BHP Billiton Limited (ADR) (NYSE:BHP) is considering a $1.2 billion write-down of its onshore petroleum business due to hefty unanticipated costs.

The company plans to make the move because the business has become more of a burden financially than earlier anticipated, due to high costs. The company has also been struggling due to the low oil prices and impairment charges. Though the firm has been experiencing rough patches, it still estimates ample revenues and profits from its mining activities. But first, it has to get rid of aspects that have been sucking too much funds out of the company.

BHP Billiton is one of the biggest mining towns in terms of value. Throughout its operations, the company has invested heavily in the energy business within many countries such as Australia and The USA. These measures have allowed the company to grow and handle competition from rival firms such as Exxon Mobil Corporation (NYSE:XOM).

BHP Billington’s Chief Executive Andrew Mackenzie described the oil and gas aspect of the firm as one of its four core businesses, together with copper, coal, and iron ore. Oil prices have been dropping by huge margins due to the thriving production in the United States while the demand for oil has gone down. As a result, oil firms have been subjected to tough times. BHP claims that a huge percentage of the $2 billion post-tax charge that the company has been receiving has its roots in Hawkville field. The latter was part of the Petrohawk Energy Corp. acquisition worth $12 billion that took place in 2011.

The company has also been servicing a goodwill impairment charge that arose from the Petrohawk acquisition. It has been estimated that BHP’s annual pretax returns for the financial year ending June 30 might amount to $2.8 billion. According to Tim Schroeders, a fund manager at Pengana Capital, the write-down was as a result of full prices of the asset. Initially, the firm had taken a good understanding of their acquisition as well as the lower prices into account.