Plunging oil prices and falling production could see BHP Billiton Limited's (ASX: BHP) share price fall much further.
BHP Billiton's share price is currently around $24.50. In the past three months, the share price has dropped by more than 15%, as the outlook for commodity prices worsens.
BHP has pulled back from its aggressive expansion into shale oil and gas, particularly in the US, with some analysts suggesting the company's entire oil and gas division is no longer profitable.
In the US, benchmark crude oil (WTI) fell to a six-year low – around US40 a barrel, and Citigroup predicts it could fall as low as $32 a barrel.
At the same time, declining reserves means BHP's oil production is expected to fall. Indeed, the miner is forecasting a 7% fall in petroleum products to 237 million barrels of oil equivalent (MMboe), from 256 MMboe this year. 4% of conventional oil production falls will be due to planned maintenance and natural field decline.
It's not the only commodity expected to see falling production, as the table below shows.
| Product | FY2015 | FY2016 | Change |
| Petroleum (MMboe) | 256 | 237 | (7%) |
| Copper (Mt) | 1.7 | 1.5 | (12%) |
| Iron Ore (Mt) | 233 | 247 | 6% |
| Metallurgical Coal (Mt) | 43 | 40 | (6%) |
| Energy Coal (Mt) | 41 | 40 | (6%) |
Source: BHP Operational review. Mt = million tonnes
Add falling production to falling commodity prices, and you have the makings of lower revenues and earnings. BHP doesn't even have the diversification it used to have, thanks to the demerger of South32 Ltd (ASX: S32) in May 2015. And that's why we could see BHP's share price fall further and stay low for longer. That could also jeopardise the company's often-criticised 'progressive' dividend policy. Buyer beware.
