Taqa shares slide after $884m Canadian gas writedown

Taqa said it took a Dh3.25bn non-cash impairment mainly linked to reserve revisions and lower anticipated production in North America.

The writedown pushed Taqa into a net loss of Dh2.52 billion in 2013, compared to net profit of Dh649 million the previous year. Courtesy Taqa

Taqa shares tumbled 10 per cent after the energy investor disclosed a US$884 million writedown on its Canadian gas assets.

The company known also known as Abu Dhabi National Energy downgraded the value of the North American holdings by 13.8 per cent to take into account a drop in gas prices since cheap shale volumes appeared in North America. It will not pay investors a dividend for 2013 because of the loss.

Shares fell to a six-month low of Dh1.26 on the Abu Dhabi bourse after the announcement.

The writedown pushed the company into a net loss of Dh2.52 billion, compared to net profit of Dh649 million the previous year. Revenue declined by 7 per cent to Dh25.75bn.

“Since acquiring our assets in North America in 2007 and 2008, our understanding of the geologies and opportunities it represents have expanded,” Stephen Kersley, the chief financial officer, said in an earnings call with reporters. “We are less optimistic than in the past on long-term pricing.”

Overall earnings last year inched up by 1 per cent to Dh13.4bn, while revenues dipped by 7 per cent to Dh25.7bn. The company’s planned capex for 2014 will remain roughly the same as last year’s at $2bn.

The writedown is the latest effort by Taqa to reassess its North American oil and gas operations following a shale gas boom that has pushed natural gas prices to less than a quarter of their peak.

Taqa entered the North American upstream sector in 2007 with the $2bn purchase of the Calgary producer Northrock Resources. It was the height of a global spending spree on energy assets intended to transform the Abu Dhabi power plant owner into a diversified international energy company.

In 2009 it announced a Dh271m impairment on North American investments. By 2011 it began divesting of fields, and the following year it temporarily shut down one of its plants, citing low gas prices.

Last year it reorganised its Canadian operations and said it hoped to further consolidate acreage to a third of its current size.

The company released an earnings video on Vimeo explaining the writedown to investors.

“It’s an accounting entry and has no impact on the business’s economic performance in Canada or its ability to service its obligations nor of the business of as a whole,” Carl Sheldon, the outgoing chief executive, said in the video. “We believe that our properties in Canada are very valuable and justify the expenditure of development capital. And the impairments are really in line with the rest of the industry.”

The writedown should not affect the company’s ability to refinance debt obligations later this year or tap debt markets anew, said Karim Nassif, the associate director of infrastructure finance for Standard & Poor’s in Dubai.

“This is non-cash impairment which should not in itself impact credit metrics,” said Mr Nassif.

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