Oil Search takes $575m impairment hit from COVID-19

A top Australian resource company has flagged a $A575m ($US400m) hit due to the economic downturn fuelled by COVID-19.

Oil Search has warned of a multi-million-dollar asset impairment charge as the economic downturn sparked by the coronavirus pandemic has lowered the value of the company.

The major resource group flagged a non-cash impairment charge between $A517 ($US360m) and $A575m ($US400m), due to prevailing economic conditions dampening the outlook for global oil and gas prices.

The impairment charge comes ahead of the group’s interim results which are scheduled to be released on August 25.

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It noted the writedowns were largely related to exploration activities in Papua New Guinea and Alaska.

“A number of exploration and evaluation assets in PNG have been identified as being of reduced priority due to lower prospectivity or sub-optimal economics,” the company said in an update to the ASX.

“As there is no current intention to pursue activities on these assets, the full value of these exploration assets is expected to be written down.”

The suspension of mining activities at its Porgera Project due to ongoing gas supply uncertainties, has resulted in its gas to electricity endeavours to be fully impaired at the site.

Oil Search said it expects the impairment charge not to impact the group’s cash earnings and outflow.