Woodside to write down 1.2 billion U.S. dollars of oil and gas assets

Australian energy heavyweight Woodside Petroleum on Thursday announced a 1.2 billion U.S. dollar hit as it writes down the value of its assets to reflect lower oil price assumptions as the downturn bites.

Woodside Petroleum Ltd, which last year walked away from a takeover option on Papua New Guinea-centric Oil Search Ltd, will also pare back investment by 17 percent to 1.96 billion U.S. dollars, but all details are set to be finalised when it delivers full year results on Feb. 17.

Cash rich Woodside had previously said including cash in any offer on top of its original one to four share ratio bid for Oil Search that was rejected in September 2015 would have been "dilutive to our shareholders" if oil prices continue to fall.

Benchmark Brent crude prices have fallen over 50 percent in the past 12 months as members of the Organization of Petroleum Exporting Countries (OPEC) produce above their self-managed production ceiling, saturating the market to maintain market share and stave off competition from non-Opec producers.

The International Energy Agency on Wednesday warned the market could "drown in oversupply" as Iranian supply enters the market after the lifting of U.S. and European sanctions which offsets production cuts elsewhere, sending Brent crude to a fresh 13-year low at 26.30 U.S. dollars per barrel overnight.

"We continue to relentlessly focus on delivering the fundamentals of our business and are now seeing the benefits of our productivity programs flow through to our results," Woodside chief executive Peter Coleman said in a statement.

"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."

Woodside production increased 6.4 percent to 24.9 million barrels of oil equivalent (mmboe), largely due to its Balnaves oil asset coming online in April 2015.

However quarterly sales volumes fell 37 percent to 1.11 billion U.S. dollars from 1.76 billion U.S. dollars in the corresponding period in 2014, reflecting the downturn in oil prices. 2015 sales volumes fell a similar amount to 4.5 billion U.S. dollars.

2016 production is forecast at between 86 and 93 mmboe signalling a likely decline in production from the 92.2 mmboe posted in 2015, its second highest on record.

However Woodside has been weathering downturn in commodities better than most with shares loosing 15.28 percent over the past year, unlike rival Santos which has slumped almost 60 percent.

At 1145 local time, Woodside shares were up six Australian cents (4.16 U.S. cents), or 0.24 percent to 25.45 Australian dollars (17.65 U.S. dollars) after early falls at the open. Endit