Australia's Santos flags $560 million impairment charge on virus-led oil slump

FILE PHOTO: A sign for Santos Ltd, Australia's No. 2 independent gas producer, is displayed on the front of the company's office building in the rural township of Gunnedah, located in north-western New South Wales in Australia, March 9, 2018. REUTERS/David Gray/File Photo

(Reuters) - Australia's Santos STO.AX said on Tuesday it will book non-cash impairments of up to $560 million after tax, joining a number of global energy majors forced to write down assets after a coronavirus-induced slump in oil prices.

The country’s second-largest independent gas producer expects to record non-cash charges of between $490 million and $560 million after tax in its 2020 interim results, it said in a statement.

Most of the impairment charges relate to Santos’s Gladstone Liquefied Natural Gas (LNG) project in its Cooper basin fields in Queensland, owing to an over 10% reduction in the company’s long-term oil price assumption.

Energy companies have been forced to write down assets or delay funding after crude prices collapsed this year owing to a breakdown in talks between Russia and Saudi Arabia and demand destruction caused by coronavirus-led restrictions.

Woodside Petroleum, Australia's top independent gas producer, warned last week of a $4.37 billion hit to its first-half results, following oil majors BP BP.L and Royal Dutch Shell's RDSa.L announcements of huge impairments on their assets.

Adelaide-based Santos said it had sufficient debt headroom and was not under threat at “current oil prices for a number of years”, adding that the impairments will have no impact on its reserves.

Santos is set to report its first-half results on Aug. 20.

Reporting by Shriya Ramakrishnan in Bengaluru; Editing by Chris Reese and Stephen Coates