AWE to impair AAL carrying value amid increased uncertainty

By Romel S. Gurky

ASX-listed AWE Limited said on Wednesday it expects to impair the carrying value of the Ande Ande Lumut (AAL) oil project in the Northwest Natuna PSC, Natuna Sea due to increase uncertainty, and has reviewed the treatment of the US$88 million Carry in the company?s accounts.

AWE said in a statement that its share of AAL 2P Reserves has been reclassified to 2C Contingent Resources as a result of a number of factors including:
? Further delays to the FID schedule as a result of incorporating the G sand into the existing Plan of Development for the K sand;
? Forward oil price curves continuing to flatten and the spot price remaining subdued (sub- US$55/bbl); and
? The PSC Operator conducting a sale process for its 50 percent interest in the project.

?These factors have increased uncertainty in the timing of development. As a result, AWE expects to recognize a non-cash impairment of the carrying value of the AAL asset of between A$130 million to A$140 million before tax,? AWE said in the statement.

AWE said the increased uncertainty has led to the Carry being written down to nil. This will result in an impairment expense of A$90 million, but does not represent a relinquishment of the contractual right to receive the Carry which remains contingent upon the project proceeding.

The combined P&L effect on AWE?s full year accounts, in relation to the AAL asset, is estimated to be an impairment in the order of A$220 million to A$230 million before tax (unaudited).

?AWE continues to see considerable value in the AAL project and notes that any reduction in uncertainty created by the potential change in Operator and project timing could result in the company revising the impairment,? the statement said.

Editing by Reiner Simanjuntak