Santos to Take $690 Million Impairment Hit for 1st Half

By Robb M. StewartFeaturesDow Jones Newswires

MELBOURNE, Australia--Santos Ltd. (STO.AU) said an about US$690 million impairment charge would be booked in its first-half results, stemming largely from reductions in its oil-price assumptions over the coming years.

The charge comes on the heels of an announcement by Origin Energy Ltd. (ORG.AU) that it will take additional writedowns against the value of a gas-export venture on Australia's east coast and lowered assumptions for the proceeds it expects from selling a basket of conventional natural-gas assets.

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Santos said it expected to recognize an impairment of the GLNG liquefied natural gas project in Queensland of about US$870 million, mainly due to lower oil prices.

It also expects an impairment charge against non-core assets in Indonesia of about US$150 million, but said that lowered crude assumptions were offset by cost cutting and improved efficiency at its assets in Australia's Cooper Basin that would mean a positive net write-back of the carrying value of the assets of about US$330 million.

The charges are considered non-cash, so won't impact cash flows or underlying earnings, the company said.

Santos said it now expects Brent oil prices to average US$50 a barrel this year, US$55 next year and US$60 the year after. It forecasts Brent will be about US$70 a barrel from 2021.

Last week, Origin said it would record further impairments of almost 1.2 billion Australian dollars (US$947 million) for the year through June, taking charges against the value of its stake in the Australia Pacific LNG project. APLNG and GLNG are two of the three multi-billion dollar LNG projects on Curtis Island in Queensland state.

Origin's annual results are due to be released Wednesday, while Santos is due to report its half-year results on Aug. 24.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 14, 2017 19:50 ET (23:50 GMT)