AWE expects impairment for Ande Ande Lumut
AWE has advised that it expects to impair the carrying value of the Ande Ande Lumut (AAL) oil project in the Northwest Natuna PSC, Indonesia.
AWE has advised that its share of AAL 2P reserves has been reclassified to 2C contingent resources as a result of factors including further delays to the FID schedule, resulting from incorporating the G Sand into the existing plan of development for the K Sand, forward oil price curves continuing to flatten and the spot price remaining subdued, and the operator Santos conducting a sale process for its 50% interest in the project.
AWE stated that it expects to recognise a non-cash impairment of the carrying value of the asset of between $130–140 MM before tax.
Having also reviewed the treatment of the US$88 MM carry relating to the project, AWE stated that the increased uncertainty has lead to the carry being written down to nil, resulting in an impairment expense of $90 MM, with this, however, not representing a relinquishment of the contractual right to receive the carry, which remains contingent upon the project proceeding.
AWE advised that the combined profit and loss effect on its full-year accounts is estimated to be an impairment of $220–230 MM before tax (unaudited).
“AWE continues to see considerable value in the AAL project and notes that any reduction in uncertainty created by the potential change in operator and project timing could result in the company revising the impairment,” AWE stated.