The BHP Group Ltd (ASX: BHP) share price will be on watch today following the release of its second quarter and half year production update.
Source:BHP
How did BHP perform in the second quarter?
The Big Australian had a solid finish to the half thanks to record production at Western Australia Iron Ore (WAIO) and record average concentrator throughput at Escondida.
BHP reported iron ore production of 62,394kt for the second quarter and 128,434kt for the first half. This represents a 3% and 6% increase, respectively, on the prior corresponding periods.
Despite an improvement in copper production over the first quarter, second quarter production was 6% lower than the prior corresponding period at 428kt and 5% lower for the half at 841kt.
BHP's petroleum production fell 16% on the prior corresponding period to 24Mmboe during the second quarter. This led to a 12% decline in half year production to 50Mmboe.
Overall, this was a largely mixed performance in comparison to the market's expectations. For example, Goldman Sachs was forecasting quarterly iron ore shipments of 69.3Mt, copper production of 382kt, and petroleum production of 25.6Mmboe.
Commodity price update
During the first half the company has benefited greatly from an increase in commodity prices since the end of FY 2020.
A few key increases include a 35% improvement in the average realised price of iron ore to US$103.78 a tonne, a 39% jump in copper to US$3.32 a pound, a 10% lift in oil price to US$41.40 a barrel, and a 22% rise in the nickel price to US$15,140 a tonne.
This was offset slightly by weakness in coal and LNG prices during the last six months.
Outlook
BHP has provided an update on its guidance for the full year. Management revealed that its iron ore guidance has increased to between 245Mt and 255Mt, reflecting the restart of Samarco in December 2020.
Its copper guidance has narrowed to between 1,510kt and 1,645kt from between 1,480kt and 1,645kt. And finally, its petroleum guidance remains unchanged at between 95 and 102 MMboe. However, volumes are expected to be in the upper half of the guidance range as additional production from Shenzi is partially offset by the impacts of significant hurricane activity in the Gulf of Mexico.
BHP's full year unit cost guidance remains unchanged for the 2021 financial year.
One slight negative is that its upcoming half year results will include an impairment charge of between US$1.15 billion and US$1.25 billion post tax in relation to New South Wales Energy Coal (NSWEC) and associated deferred tax assets.
