UNDERLYING BUSINESS PERFORMANCE
Origin Managing Director, Mr Grant King said, “During the period, Origin delivered solid operational performance with significant progress across its four key priorities.
“We have improved returns in Energy Markets, Australia Pacific LNG remains on track, our capabilities in renewables continue to grow with important progress made in solar, and liquidity is sufficient to meet our remaining contributions to Australia Pacific LNG and other business initiatives.
“Our ability to take advantage of attractively priced ramp gas in our Energy Markets business as production commences at the Queensland LNG projects led to increased natural gas sales and resulted in Origin reducing its own gas production. The consequential reduction in liquids production and lower oil prices resulted in a decreased contribution from our Exploration & Production business. The deferred gas and liquids production will be produced in subsequent periods.
“We have made strong progress on plans to reduce Australia Pacific LNG’s total upstream cost structure by $1 billion per annum. During the period, initiatives were implemented to reduce annual upstream costs by approximately $650 million, with a target of an additional $350 million of cost reduction initiatives to be implemented by the end of the 2016 financial year.
“With the completion of a period of significant development, Origin’s cash costs will be reduced in line with future business priorities. Origin has initiated a company-wide project which is expected to deliver costs savings of $200 million from the 2017 financial year.
“We continued our positive trend in safety performance, achieving our lowest ever Total Recordable Injury Frequency Rate of 3.8,” Mr King said.
Origin’s Underlying EBITDA was $2.15 billion for the 2015 financial year, a $10 million increase on the prior corresponding period.
Underlying EBITDA for the Energy Markets business increased by 20 per cent to
$1.26 billion. This was mainly due to a higher contribution from the natural gas segment due to increased sales. This is also reflected in an improved Underlying EBIT margin for Energy Markets of 9.9 per cent, which increased from 8.4 per cent5 in the prior year.
Total customer accounts increased by 4,000 in the second half of the financial year, reducing the net loss in customer accounts to 28,000 for the year.
Continued competition in Victoria and NSW contributed to the reduction in customer accounts, with 75,000 Electricity customer account losses. This was offset by an increase of 47,000 in natural gas customer accounts as Origin expands its natural gas penetration.
Origin also confirmed its intention to become number one in solar by installed capacity. During the year, a Solar as a Service product was introduced, which allows a larger number of customers to access the benefits of solar.
In Australian dollars, Contact Energy Underlying EBITDA decreased by $46 million to $487 million (NZ$525 million), reflecting continued competition and retail price discounting eroding tariff increases to recover increased distribution costs. This was partially offset by increased geothermal generation following the commissioning of Te Mihi power station.
Exploration & Production
Exploration & Production Underlying EBITDA decreased by 18 per cent to $399 million due to lower liquids production and lower liquids prices. As foreshadowed at the half year, the availability of Queensland ramp gas allowed Origin to use less gas from its own production, with the consequential reduction in liquids production. This forgone gas and liquids production will be produced in subsequent periods.
At BassGas, condensate and compressor modules were lifted onto the Yolla Platform and Yolla-5 and Yolla-6 production wells drilled, with production commencing subsequent to the year end. These activities will increase production into growing gas demand in eastern Australia.
Successful exploration and appraisal drilling programs reflected in the discovery of commercial quantities of gas in the Otway (Speculant) and Perth (Senecio and Waitsia) Basins.
Origin’s 2P reserves at 30 June 2015 totalled 6,260 PJe, a reduction of 213 PJe on the previous year, with 147 PJe attributable to production and 66 PJe net reduction in reserves primarily due to lower oil price assumptions, revised development plans, and reservoir performance across various assets, partly offset by new bookings.
Underlying EBITDA for LNG decreased by 13 per cent to $72 million.
At 30 June 2015, the Upstream project was 97 per cent complete and the Downstream project was 92 per cent complete. The project remains on track to commence sustained LNG production from Train 1 from the second quarter of the 2016 financial year and from Train 2 approximately six months later.
Origin’s cash contribution to Australia Pacific LNG was $2.2 billion during the period. At 30 June 2015, $25 billion6 had been spent by Australia Pacific LNG and estimated costs to complete are not expected to be materially different from budget7.
Underlying EBITDA was a loss of $69 million, compared to a loss of $17 million in the prior year. The higher underlying EBITDA loss reflects higher corporate costs and lower cost recoveries from Australia Pacific LNG under the service provider agreement.