Australia's Origin Energy takes $840 mln charge on oil price slump

Credit: REUTERS/JASON REED

Origin Energy said on Wednesday it will book impairments of about A$1.2 billion ($840.12 million) after tax, joining many energy majors that have slashed the value of their assets after a coronavirus-induced drop in oil and gas prices.

Adds details on other companies, breakdown of charges, background on impact of oil price crash

July 15 (Reuters) - Origin Energy ORG.AX said on Wednesday it will book impairments of about A$1.2 billion ($840.12 million) after tax, joining many energy majors that have slashed the value of their assets after a coronavirus-induced drop in oil and gas prices.

Australia's top power and gas retailer expects to record non-cash charges of between A$1.16 billion and A$1.24 billion in its full-year accounts, it said in a statement to the stock exchange.

The bulk of the charges - over A$700 million - relate to writedowns of its equity investment in its Australia Pacific Liquefied Natural Gas (LNG) joint venture due to a drop in the prices of the commodity.

A provision for an onerous LNG contract accounts for about A$440 million to A$460 million of the total.

The company buys a small number of cargoes every year from Cameron LNG, and due to the slump in global LNG prices, cargoes from the United States that were potentially hugely profitable into Asia are now loss-making.

These post-tax charges would have no impact on fiscal 2020 cashflow or adjusted profit, and as a result, Origin said it expects no change to its annual outlook.

A smaller part of the charge - between A$25 million and A$35 million post tax - relate to potential defaults on energy bill payments by customers that are financially hurt by the outbreak. This provision would be included in adjusted profit, the Australian company said.

Energy companies across the globe have been struggling as oil prices plunged in the face of dwindling demand due to the pandemic, prompting asset writedowns and sharp cuts in spending.

More writedowns in the sector were expected after global majors such as BP BP.L and Royal Dutch Shell RDSa.L announced huge impairments on their assets.

Australia's top independent gas producer Woodside Petroleum Ltd WPL.AX on Tuesday flagged impairments of $4.37 billion after tax.

Origin will release its full-year results on Aug. 20.

($1 = 1.4284 Australian dollars)

(Reporting by Rashmi Ashok in Bengaluru; Editing by Shri Navaratnam and Sherry Jacob-Phillips)

((Rashmi.Ashok@thomsonreuters.com; +918061822604;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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