which was affected by more severe weather. This offset a slight reduction in volumes at New South Wales Energy Coal during the quarter due to lower yield.

On 2 July 2015, BHP Billiton announced that the sale agreement for the San Juan Mine to Westmoreland Coal Company (WCC) had been executed. Subject to regulatory approval, the transaction is expected to be completed at the end of the 2015 calendar year with WCC assuming full operation of the mine from 1 January 2016.

Potash

Projects

Other

Production

Nickel - Nickel West production for the September 2015 quarter decreased by 12 per cent to 22 kt and reflected a reduction in third party ore delivered to the Kambalda concentrator.

Minerals exploration

Minerals exploration expenditure for the September 2015 quarter was US$44 million, of which US$34 million was expensed. Greenfield minerals exploration is predominantly focused on advancing copper targets within Chile, Peru and the South-West United States.

Variance analysis relates to the relative performance of BHP Billiton and/or its operations during the September 2015 quarter compared with the September 2014 quarter, unless otherwise noted. Production volumes, sales volumes and capital and exploration expenditure from subsidiaries are reported on a 100 per cent basis; production and sales volumes from equity accounted investments and other operations are reported on a proportionate consolidation basis.

The following footnotes apply to this Operational Review:

(1) Guidance assumes a full year of production from the San Juan mine.

(2) Well depth as at 30 September 2015; drilling still in progress.

The following abbreviations may have been used throughout this report: barrels (bbl); billion cubic feet (bcf); cost and freight (CFR); cost, insurance and freight (CIF); dry metric tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms per tonne (kg/t); kilometre (km); metre (m); million barrels of oil equivalent (MMboe); million cubic feet per day (MMcf/d); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent (Mboe); thousand ounces (koz); thousand standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum (ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).

Further information on BHP Billiton can be found at: www.bhpbilliton.com

(1) LPG and ethane are reported as natural gas liquids (NGL). Product-specific conversions are made and NGL is reported in barrels of oil equivalent (boe). Total boe conversions are based on 6 bcf of natural gas equals 1 MMboe.

(2) Metal production is reported on the basis of payable metal.

(3) Shown on a 100% basis. BHP Billiton interest in saleable production is 57.5%.

(4) Includes Cerro Colorado and Spence.

(5) Iron ore production is reported on a wet tonnes basis.

(6) Shown on a 100% basis. BHP Billiton interest in saleable production is 85%.

(7) Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal.

(8) Shown on 100% basis. BHP Billiton interest in saleable production is 80%.

(9) Shown on 100% basis. BHP Billiton interest in saleable production is 75%.

(1) Total boe conversions are based on 6 bcf of natural gas equals 1 MMboe.

(2) Stybarrow ceased production on 26 June 2015. Crude oil and condensate production in the September 2015 quarter was reduced by an 8 Mboe finalisation adjustment with respect to the June 2015 quarter.

(3) Other Australia includes Minerva and Macedon.

(4) Gulf of Mexico volumes are net of royalties.

(5) Onshore US volumes are net of mineral holder royalties.

(6) Haynesville includes North Louisiana Conventional. BHP Billiton completed the sale of North Louisiana Conventional on 17 November 2014.

(7) Other Americas includes Neptune, Genesis and Overriding Royalty Interest.

(8) UK NGL production for the September 2015 quarter was reduced by an 18 Mboe reporting adjustment following a reconciliation between estimated and actual volumes with respect to the June 2015 quarter.