Firm records impairment charge

OIL Search yesterday says the company will record a non-cash, pre-tax impairment charge of US$360-400 million (K1.2bil – K1.3bil) in the company’s 2020 interim results.
According to the petroleum company, a number of exploration and evaluation assets in PNG had been identified as being of reduced priority.
Oil Search has assessed the carrying value of its assets for impairment as at June 30, after taking into account the potential longer-term impact of prevailing economic conditions, the outlook for oil and gas prices and the current status of other factors that could impact on value realisation.
“The impairments that are expected to be recognised largely relate to PNG exploration licences,” managing director Dr Keiran Wulff said in a market release.
“As part of the strategic review currently underway and in line with the company’s commitment to prioritising capital allocation, a number of exploration and evaluation assets in PNG have been identified as being of reduced priority due to lower prospectivity or sub-optimal economics.
“As there is no current intention to pursue activities on these assets, the full value of these exploration assets is expected to be written down.
“An immaterial impairment relating to exploration leases in Alaska, which are scheduled to be relinquished, also is anticipated.
“Given the ongoing gas supply uncertainties resulting from the recent suspension of mining activities at the Porgera project, the carrying value of the Hides gas-to-electricity project is also expected to be fully impaired.
“The expected impairment expense is a non-cash item and will not impact cash earnings or cash flow.
“The final impairment expense to be recognised is subject to the finalisation of the half year accounts and completion of the half year review by the company’s auditor.”
Meanwhile, Oil Search earlier this month announced that it would reduce its total workforce by 564 by end of this year.
Full time employees (FTEs), which included employees and long-term contractors, have been reduced from 1,649 people as of March 14 this year to 1,222 currently, with a further 137 people transitioning out by year end.
This would represent a fall in the total workforce of approximately 34 per cent.
The company said the reductions had been made across all locations.