AGL Energy Ltd, Australia's second-largest energy retailer, said it will sell its gas exploration and production assets because of volatile markets, ending a decade-long attempt to diversify and resulting in a loss of nearly US$460 million.
In a statement issued on Feb. 4, Australia time, a week before it reports half-yearly earnings, the company said it decided to quit its wholesale gas production business in Queensland state because of "the fall in global oil prices with consequent effect on long-term ... gas prices."
It added that a gas project in neighboring New South Wales delivered "disappointing gas flow" and "the economic returns to support the investment of approximately AU$1 billion were not adequate."
AGL's decision to exit exploration assets comes amid a wave of divestments within the broader energy sector. The company said it expects to sell its Queensland assets but "due to difficult market conditions this may take some time."
The company reports half-year result son On Feb. 10, with analysts forecasting an underlying net profit of AU$708 million, up 12 percent on the prior corresponding period, according to Thomson Reuters Starmine.
That will now be almost wiped out by an impairment charge of AU$640 million (US$459 million) after tax against the value of the assets for the six months ended Dec. 31.
AGL shares closed up 0.4 percent at AU$18.51 on Feb. 3, while the broader market fell.
($1 = 1.3947 Australian dollars)
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