Origin Energy Limited (Origin) has advised it expects to recognise an impairment charge of approximately $1.2 billion (post tax) for the second half of FY2017 in its full year results to be released on 16 August 2017. 

Australia Pacific LNG (APLNG) is expected to recognise an impairment charge on its assets of which Origin expects to reflect its 37.5 per cent share ($815 million post tax). When Australia Pacific LNG reviews the carrying value of its assets, it considers a range of assumptions – including oil price, AUD/USD exchange rates, discount rates and costs. Since the last assessment at 31 December 2016, while there has been a change in a number of relevant assumptions, the principal change is a reduction in oil price assumptions to US$67/bbl (real 2017) from 2022.

Origin also expects an impairment charge of $357 million (post tax) for Lattice Energy, its conventional gas assets currently held for sale. The sale process is progressing well towards execution by the end of 2017. The impairment charge arises as a result of assessing the current carrying value of Lattice Energy against the expected proceeds from divestment net of estimated cost of disposal and partly reflects the cessation of depreciation and amortisation from 7 December 2016.

2H2017 Impairment Details

Asset Post-tax impairment ($m)
Assets held by APLNG (Origin 37.5% share) 815
Lattice Energy 357
Total 1,172

As a result, when the 1H2017 and 2H2017 impairment charges are aggregated, Origin expects to report a total impairment charge of $3.1 billion. The aggregate impairment charge is subject to finalisation of Origin’s full year financial statements and is an after tax, non-cash item with no impact on cash flow or Underlying EBITDA.

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