Australian Origin Energy Warns of Further A$1.2bn Write-down

Australian Origin Energy has warned that it expects a further impairment charge of about A$1.2bn (post tax) ($945mn) for the second half of the 2016-2017 Australian fiscal year (July-June), the company said Thursday.

As a result, when the 1H2017 and 2H2017 impairment charges are aggregated, Origin expects to report a total impairment charge of A$3.1bn.

Through its 37.5% share in Australia Pacific LNG, it expects to see an impairment charge of A$815mn post tax for the second half of the 12-month period.

“When Australia Pacific LNG reviews the carrying value of its assets, it considers a range of assumptions – including oil price, AUD/USD exchange rates, discount rates and costs,” it said.

“Since the last assessment at 31 December 2016, while there has been a change in a number of relevant assumptions, the principal change is a reduction in the oil price assumptions to US$67/bbl (real 2017) from 2022,” it said.

It’s also expecting 2H2017 a post-tax impairment charge of A$357 million for Lattice Energy, its conventional gas assets currently held for sale and expected to be sold by the end of the year.

“The impairment charge arises as a result of assessing the current carrying value of Lattice Energy against the expected proceeds from divestment net of estimated cost of disposal and partly reflects the cessation of depreciation and amortisation from 7 December 2016,” it said.

The 2H2017 impairment brings total impairments recognised by Origin on APLNG up to A$1.85bn, and the gross APLNG level to A$4.9bn, RBC Capital Markets analyst, Ben Wilson, said in a research note.

“We had recently reduced our APLNG asset [enterprise value] (net to Origin) by (roughly) A$2.1bn due to a US$10/bbl reduction to our assumed long term oil deck,” he said.

RBC’s estimate for long term real Brent is $64/b, he said. 

Nathan Richardson