PERTH (miningweekly.com) – Oil and gas major Santos has warned of further impairments of some $139-million for its 2020 financial results, in addition to the $756-million of expected impairments owing to lower oil price assumptions included in the company’s half-year results.
The ASX-listed company told shareholders that a $98-million impairment was the result of a revision of reserves at its Reindeer gasfield, offshore Western Australia, as well as other impairment charges of some $41-million related to other late-life, exploration and evaluation assets.
Santos’ total impairment charges for the 2020 financial year are now expected to be some $895-million before tax.
Meanwhile, the company on Tuesday updated its reserves and resources, highlighting its strong overall reserve replacement over the last three years, and positive results from its onshore assets.
Santos has reported a 138% three-year 2P reserve replacement, with 41-million barrels of oil equivalent 2P reserves added in Northern Australia and Timor Leste through the acquisition of the ConocoPhillips assets, and the sanction of infill drilling at Bayu-Undan.
“Today’s statement is the result of Santos’ disciplined annual reserves review and accounting processes, which include external audit of approximately 95% of total 2P reserves,” Santos MD and CEO Kevin Gallagher said.
“The acquisition of ConocoPhillips’ assets in Northern Australia and Timor-Leste combined with the sanction of infill drilling in the Bayu-Undan field added 41-million barrels of oil equivalent in 2020. A final investment decision on the Barossa project is expected in the first half of 2021, which would see approximately 380 mmboe commercialised to 2P reserves.”
Gallagher said that the consistent application of Santos’ disciplined operating model delivered reserve increases in the onshore assets in 2020.
The Cooper basin achieved 102% three-year 2P reserves replacement and a 2C to 2P conversion rate of approximately 70%, while reserves upgrades were also delivered in Gladstone Liquefied Natural Gas’ (GLNG’s) Fairview, Roma and Arcadia fields, and GLNG achieved 184% 2P reserves replacement in 2020.
These reserve additions were partially offset by a reclassification of 16-million barrels of oil equivalent of Juha 2P reserves in Papua New Guinea (PNG) to contingent resources and a 27-million barrels of oil equivalent 2P reserves revision at the Reindeer gasfield.
The revision at Reindeer is owing to water ingress occurring earlier than previously modelled, combined with seismic analysis showing a lower structure across a portion of the field. The Reindeer revision was partially offset by reserve increases at the Spar-Halyard and Van Gogh fields, in Western Australia, of 9-million barrels of oil equivalent in aggregate, said Gallagher.
“Santos acquired an additional 55% interest in the Reindeer field through the Quadrant Energy acquisition in 2018. The acquisition has delivered significant value for shareholders through synergies of over $60-million per annum and a leading position in the highly prospective Bedout basin, including an 80% interest in the world-class Dorado field where front-end engineering design entry is targeted for the first half of 2021.
“After accounting for the Reindeer revision and 2020 production, Santos had 1 277 petajoules of 2P sales gas reserves in Western Australia at the end of 2020, providing approximately 1.8-times coverage for existing contracts. In addition, Santos had 1 275 petrajoules of 2C sales gas resource in Western Australia at end 2020 and 401-million barrels of oil equivalent of total 2C resource when including liquids,” said Gallagher.