Shenzi Asset Takes a Hit
Woodside Energy Group Ltd’s shares have taken a discouraging turn following the revelation of a sizable impairment charge associated with assets acquired from the 2021 transaction with BHP Group Ltd. The company expects to recognize non-cash post-tax asset impairments totaling approximately $1.500 billion in 2023. This includes a significant portion of about $1.200 billion ($1.400 billion pre-tax) related to the Shenzi asset.
Reasons Behind the Impairment
The impairment charges primarily stem from goodwill and a fraction of the purchase price attributed to Shenzi following the completion of the merger with BHP Petroleum. Additionally, Woodside Energy anticipates a non-cash post-tax impairment of roughly $300 million for Wheatstone, mainly linked to short-term pricing in 2023.
Reserve Additions and Reductions
In a somewhat brighter light, the company declared the addition of 266 MMboe of proved oil and gas reserves in 2023, effectively replacing 132% of production, and 318 MMboe of proved plus probable reserves in the same year, managing to replace 158% of production. Despite these promising figures, the company’s reserves life stands at 12.2 years, considering 2023 production levels.
Challenges and Progress
Notably, Woodside also disclosed reserve additions from deepwater projects approved in the Gulf of Mexico and enhanced performance in North West Shelf and Pluto, albeit dampened by reserve reductions in Shenzi. Despite challenges, as of 2023, Woodside’s remaining proven reserves (1P) totaled 2,450.1 MMboe, with proved plus probable (2P) reserves standing at 3,757.1 MMboe.
Termination of Acquisition Discussions
The pall over the company’s prospects deepened this month when Woodside Energy terminated acquisition discussions with Santos Ltd, citing a lack of identified benefits.
Market Response
In response to these developments, WDS shares were trading lower by 1.25% at $19.82 premarket on the last check Thursday.
