Shares in Woodside Petroleum Limited (ASX: WPL) dropped to $25.10 this morning at a 10-year low after the company updated the market with its production report for the quarter ending December 2015.

As a result of lower short and long-term oil and gas price assumptions the company announced impairment charges totaling US1 billion to US$1.2 billion on the cash-generating value of its oil and gas properties.

Worse news for investors in terms of the implications for the future direction of the share price is the company’s admission that “profit for the purpose of calculating the final dividend is expected to be adjusted for impairments and other one off material non-cash charges.”

The warning over the slashing of the prized final dividend is likely to send many investors scurrying for the exits between now and March 2016.

Any investors holding onto the stock as an income play will need to be prepared to take a long-term view as the stock is likely to remain under selling pressure until any news emerges that suggests a decisive reversal of the current oil bear market.

The company’s flagship LNG and oil producing assets are the Pluto and North West Shelf projects in Western Australia, with a total of 92.2 million barrels of oil equivalent produced over 2015.

Sales revenues slumped 37% compared to the prior corresponding quarter as oil and LNG prices continued to tumble. Overall production volumes lifted more than 6%, but this was insufficient to offset the global energy price falls.

The company is forecasting production in the range of 86 million to 93 million barrels of oil equivalent in 2016, with investment expenditure in the region of US$1.96 billion – an amount significantly down on 2015.

Woodside’s strong balance sheet mean it looks a far superior bet than heavily indebted rivals like Santos Ltd (ASX: STO) or Origin Energy Ltd (ASX: ORG), although it remains at the mercy of the future direction of the oil price.

Much like equity markets in general that remain gripped with fear over the implications of the tumbling oil price and its potential to act as a forewarning of coming global economic contraction.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.