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Origin to recognise non-cash impairment charge for 2H17

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LNG Industry,

Origin Energy Ltd has announced that it expects to recognise an impairment charge of approximately $1.2 billion (post-tax) for the second half of the 2017 fiscal year in its full year results to be released on 16 August 2017.

It is expected that Australia Pacific LNG (APLNG) will recognise an impairment charge on its assets, of which Origin expects to reflect its 37.5% share ($815 million post tax). When APLNG reviews the carrying value of its assets, it takes a number of assumptions into consideration, including oil price, Australian/US dollar exchange rates, discount rates and costs. Since the last assessment at 31 December 2016, although there have been changes in the number of relevant assumptions, the principal change is a decrease in oil price assumptions to US$67/bbl (real 2017) from 2022.

Origin also claims that it is expecting an impairment charge of $357 million (post tax) for Lattice Energy, its conventional gas assets currently held for sale. The company claims that the sale process is progressing towards execution by the end of this year. The impairment charge reportedly arises as a result of assessing the current carrying value of Lattice Energy against the expected proceeds from divestment net of estimated cost of disposal and partly reflects the cessation of depreciation and amortisation from 7 December 2016.

Consequently, when 1H17 and 2H17 impairment charges are aggregated, Origin is expecting to report a total impairment charge of $3.1 billion. The aggregate impairment charge is subject to finalisation of the company’s full-year financial statements, and is a post-tax, non-cash item, without any impact on either cash flow or underlying EBITDA.

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