Conoco To Book Charge on Barnett Sale

ConocoPhillips has indicated it expects to book a hefty impairment charge on the sale of its Barnett Shale gas/natural gas liquids (NGL) interests in the US.

The US major announced June 29 it has entered into a definitive agreement to sell the asset, in the Fort Worth basin of north-central Texas, to an affiliate of Miller Thomson & Partners for $305mn, plus net customary adjustments, with proceeds to be used for Conoco's general corporate purposes.

However, as at May 31, the net book value of the assets was some $900mn, and Conoco said it expects to record a non-cash impairment this quarter.

That suggests the impairment might be in the order of $600mn. However no figure was given at this stage by Conoco, which said the transaction is subject to specific conditions precedent being satisfied, including regulatory approval, and is expected to close 3Q 2017.

Full-year 2016 production associated with the Barnett assets was 11,000 barrels of oil equivalent (boe)/day, of which 55% gas and 45% NGL. Year-end 2016 proved reserves were about 50mn boe. The impact on Conoco's full year production guidance will be marginal.

The US major has divested big North American gas-rich assets this year, including ones worth $13.3bn (completed mid-May) and up to $3bn in the hope – despite shrinking its legacy base – that new LNG and other projects will boost production. Meanwhile it is also embroiled in a dispute over its 2016 divestment of offshore Senegal acreage to Woodside.

Mark Smedley