Could CSG write-downs be looming?

Increased regulations may be a cause for concern for the energy industry.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Diversified gas and electricity company AGL Energy's (ASX: AGK) admission last week that it may be forced to write down the value of its coal seam gas (CSG) assets in New South Wales will cause concern for investors, not just in AGL but any company exposed to the industry in NSW.

In late February, the NSW government released a package of measures aimed at further regulating the industry. No doubt many of these measures will bring some relief to primary producers and residents of regions earmarked for CSG exploration and potential development, including in the Hunter Valley. For AGL's shareholders though, the new, stricter regulations have created "an impairment risk to the existing book value" of both AGL's Camden and Hunter Gas Projects.

Other companies currently exposed to CSG in NSW include oil and gas producer Santos (ASX: STO), which has the largest acreage at a staggering 62,000 square kilometres and Dart Energy (ASX: ESG), a smaller player in the region but with its assets concentrated in NSW, it has potentially much more at stake. Other major CSG players such as Origin Energy (ASX: ORG) and Beach Energy (ASX: BPT) do not have CSG assets in NSW and so are not affected by this current policy shift.

Foolish takeaway

There is a lot of controversy around the environmental impact of CSG and really no telling how future governments will regulate the industry. Investors may choose to tread well clear of the CSG industry or, at the very least, concentrate on the larger, vertically integrated producers that provide some safety for investors through their diversified business exposure.

Oil, copper, and gold continue to be in high-demand — and their popularity doesn't look to be slowing. We've uncovered three companies poised to benefit from the rising prices of these commodities. Get our brand-new report — "3 High-Risk/High-Reward Resources Stocks" — FREE!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur owns shares in Origin Energy.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »