Woodside Energy's $1.5 Billion Impairment Stirs Concerns

Woodside Energy expects to book non-cash post-tax asset impairment charges of $1.5 billion for its 2023 fiscal year, mostly due to impairment for the Shenzi field in the Gulf of Mexico, which Australia’s top energy company bought as part of the merger with BHP’s petroleum assets in 2022. 

Of the expected $1.5 billion impairments, about $1.2 billion is related to the Shenzi oil and gas field offshore Louisiana, which accounted for around 5% of Woodside’s production in 2023, the company said in a statement on Thursday.  

Shenzi also represented approximately 2% of the 2023 year-end proved plus probable reserves. 

The other portion of the 2023 impairments for Woodside is expected to come from Wheatstone, the LNG export project in Australia operated by Chevron. Woodside’s 2023 financial statement is expected to recognize a non-cash post-tax impairment of approximately $300 million for Wheatstone, mainly related to short-term pricing, the Australian company said. 

Woodside also said it had reduced the proved and proved plus probable reserves at the Shenzi field, with the reduction in reserves at Shenzi “mainly associated with the performance of infill sidetracks and performance of the Shenzi North development following start up.” 

Woodside flagged the impairment and the lowered reserve estimate at the Gulf of Mexico field a week after the merger talks with another Australian energy major, Santos, collapsed. 

Last week, Santos and Woodside ended their merger talks that would have resulted in the creation of a $52-billion energy major with solid exposure to the LNG space.  

Some analysts say the charges and lowered reserves may have played a role in the end of the merger talks.  

The impairment and the lower reserves at Shenzi “could have been one of the reasons” why the discussions of a potential merger were ended, Henry Jennings, senior market analyst at Marcus Today, told Reuters.

“Woodside has been weak for a while, so suspect the market assumed it was in the wind,” Jennings noted.  

By Tsvetana Paraskova for Oilprice.com

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