ASIC notes that Woodside Petroleum Limited (Woodside) has provided an additional $239 million for restoration costs on the future decommissioning of offshore oil rigs and associated infrastructure assets in its financial report for the year ended 31 December 2021. This increase is primarily due to the inclusion of costs for the removal of rigid plastic-coated pipelines.

Woodside has also improved its disclosure of the basis for providing for future restoration costs. This includes disclosing:

• the types of offshore and onshore infrastructure assets for which full removal has been provided;
• that full removal has not been provided for certain pipelines and infrastructure, parts of offshore platform substructures, and certain subsea infrastructure, and the reasons; and
• an indication of the additional costs if certain items for which full removal has not been provided for are not exempted from full removal by The National Offshore Petroleum Safety and Environmental Management Authority.

As part of its financial reporting surveillance program, ASIC raised concerns about the offshore infrastructure assets that were not included for full removal in the restoration provision in Woodside’s financial report for the year ended 31 December 2020, and the adequacy of related disclosures. ASIC is continuing its inquiries about why Woodside did not allow for the full removal of certain infrastructure assets in its financial report.

Restoration obligations for companies in the offshore oil and gas sector can be significant and ASIC encourages directors of other industry participants to reassess the reasonableness of their financial reporting obligations and the adequacy of disclosures.

ASIC has previously emphasised the importance of ensuring that key assumptions underlying asset values and provisions are reasonable and supportable, and disclosures about such assumptions and any uncertainties. 

Background

ASIC’s financial reporting surveillance program aims to improve the quality of financial reporting and to ensure financial reports have been prepared in accordance with the law. This supports investor confidence and the integrity of Australia’s capital markets.

ASIC conducts regular reviews on a risk-basis of the financial reports of selected listed companies and other significant public interest entities to monitor compliance with the Corporations Act and Australian Accounting Standards. ASIC alerts the market prior to each reporting season about current topics or issues that will be the focus of the reviews.