BHP Billiton dividend under threat as oil price dives

Tumbling oil prices landed a $7.2 billion (£5 billion) body blow on London-listed miner BHP Billiton as it slashed the value of its US shale business, bringing a first dividend cut since 1988 into view.

The miner is paying for an ill-timed push into the shale market when it spent more than $20 billion on two acquisitions in the era of $100-a-barrel oil prices.

Shares in BHP fell 4% or 28.5p to 628.50p as BHP cut its value of the business to $12 billion following lower expectations for the price of oil, which fell $1.43 to $29.45.

The company had 26 rigs operating in the US a year ago but this will be cut to five by the end of the quarter.

AJ Bell’s Russ Mould said the “commodities crunch is having an effect”, adding: “With dividend cover at just 0.4 times earnings, a cut to the forecast 2016 payout looks a strong possibility.”

Chief executive Andrew Mackenzie said: “The dramatic fall in prices has led to the disappointing write-down announced today. However, we are well positioned to respond to a recovery.”