Santos has joined Origin Energy in carving hundreds of millions of dollars off the value of its assets, especially its investment in export LNG in Queensland.
The news saw Santos shares dip 2% yesterday to $3.28.
Santos told the market it expects to book a net impairment charge of about $US690 million after tax in its half-year results, mostly on its Gladstone LNG project (GLNG) after dropping its oil price outlook.
The cut to the book value of its stake in the GLNG project by about $US870 million after tax ($1.1 billion), adds to a $US1.1 billion ($A 1.5 billion) write-down last year on the $US18.5 billion project and one of around more than half a billion in early 2016.
There are three export LNG projects in Gladstone, all based on using coal seam gas from huge coal basins in centra Queensland. The gLNG is the weakest of the tri and the one most widely blamed for the escalation in gas and electricity prices in the past year.
The project has struggled because supply from its coal seam gas fields has been weaker than expected.
Santos lowered its Brent oil price forecast to $US50 a barrel in 2017 and $US55 in 2018, which it said would weigh on the value of GLNG, its Indonesian assets and its Cooper Basin gas business.
The write-down would be partly offset by a $US330 million gain in the value of its Cooper Basin gas assets, due to cost cuts, increased drilling activity and output, Santos said.
Last week, Origin lifted the value of its impairments to $3.1 billion for the year to June by adding an after tax charge of $1.2 billion for the six months to June. the remainder were announced earlier in the year.
Origin is due to report its 2016-17 results today and the result will be a loss (although the company’s underlying profit will be highlighted).
Most of the $1.2 billion was taken against the value of the Australia Pacific liquefied natural gas (LNG) project in Gladstone (which is operated by ConocoPhillips),
Origin said the charge on its 37.5% stake in the $24.7 billion APLNG project is likely to be $815 million, reflecting weaker oil prices, exchange rates and costs. Origin booked a A$1 billion impairment charge on APLNG in the first half of the financial year.
Origin also said it expects to book a $357 million write-down on the value of its Lattice Energy gas exploration and production arm which is on the sale block.
