116 Woodside Petroleum Ltd|Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
B. PRODUCTION AND GROWTH ASSETS
for the year ended 31 December 2018
B.4 Impairment of oil and gas properties
Recognition and measurement
The carrying amounts of oil and gas properties are assessed half-
yearly to determine whether there is an indication of impairment
or impairment reversal for those assets which have previously
been impaired. Indicators of impairment and impairment reversals
include changes in future selling prices, future costs and reserves.
Oil and gas properties are assessed for impairment indicators and
impairments on a cash generating unit (CGU) basis. CGUs are
determined as a ﬂoating production, storage and o-take vessel
and associated oil ﬁelds for an oil asset and an LNG plant and
associated gas ﬁelds for a gas asset.
If there is an indicator of impairment or impairment reversal for
a CGU then the recoverable amount is calculated.
The recoverable amount of an asset or CGU is determined as the
higher of its value in use and fair value less costs of disposal. Value
in use is determined by estimating future cash ﬂows after taking
into account the risks speciﬁc to the asset and discounting it to its
present value using an appropriate discount rate.
If the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset or CGU is written down and an impairment loss
is recognised in the income statement.
For assets previously impaired, if the recoverable amount exceeds
the carrying amount, the impairment loss is reversed. The carrying
amount of the asset or CGU is increased to the revised estimate
of its recoverable amount, but only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Recognised impairment and impairment reversal
The Group assessed each CGU to determine whether an indicator
of impairment or impairment reversal existed. All impairment losses
and reversals are recognised in other expenses. Refer to Note A.1.
The conditional sale of two LNG vessels in the North West Shelf
operating segment resulted in an impairment loss of US$39 million
as the assets’ carrying value exceeded the fair value less costs of
disposal. The fair value less costs of disposal was determined using
in-principle sales agreements, classiﬁed as Level 3 on the fair value
hierarchy. Refer to Note D.7 for further details.
No other indicators of impairment or impairment reversal were
identiﬁed in 2017 or 2018.
Key estimates are disclosed in the ‘Key estimates and
B.5 Significant production and growth
On 29 March 2018, Woodside completed the acquisition of
ExxonMobil’s 50% interest in WA-1-R, which contains the
Scarborough gas ﬁeld, for an aggregate purchase price of
US$444 million. The transaction was accounted for as an asset
acquisition. An additional US$300 million payment due to
ExxonMobil is contingent on a positive ﬁnal investment decision to
develop the Scarborough ﬁeld. In conjunction with the transaction,
Woodside granted BHP Billiton an option to purchase an
additional 10% interest in the Scarborough gas ﬁeld on equivalent
consideration terms to the transaction with ExxonMobil.
In addition to the contingent payment above, a US$150 million
payment is due to BHP Billiton contingent on a positive ﬁnal
investment decision to develop the Scarborough ﬁeld.
Both contingent payments associated with acquiring the
Scarborough development are accounted for as contingent
liabilities in accordance with the Group’s accounting policies.
Woodside now holds the following interest in Joint Operations
relating to the Scarborough development:
• a 75% interest in WA-1-R and a 50% interest in WA-62-R, which
together contain the Scarborough gas ﬁeld;
• a 50% interest in WA-61-R which contains the Jupiter gas ﬁeld;
• a 50% interest in WA-63-R which contains the Thebe gas ﬁeld.
Assets acquired and liabilities assumed
The identiﬁable assets and liabilities acquired as at the date of the
acquisition inclusive of transaction costs were:
Exploration and evaluation assets
Total identiﬁable net assets at acquisition
Cash ﬂows on acquisition
Purchase cash consideration
Total purchase consideration
Net cash outﬂows on acquisition
1. Transaction costs were less than US$0.5 million.
Key estimates and judgements
Impairment and impairment reversal indicator key
In determining whether there is an indicator of impairment or
impairment reversal, the Group considers whether there has been a
signiﬁcant change in the following external and internal qualitative
• Commodity prices - LNG, natural gas and oil.
• Economic factors - interest rates, inﬂation rates, foreign exchange
rates and discount rates.
• Operating performance of an asset.
• Reserve and resource estimates.
• Project concept / planned use of assets.
• Forecast project expenditure.