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Dong Energy CEO Henrik Poulsen. Image courtesy of Dong Energy.

Denmark-based Dong Energy warned on Tuesday that it will write down the value of its upstream arm by just over $2 billion, citing low oil prices and reduced reserves.

Dong Energy said it will write down the carrying value of its exploration and production business by about $2.3 billion, or DKK16 billion, in its 2015 annual accounts due to low oil prices, reduced reserve estimates and challenges faced by some of its projects.

“The write-down is caused by the continued decline in oil and gas prices, reduced reserve estimates as well as project-specific factors, in particular with regard to the Hejre project which continues to face significant challenges,” the company said.

Dong added that, due to its active hedging policy, it has increased the value of its oil and gas hedges to about $1.02 billion, or DKK 7 billion.

The move comes after a strategic review of the company’s E&P business as Dong prepares its initial public offering.

The company said it will keep the E&P business as part of its planned IPO.

Dong added that, going forward, cash flows from its E&P business will help fund the company’s investments in renewable energy.

“In line with the rest of the industry, E&P needs to adapt to the significant decline in oil and gas prices. Actions are being undertaken to de-risk the E&P portfolio and focus on cash generation within the new market reality,” Dong said.

Dong holds oil and gas assets in Denmark, Norway and the UK.

Dong’s E&P segment accounted for 18 percent of the company’s 2014 revenue and 52 percent of its 2014 ​EBITDA.