TotalEnergies writes off $3.7bn on Novatek stake, withdraws directors
France's TotalEnergies announced on December 9 it would book a $3.7bn impairment relating to its 19.4% stake in Russian LNG exporter Novatek, and would no longer equity account for the share.
Western oil majors have been winding down their operations in Russia in response to Moscow's invasion of Ukraine, with ExxonMobil exiting abruptly after decades of working there in mid-October, when it said its assets in the country had been expropriated.
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TotalEnergies has taken a more measured approach. In its statement, the company said it could not sell its stake in Novatek "given the prevailing shareholders’ agreements, as it is forbidden for TotalEnergies to sell any asset to one of Novatek's main shareholders who is under sanction." Novatek's largest shareholder is CEO Leonid Mikhelson, while its second largest is fellow Russian billionaire Gennady Timchenko. Both men have been placed under Western sanctions.
Because of sanctions, TotalEnergies' two directors on Novatek's board have to abstain from voting in meetings, in particular regarding financial matters, the French firm said.
"They are therefore no longer in a position to fully carry out their duties on the board which might become an issue for the governance of this company," TotalEnergies said, adding the representatives would therefore be withdrawn immediately.
Besides the $3.7bn impairment, which will be reflected in the fourth quarter, TotalEnergies will also remove 1.7bn barrels of proven reserves as of the end of 2021 from its books. This will still leave the company with enough overall proven reserves to maintain current production for over 11 years, it said.