Santos to Accept a $1.2B Impairment Charge to Reflect Lower Oil Price

Australia's oil and gas company Santos Ltd. advised Thursday that it expects to recognize a non-cash impairment charge of approximately $1.2 billion (AUD 1.6 billion) after tax in its 2014 full-year accounts.

The impairment charge reflects the lower oil price environment and is a non-cash accounting adjustment that relates to the historical book value of the company’s assets. Impairment outcomes are subject to finalization of the full-year accounts, which will be released Feb. 20.

In undertaking the impairment analysis, Santos has used future oil price estimates which assume short-term market prices for four years, reverting to a long-term price of $90 real from 2019*. The future AUD/$ exchange rate is assumed to be 0.80 in all years.

There is no impairment of GLNG, which is on track for first LNG in the second half of 2015, within budget.

The non-cash impairment charges are not expected to impact Santos’ investment grade credit rating or debt facilities. The expected charges by asset are summarised in the table below.

Producing Assets

  • Cooper Basin (SA, Qld): Before Tax - $526.3 million (AUD 688 million); After Tax - $ 368.7 million (AUD 482 million); Comments - Oil assets only, no impairment of Cooper gas assets
  • Mereenie (NT): Before Tax - $76.5 million (AUD 100 million); After Tax - $53.6 million (AUD 70 million); Comments - Oil asset, minimal gas sales
  • Carnarvon Basin (WA): Before Tax - $153.8 million (AUD 201 million); After Tax - $72.7 million (AUD 95 million); Comments - Oil assets including Stag, Barrow, Thevenard and ME/FF. No impairment of Carnarvon gas assets
  • Vietnam: Before Tax - $74.2 million (AUD 97 million); After Tax - $49.7 million (AUD 65 million); Comments - Chim Sao/Dua
  • Papua New Guinea: Before Tax - $5.3 million (AUD 7 million); After Tax - $3 million (AUD 4 million); Comments - SE Gobe
  • Subtotal Producing: Before Tax - $836.1 million (AUD 1,093 million); After Tax - $547.7 million (AUD 716 million)

Exploration and Evaluation Assets


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