Australia's Woodside Petroleum Ltd. plans to book impairments of $4.37 billion after tax, joining global energy majors that have slashed the value of their assets after a coronavirus-induced slump in oil and gas prices.
The bulk of the impairment—$3.92 billion—is tied to cutting the value of oil and gas production and exploration assets, amid "increased uncertainty" over the development timing of gas fields off Australia and in Canada, the company said.
Nearly 80% of the impairments on its oil and gas properties were driven by a weaker outlook for oil and gas prices to 2025, but it also factored in longer-term demand uncertainty and an increased risk of higher carbon pricing.
Write-downs had been expected after global majors, such as BP Plc and Royal Dutch Shell Plc announced huge impairments on their assets.
However, Woodside's write-downs are bigger than expected, some analysts and investors said.
"Clearly in a lower oil price environment they're certainly going to have to rejig a lot of projects," said Andy Foster, a portfolio manager at Argo Investments.
Woodside CEO Peter Coleman said the company still aims to develop its Scarborough and Browse gas fields off Western Australia, but would also eye acquisitions.
"Woodside's disciplined approach to financial management gives us options to pursue inorganic growth opportunities as and when they emerge," he said in a statement.
Along with the write-downs, Woodside downgraded its estimated reserves, now counting its Greater Pluto gas fields as "contingent resources".
Those gas fields were isolated in deep water, making them challenging to develop in a weak price environment, said David Low, an analyst at consultants Wood Mackenzie.
The company, Australia's top independent gas producer, will take a $447 million provision for an onerous LNG supply deal in Corpus Christi, Texas, where it has had to pay a fee for cargoes not taken. Several Asian and European buyers have canceled cargoes from U.S. LNG plants.
Woodside will report its second-quarter production figures on July 15 and first-half 2020 earnings on Aug. 13.
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