LONDON—Glencore PLC on Thursday said it would write down the
value of its oil assets in Chad by $790 million and cut its capital
expenditure this year to preserve cash, as the commodities group
battles with weaker prices.
The Baar, Switzerland-based trader and producer of commodities
said it would take an impairment charge in Chad after significantly
reducing the number of drilling rigs and changing the capital
budget of its operations amid weaker oil prices. Glencore acquired
the Chad assets through its roughly $1.5 billion Caracal Energy
purchase in July last year.
It also said it would reduce this year's overall capital
expenditure budget to $6 billion from a previous range of $6.5
billion to $6.8 billion to preserve funds, as it reported mixed
output for the first half of the year and reduced its guidance for
full-year output of certain commodities including copper and
coal.
Glencore, whose shares traded largely unchanged in response to
the news, isn't alone in taking impairment charges and reducing
spending on large projects to retain cash and maintain dividends
amid weaker commodity prices.
Brent crude oil down by more than 50% over the past 12 months
and some metals are trading at multiyear lows, with copper hitting
a six-year low on Tuesday.
Last week at its interim results Rio Tinto PLC was hit by a $400
million write-down and cut its capital expenditure to $5.5 billion
from $7 billion. Anglo American PLC has also written down the value
of its assets and reduced spending, while analysts expect BHP
Billiton Ltd to cut spending when it announces full-year results on
Aug. 25. BHP already said it would write down the value of its U.S.
onshore petroleum business by $2 billion.
Glencore, which has the biggest exposure to copper of the large
diversified miners, said its own sourced copper production fell 3%
to 730,900 tons in the first half of the year, compared with the
same period a year earlier, due to lower output from its operations
in South America.
Zinc output, another large earnings driver after copper for the
company, rose 12% annually to 730,300 tons in the first half,
mainly because of the ramp-up of expansion projects in
Australia.
Glencore's own sourced coal production, another key revenue
driver, fell 4% to 68.7 million tons in the first half primarily
because of the market-driven production cutbacks.
The trader didn't provide any details about its closely watched
marketing division, its largest earnings driver last year. The
company is due to report first-half results on Aug. 19.
Write to Alex MacDonald at alex.macdonald@wsj.com
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