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http://www.copyright link/business/...down-on-value-of-glng-project-20160814-gqsg6g

Santos takes $US1.5b write-down on value of GLNG project​

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The GLNG venture shipped its first cargo from Gladstone last year. Supplied
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by Angela Macdonald-Smith
The collapse in oil prices has forced Santos to take a $US1.5 billion hit on the value of its new GLNG gas export project in Queensland, making a plunge into the red for the first half inevitable.
Chairman Peter Coates said the write-down, equating to about $US1.05 billion after tax, reflected "the reality of the current oil price environment".
In addition to the impact of low oil prices, the $US18.5 billion GLNG venture's own coal seam gas output has been slower to ramp up this year than it anticipated, while the cost of purchasing gas from other companies to help feed the project has increased, Santos said in its explanation of the heavy impairment.
The impairment is "clearly disappointing but it is a consequence of the challenging environment which we now face," Mr Coates said.

All of Australia's $200 billion of new LNG projects are set to return far less for their owners than anticipated because of the drop in oil prices since mid-2014, given LNG long-term contract prices are directly indexed to crude oil. The GLNG venture, partly owned by Korea Gas Corporation, French oil major Total and Malaysia's Petronas, shipped its first cargo in October last year and is currently ramping up the second production unit​

Chief executive Kevin Gallagher, who joined the oil and gas producer earlier this year, said low oil and gas prices were continuing to challenge Santos's business as well as the entire oil and gas industry.​

"At GLNG we are seeing the effects of ongoing constraints on capital expenditure and a softer LNG market," Mr Gallagher said.
"We are experiencing a slower ramp-up in production of GLNG equity gas and the price of third party gas has increased."

He said the lower ramp-up of coal seam gas output wouldn't affect the GLNG venture's ability to meet its contracted delivery commitments.
The charge, which will be taken in the half-year earnings report to be released on Friday, is expected to plunge Santos into a heavy loss on the bottom line, with some analysts also forecasting that the underlying result will also be in the red.
UBS analyst Nik Burns is anticipating Santos will report an underlying loss for the six months to June of $US20.6 million, while Citigroup's Dale Koenders is estimating a heavier loss, of $US80 million. Based on those estimates, the write-down on GLNG would take the bottom line loss to more than $US1 billion.


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