Woodside share price dips to two-month low upon late news announcement

The oil and gas giant has revealed a major impairment cost for FY23.

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The Woodside Energy Group Ltd (ASX: WDS) share price dipped in late afternoon trading to close 3.01% lower at $30.24.

This is the lowest price that the oil and gas giant has traded at since mid-December.

The move appears to have been triggered by an announcement released 23 minutes before the market close detailing some major financial news.

Let's look into the details.

Woodside share price dips on US$1.5 billion impairment

Woodside released its Reserves Statement and financial updates revealing an approximate collective US$1.5 billion (A$2.31 billion) impairment.

The company said its 2023 full-year financial statements were expected to recognise non-cash post-tax asset impairments of approximately US$1.5 billion.

This includes approximately $1.2 billion for the Shenzi Joint Venture.

Woodside said it was primarily related to goodwill and a portion of the purchase price assigned to Shenzi on completion of the merger with the petroleum division of BHP Group Ltd (ASX: BHP).

The Shenzi JV is located in the Shenzi conventional oil and gas field, approximately 195km off the coast of Louisiana in the Green Canyon protraction area of the Gulf of Mexico.

In a statement, Woodside said:

The goodwill and purchase price allocation resulted from application of acquisition accounting principles and reflect both higher hydrocarbon prices and Woodside's share price at the merger completion date.

Goodwill is not amortised and, once impaired, is not subject to a future impairment reversal. For reference, Shenzi represented approximately 5% of 2023 production and approximately 2% of 2023 year-end proved plus probable reserves.

As part of the total US$1.5 billion impairment, the 2023 full-year statements will also recognise a non-cash post-tax impairment of approximately $300 million for the Wheatstone Project in Western Australia.

Woodside says this is mainly related to short-term pricing.

The company will exclude the impairment when it calculates the final dividend, as per previous practice.

Oil and gas reserves update

Woodside also announced that it added 266 MMboe of 'proved' oil and gas reserves in 2023, replacing 132% of production.

With 'probable' reserves added, the total goes up to 318 MMboe, replacing 158% of production.

Woodside said its proved reserves' life is 12.2 years based on 2023 production levels. This puts it in the top benchmark quartile of global peers.

Woodside CEO Meg O'Neill said this reserves update reflected Woodside's larger portfolio following the BHP merger.

O'Neill said:

Woodside has delivered strong operational performance over the past 12 months. We achieved record production in 2023, while progressing a world-class funnel of development opportunities, which have us well positioned for growth and returns.

Our success in integrating the strategic merger with BHP Petroleum, combined with our ability to advance major projects and improve performance has delivered a high-quality resource base that enjoys top quartile reserves life.

Woodside share price snapshot

The Woodside share price is down 13.6% over the past 12 months.

By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 2.6% over the same period.

Motley Fool contributor Bronwyn Allen has positions in BHP Group and Woodside Energy Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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