Empire drops into the red after yo-yo gas prices force write-down
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Continually fluctuating energy prices are taking a toll on Empire Energy, forcing a $7.6 million write down and sending its half-year results into the red.
Empire (ASX:EEG) took a $10.6 million hit in the first half.
It was a disappointing result after last year’s first half profit of $13.6 million.
The company said the decline in oil and gas prices at the end of June and a flattening of expected future prices meant it had to take a $7.6 million impairment charge on its reserves.
West Texas Intermediate prices (WTI), a shorthand for US oil prices, closed at $US46.04 on June 30. At the end of 2016 they closed at $US53.72.
Chairman Bruce McLeod told Stockhead that it was a paper loss: if gas prices rise, as he expects they should coming into the Northern hemisphere winter, Empire will be able to claw back that impairment when they recalculate cash flows from the reserves and book it as a profit instead.
For comparison, the company said that if it had been able to use gas prices from September 2017, they’d only have taken a $3 million loss.
Empire Energy focuses on the US market through an eponymous subsidiary, and the Australian market through a company called Imperial Oil and Gas, where it’s largely looking for shale gas in the Northern Territory.
Shale gas is synonymous with fracking, or hydraulic fracturing, which is a method of extracting gas in small pockets by cracking open the rocks around them.
The Northern Territory currently has a moratorium on fracking until the end of the year, which the national gas industry is fighting hard to overturn.
The company’s share price remained flat on the news at 0.8c.