PERTH (miningweekly.com) – Energy major Santos on Tuesday flagged a $328-million impairment charge over its production and exploration assets, while releasing its annual reserve and resource statement.

Santos expects to recognise an impairment of approximately $147-million before and after tax in the 2022 full-year results as a result of the Spar/Halyard reserves revision, and other impairment charges of approximately $181-million before tax related to other late-life producing assets and exploration and evaluation assets as part of the regular review of asset carrying values.

The expected impairment charges will be excluded from underlying earnings and are subject to finalisation of the full-year accounts, auditor processes and board approval.

The ASX-listed company has meanwhile also reported a 171-million barrel of oil equivalent increase in its 2P reserves, before production in 2022, with 2P reserve replacement at 166%, and the three-year replacement at 366%.

“Today’s statement is the result of Santos’ disciplined annual reserves review and accounting processes, which include external audit of approximately 97% of total 2P reserves,” said MD and CEO Kevin Gallagher.

The final investment decision on the Pikka Phase 1 project in Alaska in 2022 commercialised 165-million barrels of oil equivalent of 2C resources to 2P reserves. This was more than offset by increases in Alaska contingent resources outside the Pikka Phase 1 area attributable to new well data, including the Mitquq and Stirrup discovery wells, seismic reprocessing and integrated reservoir studies, Gallagher said.

“Consistent application of Santos’ disciplined operating model continued to deliver reserves additions in the onshore assets. The Cooper basin and Queensland saw additions of 9-million barrels of oil equivalent and 10-million barrels of oil equivalent 2P reserves, respectively, before production. Reserves were also added in Papua New Guinea before production, primarily in the operated gasfields.

“These reserve additions were partially offset by a 26-million barrels of oil equivalent 2P reserves reduction in Western Australia, primarily due to earlier than expected water ingress at the Spar/Halyard field.”

After accounting for the Spar/Halyard reduction and 2022 production, Santos had 841 PJ of 2P sales gas reserves in Western Australia at the end of 2022, providing coverage for existing contracts.

In addition, Santos had 1 400 PJ of 2C sales gas resource in Western Australia at end 2022 and 437-million barrels of oil equivalent of total 2C resource when including liquids.

Santos maintains a booking of 100-million tonnes of carbon dioxide (CO₂) storage capacity and contingent resource in the Cooper basin, which underpins the Moomba carbon capture and storage (CCS) project. The project is on track for first injection of CO₂ in 2024.

Santos is also undertaking front-end engineering design work on the proposed Bayu-Undan CCS project and was awarded permits in 2022 to undertake evaluation and appraisal work for the potential storage of CO₂ in the Carnarvon and Bonaparte basins, offshore Western Australia.