BHP Billiton will unveil one of the biggest losses in its history on Tuesday, and could be tempted to respond with higher than expected spending on growth.
The final word on arguably the company's worst ever year will contain more than $US7 billion of exceptional items and drag BHP down to an attributable loss of about $US6 billion for 2015-16.
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Not even a 40 per cent rally in prices for iron ore, BHP's biggest money-spinner, over the second half of fiscal 2016 could salvage a year in which depressed commodity prices coincided with a fatal and costly dam collapse in Brazil.
"This represents BHP Billiton's largest corporate loss since the formation of the (dual-listed company structure in 2001) and we believe the largest reported loss for BHP since its inception," said UBS analyst Glyn Lawcock in a preview of Tuesday's result.
Analyst consensus suggests underlying attributable profits will be in the order of $US1.09 billion, which would represent an 83 per cent decline from last year's $US6.4 billion underlying result.
The 2015 result was itself less than half the 2014 underlying result of $US13.4 billion. Shareholder returns have similarly shrunk, with forecasts for full-year dividends ranging from US26¢ to US32¢.
Shareholders already received US16¢ of that in February, under BHP's new dividend policy which states that at least 50 per cent of underlying attributable profits will be paid out each half.
BHP chief executive Andrew Mackenzie sought in May to address market perceptions about the company's growth options, and some analysts believe the company's growing focus on "latent" growth could see capital spending creep higher.
The company has guided the market to expect $US5 billion of capital spending in the 2017 financial year, but the analyst team at Credit Suisse have speculated that spending could rise.
"We think the key risk for BHP through the results period is an increase to capex guidance for FY17, which currently stands at $US5 billion, but in our view, may not match the recent volume and project aspirations outlined to the market," said Credit Suisse analyst Paul McTaggart in a note.
If oil prices improve during fiscal 2017, the Credit Suisse analysts believe BHP will respond quickly by increasing drilling rates in the high-value regions of its US shale business in particular, where spending cuts have prompted bigger than expected production declines.
Like Credit Suisse, UBS also believes that oil prices will rise over the next 12 months and prompt BHP to spend more than $US5 billion.
"It does sound like it will be reviewed every quarter with a view to raising or lowering the spend," Mr Lawcock said last month.
"If the oil price starts to rise we would expect to see BHP lift the capital spend in US onshore as well as the rig count and fracking to respond to a higher price, which is our expectation."
BHP has already announced $US200 million of spending during fiscal 2017 for the restart of the third concentrator (Los Colorados) at the Escondida copper mine in Chile.
If capital spending forecasts do rise above the $US5 billion forecast, they are not expected to blow-out dramatically. But it would be a notable event, given BHP has been reducing capital spending since its outlay peaked at $US21.7 billion in fiscal 2013.
Exploration spending has also started to grow after several years of strict cost-cutting.
Just last week BHP struck gas in waters off Trinidad and Tobago, as part of a $US700 million drilling campaign in that region and the Gulf of Mexico.
Investors also expect an update on BHP's cost reduction targets, which state that $US2.2 billion of cost will be taken out of the business over the two years to June 30, 2017.
An independent review of what caused November's tragic dam collapse at the Samarco iron joint-venture is expected to be published soon. Analysts believe it will be several years before BHP can fully quantify the cost of the accident, which killed at least 19 people and destroyed several towns.
BHP's Australian shares closed on Friday at $20.68. The stock has risen by more than 45 per cent over the past seven months, but remains well below the $25.32 it was fetching one year ago.
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