AWE Ltd., Sydney, has reclassified its 50% share of the 2P oil reserves in the Indonesian northwest Natuna Sea Ande Ande Lumut (AAL) development due to project delays, lower oil prices, and the potential sale of operator Santos Ltd’s 50% interest.
AWE says the previously booked 24.57 million bbl of 2P reserves have been reclassified to 2C contingent resources and the company expects to impair the carrying value of the project. It has reviewed the treatment of the $88-million carry in the company’s accounts.
AWE says the reclassification stems from delays to the schedule leading to a final investment decision as a result of incorporating the G sand reservoir into the existing development plan for the K sand.
It has also noted the forward oil price curves are continuing to flatten and the spot price remains subdued at less than $55/bbl.
AWE also said project operator Santos is conducting a sale process for the whole of its interest.
“These factors have increased uncertainty in the timing of development,” the company statement said. “As a result AWE expects to recognise a noncash impairment of the carrying value of the AAL asset of $130-140 million (Aus.) before tax.”
Despite this writedown, AWE still sees value in the AAL project and says that any reduction in uncertainty created by the potential change in operator and project timing could result in a revision of the impairment.
AWE acquired 100% of AAL field in early 2013 and then sold off half of its share along with operatorship to Santos in November 2013.