Santos is the operator and has a 30% interest in GLNG.
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“The expected impairment charge for GLNG is clearly disappointing but it is a effect of the challenging environment which we now face”, said Peter Coates, chairman, Santos.
Santos said it has seen a “slower ramp-up of GLNG equity gas production and an increase in the price of third-party gas”, causing it to adjust its upstream gas supply and third-party gas pricing assumptions for GLNG.
“Low oil and gas prices continue to challenge our upstream business and the entire oil and gas industry”, says CEO Kevin Gallagher.
It’s clearly a major problem for Santos’s oil and gas peers including Woodside Petroleum Limited (ASX: WPL), Origin Energy Ltd (ASX: ORG) and BHP Billiton Limited (ASX: BHP). Unfortunately for the oil and gas producer, Brent oil prices are now at US$47.13 a barrel according to Bloomberg, and the exchange rate is now 76.43 U.S. cents.
“It would be a concern if oil prices were to stay low for an extended period of time”, said Andy Forster, a portfolio manager at Argo Investments, which owns shares in Santos.
Spot LNG prices in Singapore slid more than 25 percent in the past year even as gas prices in Australia increased following the start of three export projects on the east coast.
Santos in February posted a $US2.7 billion loss after cutting its oil and gas reserves and is reducing the value of its key exploration assets, following the oil price slump.
That compares to the current market capitalisation of $8.4 billion, suggesting the oil company is trading at roughly around book value.
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The company on Monday said it had made a decision to take the non-cash impairment charge following a review of key production assets.
