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- CIMIC Group (CIM) has failed to recover more than $1 billion in contract assets, following the end of its long-standing dispute with Chevron
- CIMIC has been pursuing Chevron over a cost blowout associated with the Gorgon Jetty LNG project in Western Australia since 2016
- However, an arbitration tribunal has chosen to award $35 million in counterclaims to Chevron and only $78 million to CIMIC subsidiary CPB Contractors and its consortium of partners
- As a result, CIMIC will be forced to write off the unrecovered costs, which were still recorded as contract assets in its recent financial statements
- Despite the news, the company remains confident about its cash position, citing its recent billion-dollar deal with fund management giant Elliott Advisors
- CIMIC Group is down a slight 1.60 per cent with shares trading for $22.13 each
CIMIC Group (CIM) has failed to recover more than $1 billion in contract assets after its protracted dispute with Chevron finally came to an end.
CIMIC has been pursuing Chevron over a cost blowout associated with the Gorgon Jetty project in Western Australia since 2016. Specifically, CIMIC was disputing the cost of work done on the project’s jetty between 2009 and 2014 and was expecting Chevron to foot a $1.15 billion bill.
However, an arbitration tribunal has instead chosen to award $35 million in counterclaims to Chevron and only $78 million to CIMIC subsidiary CPB Contractors and its consortium of partners associated with the project.
As a result, the company will be forced to write off the unrecovered costs, which were still recorded as contract assets in its recent financial statements.
This isn’t CIMIC’s first billion-dollar write off this year as it follows a similar $1.8 billion hit back in January due to unrecovered debts from its Middle Eastern operations.
When the previous write-down was first announced CIMIC shares plunged 20 per cent, sparking a shareholder-led class action, which remains ongoing.
Despite the news, the company remains confident about its bottom line, stating the award will have no impact on its operational business or cash position. This is partly due to CIMIC’s recent billion-dollar deal it sell 50 per cent of its Thiess business to fund management giant Elliott Advisors, which could be worth up to $1.9 billion.
The recent write-down revelations have hit the company’s share price substantially this. From a 52-week high of around $35 per share back in January, CIMIC’s market share has slid down more than 30 per cent in the intervening months to now trade in the low twenties.
CIMIC shares are down 1.60 per cent and are trading for $22.13 each at 10:50 am AEDT.
