Page 9 - AsianOil Week 28

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tonnes per year of LNG on a free-on-board (FOB) basis for 20 years, with the rst cargo hav- ing been delivered in June 2020. e slump in global LNG prices over the last couple of years means that the company now expects to incur a post-tax average annual charge of AUD25mn ($17.4mn) associated with the contract.
Exploration hit
Woodside, meanwhile, said on July 14 that it expected to recognise a post-tax impairment loss of $3.92bn. e gure includes a $2.76bn write down for its oil and gas properties and a $1.16bn impairment for its exploration and eval- uation assets – both of which include deferred petroleum resource rent tax (PRRT) as well as income tax. e company also expects to include a non-cash, post-tax onerous contract provision for the Corpus Christi LNG sale and purchase agreement of $447mn.
Woodside added that around 80% of the losses related to its oil and gas properties were due to the signi cant and immediate reduction in oil and natural gas prices assumed up to 2025.
It added: “Additional contributors are increased longer-term demand uncertainty impacted by the COVID-19 pandemic and macroeconomic dynamics, and increased risk of higher carbon pricing.”
e company announced that it had deliv- ered record first-half production of 50.1mn barrels of oil equivalent, up 28% year on year. Woodside will release its first half financial results on August 13.
Economic impact
Oil Search said on July 13 that it expects to recog- nise a pre-tax impairment charge of $360-400mn
– $250-300mn a er tax – in its rst half results that are due to be released on August 25.
e company said it had assessed the impair- ments a er taking into account the potential longer-term impact of prevailing economic con- ditions as well the outlook for oil and gas prices.
The impairments will largely relate to the company’s Papua New Guinea (PNG) explo- ration licences, which it has been identi ed as being of reduced priority due to lower prospec- tivity or sub-optimal economics.
“As there is no current intention to pursue activities on these assets, the full value of these exploration assets is expected to be written down,” it added.
e company noted that it was also scheduled to relinquish its exploration leases in Alaska, which should incur an immaterial impairment. e company had planned to sell the leases prior to the price crash in March.
What next
e asset write-downs were inevitable given the state of the oil and gas market. Oil and gas prices are only set to regain lost ground slowly, with global supply expected to outmatch demand sig- ni cantly given questions over sequential waves of COVID-19 outbreaks.
Victoria is back in lockdown and the New South Wales having set out parameters for what would and would not trigger its own tightening of social restrictions. is is likely to be the new global normal until a viable vaccine can be devel- oped and produced in mass quantities.
All three companies have already lowered their budgets for this year and frugality is likely to remain a watchword not just next year but in also in the years that follow.™
Week 28 16•July•2020 w w w . N E W S B A S E . c o m P9