Woodside Petroleum is looking at a near $1 billion one-off boost from the write back of previously made impairment and onerous contract losses taken in the troubled 2020 year as world prices collapsed and demand plummeted.
Buried in last week’s 4th quarter report was news that the company had conducted its usual half year review of its asset values, including past impairments and decided that the rebound in prices and values would mean a part reversal of previous write-downs.
Woodside said its December 31 full year accounts are expected to recognise a non-cash, post-tax impairment reversal related to oil and gas properties of US$582 million made up of $US319 million related to Pluto-Scarborough and $US263 million related to northwest Shelf gas.
“The impairment reversal for Pluto-Scarborough is due to the additional value generated by Scarborough and Pluto Train 2, which have been combined with Pluto into a new Pluto-Scarborough cash generating unit for the purposes of impairment assessment, following the final investment decisions for Scarborough and Pluto Train 2 in November 2021.
“The impairment reversal for NWS Gas is due to updated cost and production profiles including the incorporation of the impact of third-party processing agreements, and improved short-term pricing assumptions.
“Both impairment reversals represent the maximum reversal values allowable under relevant accounting standards. Impairment reversals are limited to historical impairment losses recognised, net of depreciation and amortisation that would have been incurred had no impairment taken place.,” Woodside explained.
These two writebacks will not have an impact on the company’s final dividend for the year, to be announced next month.
But a third reversal of a previous write down will. Woodside said its December 31 accounts are also expected to include a non-cash, post-tax revaluation benefit for the onerous contract provision for the Corpus Christi LNG sale and purchase agreement, resulting in a further reduction of this provision by $US95 million.
“The revaluation of the provision reflects the improved global gas market pricing and Woodside’s view of likely increased margins available between North American and other gas markets.
The writeback will leave the onerous contract provision for the Corpus Christi LNG sale and purchase agreement at $US214 million.
Woodside said the outcome of the asset value review and the Corpus Christi onerous contract provision revaluation is subject to finalisation of 2021 financial statements including completion of external audit and Board approval. The accounts, profit figures and final and full year dividend details will be issued on February 17.
All up the total amount involved is $US677 million or around $A940 million at current exchange rates).
