Santos takes $1.6 billion hit
Santos will take a $1.6 billion hit after writing down the value of its assets in response to sliding oil prices.
The Adelaide-headquartered oil and gas company has taken impairment charges on a string of production and exploration assets after factoring in the impact of the more than 50 per cent slide in oil prices since mid 2014.
But the company has not made any writedowns in relation to its flagship GLNG project, which is under construction in Gladstone, Queensland.
The writedowns are based on current forecasts for oil prices during the next four years, but Santos expects the commodity to revert to a long-term price of $US90 a barrel from 2019.
Santos chief financial officer Andrew Seaton said the writedown was “a reflection of the current oil price environment”.
“The non-cash impairment charges are not expected to impact Santos’ investment grade credit rating or debt facilities,” he said in a statement.
You might like
“Reflecting the current oil price environment, we have reduced our oil price assumptions for impairment purposes. This has led us to take an impairment charge for our oil-producing assets and some exploration assets, including Gunnedah.
“Importantly, there is no impairment of the GLNG project, which remains on track for first LNG in the second half of this year, within budget.”
Santos in January flagged that it could have to make potential writedowns following the oil price slump.
Oil prices have halved since mid-2014 to around $US50 a barrel, weighing on some of the company’s riskier projects.
In early February Santos joined miners BHP and Arrium in flagging job losses in South Australia.
Following hard after Arrium’s announcement of a 580-job hit at its Whyalla operations and BHP flagging job losses at Olympic Dam, Santos has told employees that it will be making redundancies due to the volatile oil price.
Stay informed, daily
A Santos spokesman said on February 2 that the level of the job losses was being considered as part of a broader review.
“In December last year we announced a 25% reduction in capital expenditure for 2015 and also flagged a review of our operational expenditure,” the spokesman said.
“As part of this process, we are now focusing on pursuing all efficiency and productivity options and setting how the business will operate in this new, low oil price environment, including reducing our contractor workforce and implementing redundancies.
“The level of redundancies will be determined through this productivity and efficiency process.
“Despite the current volatility in the oil price, Santos remains committed to the development of the Cooper Basin, with a view to unlocking its full potential.”
In December, Santos chief executive David Knox insisted the company was in sound financial shape.
“The current volatile oil price means that Santos is focused on driving operational efficiency, reducing costs, prudently managing capital and making sure our balance sheet remains strong – without making short-term reactive decisions that could damage the long-term interests of the company or the interests of shareholders,” Knox said.
– InDaily staff and AAP
Want to see more stories from InDaily SA in your Google search results?
- Click here to set InDaily SA as a preferred source.
- Tick the box next to "InDaily SA". That's it.
