Woodside Petroleum shareholders are bracing for a big cut to their dividends after the energy giant flagged up to $US1.
2 billion in writedowns due to the slump in oil prices.
The company has lowered its short and long term price assumptions as oil prices slide to 13-year lows, meaning Woodside expects to take an impairment charge of between $US1 billion ($A1.45 billion) and $US1.2 billion ($A1.74 billion) against its asset values.
That is expected to slash its 2015 net profit by between $US700 million and $US850 million when the oil and gas producer releases financial results in February.
Woodside made a net profit of $US2.4 billion in 2014.
Analysts say the damage caused by plunging prices will push dividends lower and could also affect the development timeline of Woodside’s key growth project, Browse, in north Western Australia.
US crude touched a low of $US26.30 overnight after the International Energy Agency warned the market could “drown in oversupply”.
Woodside chief executive Peter Coleman remains upbeat, saying the company is now seeing the benefits of its work to boost productivity.
“The recent significant fall in oil and gas prices has highlighted the quality of our low cost production and approach to balance sheet risk management,” he said.
Fat Prophets Resources analyst David Lennox said the large writedowns were to be expected given weak oil prices.
“Woodside’s net profit will definitely be lower so one would expect that their dividend would be lower,” he said.
Woodside has previously maintained an 80 per cent dividend payout ratio.
Mr Lennox said if Woodside and its Browse partners decide to rationalise capital in the low oil price environment, they would need to consider delaying a final investment decision on the project.
“Because that project has a long lead time they may just put it on the backburner for a little while,” Mr Lennox said.
Mr Coleman said cost savings are being delivered in the front-end engineering and design phase of Browse, and the project remains on track for a final investment decision in the second half of 2016.
Woodside said its 2015 sales revenue dropped more than a third to $US4.5 billion ($A6.53 billion), due to lower oil and gas prices.
Revenue for the December quarter fell by a similar amount to $US1.1 billion, compared to the previous corresponding period.
Woodside shares dropped 39 cents to $25.00.