Sydney (AFP) - The world's biggest miner BHP announced Friday the sale of its US shale oil and gas operations to BP for US$10.5 billion, a heavy loss but a potential windfall for shareholders.
The Anglo-Australian firm spent US$20 billion in 2011 to acquire the assets, but the sector later experienced a fall in prices, hammering profits.
It prompted BHP to announce plans to exit the business last year.
With its net debt currently towards the lower end of its target range of US$10-US$15 billion, the money raised is set to be returned to shareholders, either through dividends or share buybacks.
"We are pleased that we have agreed to sell all of our shale assets in two simple transactions that provide certainty for shareholders and our employees," said BHP chief executive Andrew Mackenzie.
"The sale of our onshore US assets is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come."
Under the deal, BP American Production Company, a subsidiary of the British giant, will acquire Petrohawk Energy Corporation, which holds BHP's Eagle Ford, Haynesville and Permian assets, for US$10.5 billion.
In a separate transaction, a unit of the privately owned Merit Energy will buy BHP Billiton Petroleum (Arkansas) Inc. and BHP Billiton Petroleum (Fayetteville) for $US300 million.
Both sales are expected to be completed by the end of October, with BHP's share price jumping 2.22 percent to Aus$34.38 in early trade Friday.
The move follows a push last year by New York-based Elliott Advisors, a significant shareholder in the company, for BHP to restructure the business, including spinning off its US oil and gas operations.
- 'World-class' -
In addition to its demerger of South32 in 2015, BHP has now announced or completed more than US$18 billion of divestments over the last six years.
It is all part of its plan to focus on its most profitable core long-life operations -- iron ore, copper, petroleum, coal and potash.
BHP said it expected to record a one-off post-tax charge of about $US2.8 billion in its full-year results due next month on account of the BP and Merit Energy deals.
Despite the shale operations proving to be a poor investment for BHP, BP chief executive Bob Dudley called the businesses "world class" with rising oil prices boasting their prospects.
"This is a transformational acquisition... a major step in delivering our upstream strategy and a world-class addition to BP's distinctive portfolio," he said in a statement.
"Given our confidence in BP's future -- further bolstered by additional earnings and cash flow from this deal -- we are increasing the dividend, reflecting our long-standing commitment to growing distributions to shareholders."
The Eagle Ford, Haynesville and Permian fields produce oil and gas that is sold both domestically in the United States and to international customers, producing around 58.8 million barrels of oil equivalent (boe/d) annually.
BP is already a significant operator in the US onshore oil and gas sector, pumping 315,000 boe/d across five states a year.