Santos has become a victim of plummeting oil prices, booking $2.4 billion in pre-tax writedowns and signalling it will post a large annual loss.
Australia's second-largest oil and gas producer will take an after-tax $1.6 billion impairment charge to next week's full year results.
More than $1 billion was slashed from the value of producing assets, more than half of that oil wells in South Australia's Cooper Basin.
More than $1.2 billion was cut from the value of its exploration assets, meaning rigs will be mothballed with those offshore and onshore assets now uncommercial.
The oil price was not the only factor, with more than $800 million taken off its controversial NSW Narrabri coal seam gas project, now valued at only $500 million.
Writedowns occur when a company reduces the value of assets - in this case because a 50 per cent oil price fall in four months has cut cashflows.
Chief executive David Knox admitted the speed and degree of the fall was a shock.
"We must recognise the reality of the world we are in today," he said in an analysts briefing.
"We are still bullish on energy demand going forward."
The writedowns were expected but the size was a surprise and Santos' shares closed 12 cents weaker at $7.59.
They are down 40 per cent since late November.
He said Santos had shored up its position since the price crash: cutting capital expenditure by 25 per cent with more to come, adding $1 billion in liquidity through debt with ANZ Bank and reducing costs including large redundancies.
A hiring freeze is believed be in place.
Santos chief financial officer Andrew Seaton was forced to defend the company, basing the impairments on an average oil price steadily reverting from $US55 a barrel this year, back to a long-term $US90 by 2019.
Analysts questioned that, with one telling AAP that trying to predict the price currently was fraught with danger.
Citigroup said this week the oil price might fall to $US20, with the International Energy Agency reporting US production still rising and adding to a glut.
The flagship $US18.5 billion GLNG project in Queensland escaped any writedowns and was on track to come online in the second half of the year.
Mr Seaton said the impairment charges were not expected to affect its investment grade credit rating.
The dividend would be discussed before next week's results, but he hinted it would not be affected because the writedowns did not affect cashflow.
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