Australia's oil, gas giant joins in on asset writedowns

Australia's oil and gas producer Santos Ltd has joined Woodside Petroleum and flagged further asset writedowns as the company looks to ways it can weather the slump in oil to preserve cash.

Santos, Australia's third largest oil and gas producer, on Friday announced it cut capital spending more than expected in 2015, down 54 percent to 1.66 billion Australian dollars (1.16 billion U.S. dollars) compared with 2014, while realizing a 10-percent cut in production costs.

However, the company is expecting further cuts to expenditure and asset writedowns with a focus on preserving cash after quarterly sales fell 24 percent to 828 million Australian dollars (578.86 million U.S. dollars) on the same period last year as oil prices drop further since its first capital expenditure cut in November.

"Having regard to the further deterioration in the oil price since (November 2015), the company expects to book reductions to both asset carrying values and reserves as part of finalizing its 2015 full-year financial accounts," the Santos fourth quarter activities report said. Santos is due to report on February 19.

In November, Santos announced 3.5 billion Australian dollar (2.45 billion U.S. dollar) capital initiative to "strengthen the balance sheet and reduce debt" after rejecting a 7.1 billion Australian dollar (4.96 billion U.S. dollar) take over offer from Scepter Partners in October.

Santos' share have slid in response to be among the worst performers on the ASX. At 11:40 local time, Santos was up 30 Australian cents, or 11.72 percent to 2.86 Australian dollars, though have lost 60 percent over the past year.

Santos executive chairman Peter Coates, however, said the company is able weather the oil rout with 4.8 billion Australian dollars (3.35 billion U.S. dollars) in cash and committed undrawn debt facilities, and no material debt maturities until 2019.

"Santos is well placed to withstand an extended period of low oil prices," Coates said.

"We are continuing to focus on reducing our capital expenditure and will build upon the significant improvements that we have made to our operating efficiency."

Santos' capital expenditure reductions and impairment charges come after Woodside Petroleum on Thursday announced it expected 1.2 billion U.S. dollar hit to reflect lower oil price assumptions.

Last week, diversified miner BHP Billiton also announced a 7.2 billion U.S. dollar pre-tax writedown in its U.S. shale operations after originally paying too much for the assets in 2011, according to local analysts. Endit