When Andrew Mackenzie was winning science prizes at school in Scotland, or even when completing his doctorate in steroidal molecular maturity parameters (oil and gas exploration), did he ever think he would one day head the world’s biggest mining group by revenues? An award-winning geologist with years of management experience, he has the right credentials to lead BHP Billiton. But in what direction?
All the big miners have been working to a template recently: take writedowns, cut costs, change chief executive and try to move on. On Wednesday BHP took a further $3.1bn writedown against various projects but its overall tone stressed continuity, not change. It can afford for now to avoid the level of contrition shown by Rio Tinto last week. BHP began cost-cutting earlier and has replaced its chief before speculation over a handover really weighed on the investor mood. And while the miner’s overpayments and overestimates in the boom years were severe – almost $7bn in various impairments have been taken in the past two years – they are a third of those taken by its big rival Rio.
Putting an oil expert in charge of a mining group suggests a change of focus. (It is also ironic considering that not long ago BHP was under pressure to explain why it was in the petroleum game at all.) But no shift is likely: BHP had been increasing its oil operations under Marius Kloppers – who after all, hired Mr Mackenzie. Petroleum’s contribution to operating profits has risen twice as fast as BHP’s group-wide growth in the past five years and now accounts for almost a third of operating profits. Oil, where prices are still hot, is a relatively attractive business compared with the volatile yet cooling prices of other commodities.