Woodside Forecasts $3.9bn Impairment

Australian Woodside on July 14 said it will recognise non-cash, post-tax impairment losses of $3.92bn (A$5.6bn) during the six months to June 30 thanks to a drop in oil and gas prices.

The company will take a $2.76bn charge against oil and gas properties and a $1.16bn one for exploration and evaluation assets. Its half-yearly results are also expected to include a non-cash, post-tax onerous contract provision for the Corpus Christi LNG sale and purchase agreement of $447mn.

The combined impact of the impairments and the onerous contract provision is a post-tax loss of $4.37bn. “Approximately 80% of the oil and gas properties impairment losses are due to the significant and immediate reduction in oil and natural gas prices assumed up to 2025, impacting Woodside’s products in the prevailing economic climate,” the company said. “Additional contributors are increased longer term demand uncertainty impacted by the Covid-19 pandemic and macroeconomic dynamics, and increased risk of higher carbon pricing.”

The company said that despite the challenges of the current environment, the fundamentals of its business remained strong, particularly the outlook for core product, natural gas, and future products such as hydrogen and ammonia.

“Although these are difficult and uncertain times, the medium-term outlook for Woodside’s growth prospects and for our core product, natural gas, is positive. In the longer term, our commitment to innovation and new technologies will ensure we can also take advantage of emerging markets for hydrogen and ammonia which will be a crucial part of the world’s transition to a lower-carbon future,” Woodside CEO Peter Coleman said.

The outcome of the asset value review is subject to final board approval and will be published in the half-year report that will be published on August 13.