What: Leading vertically integrated energy player Origin Energy Ltd (ASX: ORG) ended Wednesday's trading session down 3.05% at $9.84 after touching a new intra-day 52-week low of $9.78 after announcing details of write-downs which the company is set to make.
So What: In recent months investors have become increasingly concerned as to the strength of Origin's balance sheet, the outlook for its massive APLNG business and the effect of multi-year low oil prices on the group's operations.
These concerns now (arguably) appear justified with Origin advising the market that it has reviewed its upstream assets and as a result it expects to recognise a non-cash, post-tax impairment charge of around $337 million in conjunction with its full year results for the 12 months ending 30 June 2015.
Now What: Investors can expect to hear further details of the write-downs when Origin reports on 20 August, but already we know the following:
| Asset | Post-tax impairment ($m) | Comment |
| Cooper Basin | 180 | Impact of revised operator development plan, reserves revisions and lower oil prices |
| Bass Basin | 122 | Impact of reserves revisions and lower oil prices |
| Otway Basin | 35 | Impact of reserves revisions and lower oil prices |
| Total | 337 |
Importantly, it should be noted that management did single out that "there is no impairment charge related to Australia Pacific LNG, the economics of Origin's investment in Australia Pacific LNG remain robust."
While the above write-downs are non-cash in nature that doesn't mean they should be ignored by investors. The write-downs imply that Origin's assets are less valuable than previously assumed, therefore long-term investors need to take these changes into account when undertaking a valuation of the stock.
The share price of Origin has now fallen around 38% over the past five years, in comparison the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has gained 18%. Investors viewing the knocked down share price as a buying opportunity will need to have confidence that the market is wrong in its assessment of Origin's future prospects.
