Santos Ltd. will take a $1.05 billion writedown on the value of its Gladstone LNG project due to rising prices for third-party natural gas supplies and slower than expected ramp up of its own equity output.
The non-cash charge on the liquefied natural gas export project in Queensland, which is $1.5 billion before taxes, will be recorded in its half-year results on Friday, the Adelaide-based company said in a statement Monday to the Australian stock exchange. The writedown won’t impact debt facilities, the country’s third-largest gas producer said.
Shares fell as much as 2.3 percent to A$4.62 in Sydney and were trading at A$4.69 at 10:43 a.m. local time. The benchmark S&P/ASX 200 Index was little changed.
“We are seeing the effects of ongoing constraints on capital expenditure and a softer LNG market,” Chief Executive Officer Kevin Gallagher said in the statement. “We are experiencing a slower ramp up in production of GLNG equity gas and the price of third party gas has increased” in Australia, he said.
The impairment is the latest sign of strife in Australia’s energy sector with major gas export projects including GLNG struggling under the weight of the energy industry downturn that started in 2014. Santos had already taken a A$565 million ($433 million) pretax charge against the plant last year.
Spot LNG prices in Singapore have slid more than 25 percent in the past year, while natural gas prices in Australia increased following the start of three export projects on the east coast.
Oil crashed to a 12-year low earlier this year, forcing producers to cut spending on exploration and production to weather the worst downturn in a generation. Brent crude has averaged about $42 a barrel so far this year, compared with more than $53 during 2015 and nearly $100 in 2014.
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