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PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, Téléfax: + 41 58 792 91 10, www.pwc.ch
Key audit matter How our audit addressed the key audit matter
The impact of oil and gas reserves on net property, plant and
equipment (PP&E) for the Canada, Malaysia, and France
segments
Refer to note 1 - Corporate information, note 2 - Critical
accounting estimates and judgements, and note 8 – Oil and Gas
Properties to the consolidated financial statements.
The Corporation had USD 1’278.5 million of net PP&E assets as
at December 31, 2023. Depletion charges were USD 126.0 million
for the year then ended. PP&E is depleted based on the year’s
production in relation to the estimated total proved and probable
reserves in accordance with the unit of production method.
PP&E assets are grouped for recoverability assessment purposes
into cash generating units (CGU’s). At each balance sheet date or
when there are facts and circumstances that suggest that the net
book value of capitalized costs within each field area cost centre is
higher than anticipated future net cash flow from oil and gas
reserves attributable to the Corporation’s interest in the related
field areas, the Corporation performs an assessment as to
whether there is an indication that an asset may be impaired.
Management determines the recoverable amounts of the CGU
based on the higher of fair value less costs of disposal and value
in use using estimated future discounted net cash flows of proved
and probable oil and gas reserves. The Corporation’s estimates of
proved and probable oil and gas reserves used in the calculations
for impairment tests and accounting for depletion have been
reviewed by Management’s experts, specifically independent
qualified reserves evaluators.
Significant assumptions developed by management used to
determine the recoverable amount of the CGU’s include the
proved and probable oil and gas reserves, expected production
volumes, future oil and gas prices, future development costs,
future production costs and the discount rate.
We determined that this is a key audit matter due to (i) the
significant judgment made by management, including the use of
management’s experts, when developing the expected future cash
flows to determine the recoverable amount and the proved and
probable oil and gas reserves; and (ii) a high degree of auditor
judgment, subjectivity and effort in performing procedures
and evaluating audit evidence relating to management’s
estimates.
Our approach to addressing the matter included the
following procedures, among others:
භ The work of management’s experts was used in
performing the procedures to evaluate the
reasonableness of the proved and probable oil and
gas reserves used to determine depletion charges
and the recoverable amount of PP&E. As a basis
for using this work, management’s experts’
competence, capability and objectivity were
evaluated, their work performed was understood
and the appropriateness of their work as audit
evidence was evaluated by considering the
relevance and reasonableness of the
assumptions, methods and findings.
භ Tested how management determined the
recoverable amount of CGU’s, which included the
following:
o Evaluated the appropriateness of the methods
used by management in making these
estimates.
o Tested the data used in determining these
estimates.
o Evaluated the reasonableness of significant
assumptions used in developing the
underlying estimates:
ඵ Expected production volumes, future
development costs and future production
costs by considering the past
performance of each segment, and
whether these assumptions were
consistent with evidence obtained in
other areas of the audit.
ඵ Future oil and gas prices by comparing
those prices with other reputable third-
party industry forecasts.
ඵ The discount rate, by performing an
independent sensitivity analysis.
x Recalculated the unit of production rates used to
calculate depletion charges of PP&E.