Page 5 - AsiaElec Week 29

AsiaElec COMMENTARY AsiaElec

post-tax relating to an onerous contract provi-
sion associated with Cameron LNG. The com- recognise a pre-tax impairment charge of $360-
pany agreed in December 2013 to buy 250,000 400mn – $250-300mn after tax – in its first half
tonnes per year of LNG on a free-on-board results that are due to be released on August 25.
(FOB) basis for 20 years, with the first cargo hav- The company said it had assessed the impair-
ing been delivered in June 2020. The slump in ments after taking into account the potential
global LNG prices over the last couple of years longer-term impact of prevailing economic con-
means that the company now expects to incur ditions as well the outlook for oil and gas prices.
a post-tax average annual charge of AUD25mn The impairments will largely relate to the
($17.4mn) associated with the contract. company’s Papua New Guinea (PNG) explo-
ration licences, which it has been identified as
Exploration hit being of reduced priority due to lower prospec-
Woodside, meanwhile, said on July 14 that it tivity or sub-optimal economics.
expected to recognise a post-tax impairment “As there is no current intention to pursue
loss of $3.92bn. The figure includes a $2.76bn activities on these assets, the full value of these
write down for its oil and gas properties and a exploration assets is expected to be written
$1.16bn impairment for its exploration and eval- down,” it added.
uation assets – both of which include deferred The company noted that it was also scheduled
petroleum resource rent tax (PRRT) as well as to relinquish its exploration leases in Alaska,
income tax. The company also expects to include which should incur an immaterial impairment.
a non-cash, post-tax onerous contract provision The company had planned to sell the leases prior
for the Corpus Christi LNG sale and purchase to the price crash in March.
agreement of $447mn.
Woodside added that around 80% of the What next
losses related to its oil and gas properties were The asset write-downs were inevitable given the
due to the significant and immediate reduction state of the oil and gas market. Oil and gas prices
in oil and natural gas prices assumed up to 2025. are only set to regain lost ground slowly, with
It added: “Additional contributors are global supply expected to outmatch demand sig-
increased longer-term demand uncertainty nificantly given questions over sequential waves
impacted by the COVID-19 pandemic and of COVID-19 outbreaks.
macroeconomic dynamics, and increased risk Victoria is back in lockdown and the New
of higher carbon pricing.” South Wales having set out parameters for what
The company announced that it had deliv- would and would not trigger its own tightening
ered record first-half production of 50.1mn of social restrictions. This is likely to be the new
barrels of oil equivalent, up 28% year on year. global normal until a viable vaccine can be devel-
Woodside will release its first half financial oped and produced in mass quantities.
results on August 13. All three companies have already lowered
their budgets for this year and frugality is likely
Economic impact to remain a watchword not just next year but in
Oil Search said on July 13 that it expects to also in the years that follow.™

Week 29 22•July•2020 www. NEWSBASE .com P5