Santos announces $US1.5bn writedown on GLNG project
Santos has taken a near $2bn pre-tax impairment on its flagship LNG project as low oil prices torment the energy giant.
Santos has taken a near $2 billion pre-tax impairment on its flagship LNG project as low oil prices torment the local energy giant.
In a statement to the market this morning the company (STO) said it will take a pre-tax charge of $US1.5bn ($1.96bn) against the carrying value of the mammoth GLNG development in Queensland to recognise the current challenging market environment.
The group said the non-cash writedown would not affect its debt facilities and came after a review of its key production assets.
It will hit its bottom-line by $US1.05bn after tax, with the impairment to be recorded in its half-year accounts, due out on August 19.
Santos chairman Peter Coates said the company remained confident in the long-term value offered by the Gladstone project despite the “disappointing” writedown.
“We have decided to adjust our long-term operating assumptions for GLNG to reflect the reality of the current oil price environment,” he said.
“However, we firmly believe in the strong long-term growth of LNG consumption and demand globally. GLNG will continue to be an important part of our LNG portfolio and a key supplier of LNG to the Asian market.”
The company’s chief executive, Kevin Gallagher, admitted soft energy prices were “challenging” its operations, but sought to soothe concerns about meeting its offtake agreements despite a slower ramp-up in GLNG production than expected.
“At GLNG we are seeing the effects of ongoing constraints on capital expenditure and a softer LNG market. We are experiencing a slower ramp up in production of GLNG equity gas and the price of third party gas has increased,” Mr Gallagher said.
“We have therefore adjusted our assumptions regarding upstream gas supply and third party gas pricing.
“This will not affect GLNG’s ability to meet its LNG offtake commitments.”
The charge would not affect Santos’ BBB- credit rating with a negative outlook, Standard & Poor’s confirmed.
