Oz Cooper Announces Impairment Charges

Sydney-listed Cooper Energy expects to book A$108mn (US$77.7mn) in non-cash, pre-tax impairment charges in its results for the 12 months ending June 30, to account for lower oil and gas prices, it said on August 25. Post-tax, the charges will come to A$76mn.

“The review assessed carrying values and abandonment provisions in light of lower current gas and oil prices in post-Covid-19 markets, the US dollar exchange rate, lower interest costs and intelligence acquired since December 31 2019 on drilling, development, restoration and abandonment costs,” Cooper said.

The final sum of the charges will be subject to the finalisation and approval of company’s audited financial statements for the year up to the end of June, which Cooper plans to release on August 31. 

Cooper said the review of asset values incorporates revised assumptions for oil and gas prices and exchange rates based on current and expected values. Contracted gas is modelled at prices specified in the relevant gas sales agreements.

“The impairments have been made to align our asset carrying values with 2020 prices, costs and expectations. Price assumptions for uncontracted gas have been revised to reflect the lower, post-Covid-19 prices currently prevailing and anticipated for FY21, increasing thereafter,” Cooper managing director David Maxwell said. “For our uncontracted gas, the impact of adopting current prices has been significant as Victorian spot prices at 30 June 2020 were approximately 50% lower than 12 months earlier.”

Price assumptions for uncontracted gas have been revised to reflect expectations as at June 2020 for future term gas sales, it said. The resultant price deck has lower current and near-term prices with rising prices in coming years due to tightening gas supply in south-east Australia. Cooper’s uncontracted gas is principally located in the offshore Otway Basin. Supply from the Sole gas field is largely contracted.