Low oil prices have claimed another victim with Woodside Petroleum, Australia’s leading oil and gas producer, unveiling a $3.92 billion asset-value write-down.
Approximately two-thirds of the non-cash impairment charge relates to oil and gas properties and one-third to exploration and evaluation assets.
Woodside chief executive, Peter Coleman, said that despite the write-downs the company was in a strong financial position.
“”We have low-gearing and high liquidity, and announced significant expenditure reduction activities in March,” he said.
Woodside’s write down follows similar moves by the world’s oil majors as they struggle with a crashed oil price which at one stage this year even entered negative territory.
A more reliable way of looking at oil is the step-down process which has seen the price of Brent-quality crude slide from $85 a barrel in mid-2018 to $60/bbl in the middle of last year and now down to $40/bbl.
BP And Shell Led The Write-Downs
Other recent write-downs include a $17.5 billion charge taken by BP and a $22 billion write-down by Royal Dutch Shell.
Coleman said the oil and gas properties charge amounted to $2.76 billion while the exploration and evaluation charge was $1.16 billion.
The financial accounts are also expected to include a $447 million “non-cash, post-tax, onerous contract provision” for a liquefied natural gas contract with U.S. oil and gas producer Cheniere Energy.
The combined impact of the impairments and onerous contract provision is a post-tax loss of $4.37 billion, a charge which is not expected to materially effect the company’s balance sheet.
Oil-Price Did Most Of The Damage
Woodside said in a statement that approximately 80% of the oil and gas properties impairment loss was due to the “significant and immediate reduction in oil and gas prices assumed up to 2025”.
Coleman said Woodside had taken some tough decisions in recent months in response to the Covid-19 pandemic and the over-supply of oil and gas in key markets.
“Woodside’s focus remains on cash preservation, capital discipline and maintaining the strength of our balance sheet,” Coleman said.
On the stock market, Woodside shares were steady today (Tuesday) at $14.77. They are down 38% since the start of the year but have recovered from a mid-March low of $10.50.