Lotos E&P has decided to write off the full value of its investment in the troubled Yme project off Norway, while criticising the lack of progress by Canadian operator Talisman Energy in coming up with an alternative development solution for the ill-fated field.
The hefty impairment is set to reduce the Polish company’s first-half net earnings by about 191 million zlotys ($61.2 million), it said in a statement, while not disclosing the amount it had invested in the aborted scheme.
“As the decision-making process concerning the choice of the Yme field development concept is getting protracted and no development scenario has been selected, Lotos has decided to recognise further impairment loss reducing the carrying amount of its Yme assets,” the company said in a statement.
The field’s so-called MOPUStor newbuild mobile offshore production unit is set to be scrapped by the operator next summer due to myriad technical issues that resulted in project costs ballooning by 136% to Nkr11.6 billion ($1.9 billion).
Talisman, which holds a 60% stake in production licence 316 that hosts the field, is estimated to have lost about half of its total investment of Nkr10 billion.
Lotos holds a 20% stake with remaining partners Wintershall and Kufpec each on 10%.
Talisman was due to file an alternative development plan for the field by the end of the second quarter, but has not ruled out that the project could be shelved altogether, with the company looking to sell its North Sea assets.
A company spokeswoman said earlier this year: “In order to develop Yme, we must find a development solution that is robust and with a sufficient economic basis. Evaluations have shown the project may now not be profitable.”
Lotos’ group chief financial officer Mariusz Machajewski criticised “the failure of the Yme field operator and licence holders to reach a decision on the future of the project”, which was previously expected in the first quarter .
He added the decision to recognise an impairment for the full amount of the company’s capital expenditure on Yme was “a manifestation of our fair and responsible approach towards our current and future shareholders”.