BHP Billiton has renewed expansion plans for its petroleum business as a recovery in oil prices and reduction in costs makes investments in projects more attractive.
The resources giant said demand growth and declining output from existing fields will lead to a significant opportunity to invest in the sector.
"While currently well supplied, underlying fundamentals suggest both oil and gas markets are improving more quickly than our minerals commodities," Petroleum Operations president Steve Pastor told reporters.
BHP's bullish outlook comes just months after it booked a $US7.2 billion charge to write down the value of its US shale assets amid a collapse in oil and gas prices and a gloomy short term outlook, pushing the company to a record full year loss.
At the time, it had stripped the shale drilling program to a minimum until oil prices recovered, as part of a review of investment and development plans in the business.
On Wednesday, it reiterated its faith in the shale business, saying it could boost development at the Permian asset in western Texas, which could make it the petroleum division's largest production and free cash flow contributor within five years.
A strong recovery in oil prices has contributed to the improved sentiment. Crude prices slid from more than $US100 a barrel in 2014 to a 12 year low below $US30 a barrel in January. Benchmark prices have sinnce bounced back to around $US50 a barrel.
BHP said it is looking to rebalance its petroleum portfolio towards oil assets.'"We see more upside potential for oil than gas, given that gas assets are more abundant," Mr Pastor said.
The company's recent sale of half of its stake in the Scarborough area gas fields, off the coast of Western Australia, also stemmed from its desire to rebalance its somewhat gas-heavy portfolio.
The company said it is eyeing acquisition opportunities for oil assets, but will stay very disciplined to ensure it did not overpay.
At the same time, the primary focus remains on developing its existing assets, Mr Pastor said.
BHP also said it had made a conventional oil discovery at the Caicos well in the Gulf of Mexico, and it expects to take an investment decision on the second phase of the Mad Dog conventional oil project in the Gulf of Mexico within six months.
BHP's share of the project, operated by oil giant BP, is expected to be $US2.5 billion, with first production in 2022.
The company said unit cash costs in its conventional petroleum business are expected to be around $US10 per barrel of oil equivalent over the next two years, giving it some of the best returns in the industry. It also said its shale assets are generating cash at current prices.
BHP Billiton shares dropped 0.2 per cent to $22.85 in a weak Australian market.