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Origin books $1.68bn LNG-linked loss for 1H17

Glenn Freeman  |  16 Feb 2017Text size  Decrease  Increase  |  

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Origin Energy has reported a $1.68 billion loss for 1H FY2017, down $1.4 billion on the same period a year earlier.


This is largely attributed to a post-tax $1.9 billon impairment, relating to a $1 billion carrying value reduction of Australia Pacific LNG (APLNG), in which Origin (ASX: ORG) holds a 37 per cent stake. Write-downs were also accrued from its Browse Basin, NewCo and Energia Austral assets--of $578 million, $170 million and $114 million, respectively.

Origin CEO, Frank Calabria, blamed the losses--which came primarily from its LNG operations--on the low oil price environment, which provided: "insufficient LNG revenue to cover interest, tax, depreciation and amortisation."

Underlying profit of $184 million was down 28 per cent on the prior period, driven by the lower contribution from APLNG.

However, Calabria said the company's operational performance was "solid during the period, with a number of important milestones achieved."

“Pleasingly, higher contributions from Origin’s two business units, Integrated Gas and Energy Markets, delivered a $277 million increase in underlying EBITDA [earnings before interest, tax, depreciation and amortisation] to $1.15 billion."

Shareholders will not receive an interim dividend, with Origin continuing to review distributions in the context of its ongoing focus on debt reduction.

Its core division, energy markets--which includes power generation and retailing--delivered underlying EBITDA of $734 million. Gas sale volumes to Origin's business customers increased 24 per cent, and it maintained competitive pricing despite market pressures during the period.

Its electricity generation and retailing business also contributed to margin improvements.

Integrated gas, which includes Origin's conventional gas fields and APLNG, reported $42 million in underlying EBITDA, a $305 million increase from $137 million in 1H FY16. This takes into account $80 million in write-downs relating to oil-linked gas pricing, which hit domestic sales, oil hedging and operations at several gas fields.

Management forecasts FY2017 EBITDA of between $2.45 million and $2.6 million, with this guidance assuming an average oil price and Australian-to-US currency rate of US$52 per barrel and 73 cents, respectively.

Origin has also previously announced business restructure plans, flagged in December 2016. This will involve separating its conventional oil and gas business, and listing the new entity on the Australian Securities Exchange.

The initial public offer is slated for the June quarter, with details yet to be announced. This is expected to further reduce Origin's debt, which is on track to exceed the mid-2017 target of sub-$9billion.

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Glenn Freeman is Morningstar's senior editor.

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