BHP Billiton will reduce its drilling activity in US shale by 40 per cent to try and release cashflow in response to the plunging oil price.

Action in relation to the high cost US shale business had been expected to be announced by BHP on Wednesday as it reported its latest quarterly production results.

In response to oil prices more than halving in the past six months to below $US50 a barrel, BHP will reduce the number of rigs it operates in its onshore US business by 40 per cent by the end of June and may cut more.

The price falls have made unconventional shale production less profitable because it requires more labour than conventional oil and gas drilling.

BHP said it spent $US1.9 billion ($A2.06 billion) on its US onshore business in the first half of 2014/15.

“We will keep this activity under review and make further changes if we believe deferring development will create more value than near-term production,” chief executive Andrew Mackenzie said.

Major US shale contractor Schlumberger, who counts BHP as its top customer, cut 9,000 jobs last week in anticipation of a decline in oil and gas activity.

BHP also flagged impairments of $US200-$US250 million would weigh on its first half earnings result due to the sale of US conventional and unconventional petroleum assets in Louisiana and Texas.

The resources giant said on Wednesday it had increased overall group production by nine per cent in the first half with records in five of its commodities: iron ore, petroleum, coal, manganese and alumina.

However, there were also double-digit percentage price falls in its major commodities, which has led to speculation about its ability to maintain its dividend.

Mackenzie said that was being countered.

“Our operational performance over the last six months has been strong,” Mackenzie said.

“We are reducing costs and improving both operating and capital productivity across the group faster than originally planned.

“These improvements will help mitigate some of the impact of lower commodity prices and we remain alert to opportunities to further increase free cash flow.

Iron ore production increased 15 per cent to 124 million tonnes, with full year guidance of 245 million tonnes unchanged.

Sales were up nearly 18 per cent to 126.2 million tonnes.

However the average realised price for the half of $US70 a tonne was 38 per cent weaker than last year and 27 per cent weaker than the previous half.

Petroleum production increased nine per cent to a record 131 million barrels of oil equivalent.

Copper production fell by two per cent to 813,000 tonnes due to lower grades.