21 February 2019

Half Year Results 2019

Origin delivers solid operational performance and reinstates dividend

Origin Energy Limited (Origin) today announced a Statutory Profit of $796 million for the half-year ended 31 December 2018.

This result compares to a Statutory Loss of $136 million from continuing operations in HY2018, which included a significant after-tax impairment charge of $360 million.

In HY2019, Origin’s Underlying EBITDA was $1,727 million, with Underlying Profit of $592 million, reflecting higher oil linked revenues in Integrated Gas and reduced financing costs from lower debt and interest expense.

Increasing levels of competition in the retail electricity market, combined with the impact of providing price relief to customers, kept the performance of Energy Markets relatively flat.

Net cash flow from operating and investing activities (NCOIA) increased to $754 million, including a $393 million net cash distribution from Australia Pacific LNG.

Origin has declared a fully franked dividend for HY2019 of 10 cents per share. 

 

Performance summary

HY2019

HY2018

Statutory Profit/(Loss) – total operations

Statutory Profit/(Loss)*

$796 million

$796 million

($207) million

($136) million

Statutory EPS*

45.3 cps

(7.8) cps

Underlying Profit*

$592 million

$388 million

Underlying EPS*

33.7 cps

22.1 cps

Underlying EBITDA*

$1,727 million

$1,435 million

NCOIA – total operations

$754 million

$351 million

Underlying ROCE*

Gearing (debt/debt + equity)

8.6%

32 per cent

6.7%

42 per cent

Interim dividend

Total Recordable Injury Frequency Rate (TRIFR)

10 cps

3.4

Nil

1.9

*continuing operations


Origin CEO Frank Calabria said, “Origin delivered a solid performance over the half, with Energy Markets performing well in a challenging environment and Integrated Gas making a significant contribution as a result of higher commodity prices and reliable operations from Australia Pacific LNG.

“Our debt reduction is on track and we are approaching our target capital structure as we continue to target productivity efficiencies in Australia Pacific LNG and Origin more broadly.

“Adjusted Net Debt now stands at around $6 billion, down a further $438 million in the half. We recently announced the sale of the Ironbark asset to Australia Pacific LNG. This sale, once approved by regulators, will further assist in reducing debt.

“Having materially reduced debt and improved business performance over recent years, Origin is now in a position to pursue strategic opportunities. The recent acquisition of centralised energy services business, OC Energy, demonstrates this disciplined approach to future growth.

“Disappointingly, our safety performance deteriorated during the half with TRIFR increasing to 3.4, from 2.2 in FY2018. We strive for zero harm to our people and our focus remains on achieving this objective, with organisation-wide safety programs underway.

“Origin will continue to focus our efforts in leading Australia’s transition to a low-carbon economy. We work every day to make energy more affordable, more sustainable, smarter and easier for our customers,” he said.

Customer

“Our customers are at the heart of our business and we know that high energy prices continue to have an impact on them. To help address affordability, Origin has recently held or reduced electricity prices. We have also continued to protect our hardship customers from the impact of price rises since 2016,” Mr Calabria said.

“In July 2018, we lowered or held flat electricity prices in New South Wales, Queensland, South Australia and the ACT. Concession customers in these states and the ACT also benefited from an automatic discount on their standing rates from 1 January 2019. In Victoria, we continue to offer our customers significant discounts of up to 26 per cent on their plans.

“We are making a step-change in our Retail business to transform the customer experience and we were recently a founding signatory to The Energy Charter, an industry-led initiative addressing customer expectations of the sector.

"Origin will continue to advocate on behalf of our customers for energy and climate policies that will result in sustained and structural reductions in energy prices,” he said.

Dividend

The Board has determined to pay a fully franked interim dividend of 10 cents per share.

Origin Chairman Gordon Cairns said, “I am pleased to announce the payment of a 10 cent fully franked interim dividend. Recommencing the payments of dividends represents an important milestone for Origin given the focus over the past three years on improving business performance and reducing debt.”

OPERATIONAL PERFORMANCE (CONTINUING OPERATIONS)

Business segment

HY2019

HY2018

Change

Change

Energy Markets

$852 million

$834 million

$18 million

2%

Integrated Gas

$900 million  

$630 million

$270 million

43%

Corporate

($25) million

($29) million

$4 million

14%

Underlying EBITDA

$1,727 million

$1,435 million

$292 million

20%

 

Energy Markets

Growth in Energy Markets was kept to a modest 2 per cent, with Underlying EBITDA of $852 million.

This increase was mainly driven by the gas portfolio, underpinned by strong sales to business customers. The electricity portfolio was impacted by high levels of competition, customer price relief initiatives and lower electricity usage per customer.

Energy Markets experienced net customer account losses of 28,000 for the half. We continue to focus on improving the customer experience and address cost to serve by targeting efficiencies within our Retail business, as part of the organisation-wide productivity effort. 

Origin continued to provide reliable power supply to customers by maximising output from Eraring Power Station, upgrades at other smaller stations and through new contracted renewable energy projects. This half, 306 megawatts of new solar energy came online and a further 773 megawatts of new renewable energy is targeted to come online by 2020.

Integrated Gas

Underlying EBITDA in Integrated Gas increased by $270 million or 43 per cent to $900 million.

This growth was driven by higher commodity prices, particularly higher oil prices combined with reliable production from the Australia Pacific LNG project. The contribution from Australia Pacific LNG was partly offset by the cost of commodity hedging.

Origin’s cost-per-well and operational cost reduction targets are on track to deliver a June 2019 run-rate distribution breakeven, after servicing project financing, of below US$40 per barrel in FY2020.

Outlook

Origin provides the following update to FY2019 guidance, if market conditions do not materially change, and the regulatory and political environment does not adversely impact operations. 

Energy Markets guidance is unchanged, with Underlying EBITDA expected to be $1.5 to $1.6 billion.

The second half of FY2019 is expected to be lower than the same period for FY2018 as a result of environmental certificate trading gains not repeated ($30 million) and the continued impacts of retail competition, including price relief initiatives ($60 million) and lower customer usage.

Australia Pacific LNG’s guidance is an expected production range 665 to 685 PJs and 250 to 300 operated wells drilled (100 per cent share). Australia Pacific LNG is targeting an operating breakeven of US$23 to 26/boe and a distribution breakeven of US$39 to 42/boe[1].

Capital expenditure, excluding Australia Pacific LNG and acquisitions, remains unchanged and is expected to be $385 to $445 million.

A fully franked dividend of 10 cents per share is expected at Full Year 2019 results.

[1] Assuming an AUD:USD exchange rate of 0.72

 


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