Woodside Petroleum suffers $1.07bn writedown on Kitimat LNG project

Woodside Petroleum writedown raises fresh uncertainty over the chances of the development going ahead.

Woodside picked up its stake in Kitimat after sealing a $4.5bn deal with US-based Apache Corporation in December 2014.

Woodside Petroleum has suffered a $US720m ($1.07bn) writedown on its Kitimat LNG project in Canada, raising fresh uncertainty over the chances of the development proceeding due to depressed gas market conditions on the country’s west coast.

The after-tax impairment to be reflected in its full-year results on Thursday had been expected after its partner Chevron took a $US1.6bn writedown on the project earlier in February.

The US major plans to offload its 50 per cent operating stake in the proposed plant, raising speculation over its Australian partner’s appetite to stick with the development.

Woodside said Kitimat remains a world-class project.

“Woodside will continue to evaluate actively future development opportunities including optimisation of gas supply into processed facilities,” the Perth-based producer said in a statement late on Tuesday.

“However, the impairment reflects increased uncertainty, particularly in the timing of the development of the Liard resource, following sustained depressed gas market conditions in Western Canada.”

Some of the world’s biggest energy majors have been hit by tough conditions in North American gas markets with prices falling to low levels due to a glut of supply and warmer than expected winter in the northern hemisphere.

Woodside’s dividend for 2019 will exclude the impact of the impairment on net profit after tax.

Kitimat LNG includes up to three LNG trains totalling 18 million tonnes of annual output, making it a larger project than either Woodside’s North West Shelf or Chevron’s Gorgon LNG plants in Western Australia.

Woodside picked up its stake in Kitimat after sealing a $4.5bn deal with US-based Apache Corporation in December 2014.

Chevron said in December while Kitimat was a globally competitive LNG project, the company saw better investments in other parts of its global portfolio and said the stake may be of higher value to another company.