11 April 2017
Half Year Report to Shareholders 2017
Message from the Chairman and CEO
We are pleased to share Origin’s half year results for 2017 including progress on our key priorities.
Our operational performance was solid during the period and a number of important milestones were achieved. A review of the carrying value of all Origin’s assets also led to an impairment charge that heavily impacted the statutory result.
Solid operational performance
Underlying EBITDA increased by 32 per cent or $277 million to $1.15 billion, driven by higher contributions from Origin’s two business units, Integrated Gas and Energy Markets.
In Integrated Gas, completion of Australia Pacific LNG was a standout achievement. This, along with first gas from the Halladale and Speculant fields in the Otway Basin, resulted in a significant increase in production, EBITDA and cash flow. Energy Markets continued to deliver increasing earnings, with the natural gas and electricity portfolios performing well. Customer numbers increased, as did gas and electricity volumes, and higher margins were achieved in solar and energy services.
In December 2016, we announced an intention to sell via Initial Public Offering (IPO) Origin’s conventional upstream assets. Progress continues on this transaction and it is on track to complete in 2017. Other important developments included installation of a new leadership team, including the appointment of Lawrie Tremaine as Chief Financial Officer, and continued progress on asset sales.
Origin recorded a Statutory Loss of $1.7 billion, principally driven by an impairment of $1.9 billion. The total impairment charge was comprised of Origin’s 37.5 per cent share of Australia Pacific LNG’s impairment of its assets ($1.03 billion), and impairment of investments in the Browse Basin ($578 million), conventional exploration assets ($170 million) and Energía Austral SpA ($114 million). The total impairment charge is an after tax, non-cash item with no impact on cash flow or EBITDA.
Underlying Profit of $184 million was a 28 per cent reduction on the prior period.
The Board has determined not to pay a dividend in respect of earnings for the first half of the 2017 financial year. The Board will continue to review each dividend in light of our focus on debt reduction.
Origin’s FY2017 Underlying EBITDA guidance range, which was previously $2.370 billion to $2.615 billion, has improved to $2.450 billion to $2.615 billion, subject to market conditions. Underlying Profit guidance is $480 million to $590 million for FY2017.
Adjusted net debt is targeted to be well below $9 billion by the end of FY2017. Upon completion of the expected sale via IPO of the conventional upstream assets, we expect a further material reduction in debt.
Origin’s focus is on our Energy Markets business and a simplified Integrated Gas business.
Leadership in Energy Markets means delivering a market leading customer experience with a focus on our digital and innovation capabilities, growing the volume of renewable energy we supply and developing new energy solutions for our customers.
The Integrated Gas business is aiming to build on our leadership as Australia’s largest onshore unconventional gas developer and operator, using our scale and capability to explore, develop and produce unconventional gas resources. We will also continue to execute momentum at Australia Pacific LNG by improving operating and capital efficiency.
We believe focusing on these key priorities will position Origin for growth in a rapidly changing market.
Thank you for your continued support.
- A reconciliation between Statutory and Underlying Profi t measures can be found in note A1 of the Origin Consolidated Interim Financial Statements.
- As announced with the interim financial results on 18 February 2016.