Origin Energy’s profit nearly halves

Australia’s Origin Energy said it will not pay a final dividend as its full-year underlying profit nearly halved due to low oil and gas prices.

Origin, that owns a 37.5 percent stake in the Australia Pacific LNG project, said its underlying profit from continuing operations was at A$354 million (US$272.6) in the year ending June 30, down 41 percent on the previous year.

Statutory loss from total operations was $589 million, an improvement of 10 percent on the prior year, according to the report.

Origin net debt decreased $4 billion to $9.1 billion thanks to the sale of its Contact Energy business in New Zealand and a sale of new shares.

The Sydney-based company said its operational performance was boosted by the January start-up of the ConocoPhillips-operated ALNG project on Curtis Island.

According to Origin, APLNG Train 2 is expected to commence production in the second quarter of FY2017.

“This transition from development through to production in FY2016 and FY2017 will see the company benefit significantly from its investment in APLNG through earnings and returns from FY2018 and beyond,” the statement said.

Production has ramped up quickly to above design nameplate capacity since the start-up and to date, Origin said, adding that APLNG has shipped 36 cargoes, primarily to its two major customers, Sinopec and Kansai.

At full capacity, APLNG’s two train LNG production facility is expected to supply nine million tonnes per annum (mtpa) of LNG.

“The maiden EBITDA contribution from the commencement of LNG production by APLNG has in part offset the impact of lower oil prices on the Integrated Gas business which decreased by $112 million to $386 million. As the investment in APLNG nears completion and cash flows from production reduced Origin’s required contribution to APLNG, cash flow after operating and investing activities has improved by $1.4 billion to ($1.6) billion,” Managing Director Grant King said.

“In association with the commencement of LNG production, Origin brings to account its share of APLNG’s Interest, Tax, Depreciation and Amortisation (ITDA). This has increased ITDA in Origin’s accounts from $62 million to $296 million and includes a disproportionate share of costs associated with infrastructure assets. The increase in revenue at current low oil prices did not fully offset the increase in ITDA and is the main driver of the decline in Underlying Profit from continuing operations of $249 million to $354 million,” said King.

Origin’s remaining contribution to APLNG is expected to be $0.6 billion from 1 July 2016 until APLNG is self-funding, in line with previous guidance. Capital expenditure (excluding APLNG) for the 2017 financial year is expected to be

Capital expenditure (excluding APLNG) for the 2017 financial year is expected to be approximately $550 million, limited to maintaining existing assets, IT spend in Energy Markets, completing projects that have commenced and meeting joint venture and permit commitments, the company said.

This is higher than previous guidance due to the timing of asset sales and the completion of the Halladale/Speculant project, additional spend associated with appraisal testing on the Waitsia resource and additional maintenance spend in the Otway Basin and the Darling Downs Power Station.

Origin continues to target further debt reduction and expects adjusted net debt to be well below its target of $9 billion at the end of the 2017 financial year, said King.

“In FY2018 and beyond, as APLNG completes the transition from development to production of its LNG project, Origin expects to see significant growth in earnings and returns, strong cash flow and continuing reduction in debt,” he added.