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20 September 2016
With the bulk of company reports for the 2015/16 financial year having been delivered, it is clear the fossil fuel sector has taken some substantial financial hits recently.
Write-downs on fossil fuel assets and increased provisioning for dodgy debts to the sector have combined to paint a bleak picture throughout reporting season.
By far the hardest hit has been BHP Billiton, which wrote down AU$9.4 billion dollars on its US onshore petroleum activities, which predominantly involved shale gas exploration.
Closer to home, Santos has also felt the pinch from its own high-cost gas investment. The company wrote down the value of its flagship GLNG project by almost $2 billion.
The coal industry has also seen some significant losses, with Rio Tinto reporting almost a billion dollars worth of take or pay charges for unused capacity at the Abbot Point. Wesfarmers wrote down a massive $850 million on its Curragh coal mine in central Queensland, while coal transporter Aurizon reduced the book value of its Aquila Resources business and rolling stock by a combined $528 million.
AGL Energy‘s decision to abandon coal seam gas operations in NSW (Camden and Gloucester) added significantly to $795 million worth of impairments reported for the 2015/16 financial year.
While we are still waiting for full financial year reports from ANZ, NAB and Westpac, we know the banking sector hasn’t been immune to the costs of dodgy fossil fuel assets. Both Commonwealth Bank and Macquarie Group have reported significant bad debt provisioning, with at least $200 million attributable to dodgy resources lending for each bank.
|Company||Writedown (AU$)||Project / asset|
|BHP Billiton||$9427 million||US onshore gas & Indomet coal|
|Rio Tinto*||$925 million||Abbot Point Coal Terminal take or pay charges|
|Wesfarmers||$850 million||Curragh coal mine|
|AGL Energy||$795 million||CSG impairment|
|Beach Energy||$635 million||Cooper Basin and other gas|
|South32 Ltd||$582 million||South Africa energy coal|
|Origin Energy||$551 million||Bass, Cooper & Otway gas|
|Aurizon||$528 million||Aquila Resources and rolling stock|
|AWE Ltd||$292 million||BassGas, Cliff Head & Tui Oil (NZ)|
|Commonwealth Bank||$200+ million||Resources debt|
|Macquarie Group**||$200+ million||Resources debt|
|Horizon Oil||$195 million||PNG & NZ oil|
|Wollongong Coal**||$125 million||Russell Vale colliery|
|Carbon Energy||$96 million||Underground coal gasification impairment|
|Cue Energy||$91 million||Mahakam Hilir PSC, Maari oil field, exploration assets|
|Senex Energy||$70 million||Exploration assets|
|Cooper Energy||$34 million||Indonesian & Otway oil/gas|
*Half year report to 30 June 2016
**Full year to 31 March 2016