Half Year Report to Shareholders for the half year ended 31 December 2016.

Half year report to shareholders (6 pages)

Message from the Chairman and Managing Director

During the period, we continued to take action to strengthen our balance sheet and build further resilience in the low oil price environment.

Solid performance from continuing operations

In reporting on the half year ended 31 December 2015, the Company delivered a solid underlying performance from its continuing operations with Underlying EBITDA of $807 million and Underlying Profit1 of$243 million. Origin also recorded a Statutory Loss of $254 million.

The strong performance of Origin’s Energy Markets business, which delivered a $100 million increase in Underlying EBITDA during the period, contributed to Origin’s steady Underlying EBITDA. The increase in Energy Markets’ contribution was driven by higher natural gas volumes and margins, stable electricity contribution, and continued improvement in Cost to Serve.

A very important milestone achieved by Australia Pacific LNG during the period has been first production of LNG with five cargoes exported to date2. Given the long-term nature of this project, we believe Origin’s investment in Australia Pacifi c LNG will be rewarding for shareholders despite current low oil prices.

Origin also announced a non-cash impairment of $244 million – driven primarily by prior decisions to reduce debt and preserve cash through restructuring, the discontinuation of geothermal activities and deferral of large-scale IT projects.

Improved resilience to oil price

In the half, Origin achieved $5.5 billion in debt reduction and initiated cash preservation measures to reduce net debt to below $9 billion in FY2017.

To guard against falls in oil price below US$40 per barrel in FY2017, Origin has purchased put options to provide a partial off set to any additional contributions to Australia Pacific LNG.

A $1 billion planned reduction in Australia Pacific LNG’s upstream operating costs has been achieved six months ahead of schedule. As Upstream operator for the project, Origin is working on further reducing Australia Pacific LNG’s breakeven costs.

Our Electricity and Natural Gas Cost to Serve continues to fall and Energy Markets remains on track to achieve a targeted $100 million cost reduction, as well as a $50 million reduction in capital expenditure by the end of FY2016.

We also remain on track to deliver $200 million in functional cost savings from FY2017 and are targeting at least $800 million from asset sales.

Dividend

In line with guidance provided at the time of last year’s Entitlement Offer, the Board has determined an unfranked interim dividend of 10 cents per share, which represents a payout ratio of 55 per cent of underlying earnings. The dividend will be paid to shareholders on 31 March 2016.

Prospects

To drive improved returns for shareholders in a low oil price environment, Origin continues to progress its three key priorities of growing the contribution from Energy Markets; growing production and reducing costs in Integrated Gas; and maintaining adequate funding and an appropriate capital structure.

Thank you for your ongoing support.

Gordon Cairns
Chairman
Grant King
Managing Director
References
  1. A reconciliation between Statutory and Underlying Profi t measures can be found in note A1 of the Origin Consolidated Interim Financial Statements.
  2. As announced with the interim financial results on 18 February 2016.