Inpex, Japan’s largest oil and gas exploration and production company, has downgraded its financial forecasts for the fiscal year which ended on March 31, 2016, citing impairment losses and recent performance trends.
The company said it would recognize impairment losses on some of its upstream assets, “mainly related to projects currently in production after revaluating the assets of its upstream projects” due to the drop in crude oil prices.
Thus, the company has halved its full year forecast, and now expects to report a net income of 26.0 billion yen ($235.5 million), down from the previously forecasted 52 billion yen ($471.1 million).
Inpex has explained that impairment tests were conducted on the Lucius oil field in the U.S. Gulf of Mexico, where the recoverable amount of the asset is expected to fall below the carrying amount. Inpex said that as a consequence, it would reduce the carrying amount to the recoverable amount, posting the reductions as impairment losses amounting to approximately 25.5 billion yen.
Also in light of deteriorating business environment caused by the drop in oil prices, INPEX will recognize one-off losses on its assets in Angola (19 billion yen), Canada(8 billion yen), Timor Sea (7 billion yen) and other upstream projects (7 billion).