Origin Energy Ltd has announced a 40% increase in statutory profit to AU$ 530 million for the financial year ended 30 June 2014.
However, the company’s underlying profit fell 6% to AU$ 713 million. This result was attributed to a lower contribution from energy markets, which was partially offset by higher contributions from all other segments.
Origin Chairman, Gordon Cairns, said: “As foreshadowed at the beginning of the year, our Energy Markets business has faced challenging market conditions placing pressure on electricity margins. In the second half of the year, we have seen some improvements in those margins suggesting that our focus on improving the performance of our existing businesses is delivering results.”
Mr Cairns continued: “The 2015/16 financial years will be a transitional period for Origin with the commencement of LNG production by Australia Pacific LNG in mid-2015 after a seven- year development phase.
“The LNG project will deliver a step change in Origin’s earnings and cash flow from the 2016 financial year when the project begins to deliver LNG under its existing long-term contracts.
“The first full year of earnings and cash flow from two LNG trains at Australia Pacific LNG is expected in the 2017 financial year, with distributable cash flow of around US$ 1 billion (Origin’s 37.5% share) on average per year. The step change in cash flow will allow Origin to increase shareholder distributions, maintain an investment grade credit rating and reinvest cash in growing businesses.
“Origin is well placed to fund its commitment through to completion of the Australia Pacific LNG project, with AU$ 5.1 billion of existing liquidity comprising undrawn debt facilities and cash.
“During the period, Origin announced the acquisition of a 40 per cent interest in the Poseidon exploration permits in WA’s highly prospective Browse Basin. We believe that acquiring these resources, when compared with greenfield exploration, substantially reduces the risk of securing opportunities to drive Origin’s long-term growth.
“Given the company’s strong cash flow over the past financial year and good progress on Australia Pacific LNG, Origin intends to refinance the debt facilities used for this acquisition via the issue of a new Euro hybrid security as an alternative to ordinary equity.”
Origin Managing Director, Grant King, said: “Overall we are pleased with the improvements in operational performance of our existing businesses and the progress made on Australia Pacific LNG. This has been achieved together with a much improved safety result, evidenced by the 23% reduction in the total recordable injury frequency rate from 6.5 to 5.”
Underlying EBITDA increased by 38% to AU$ 83 million, primarily reflecting higher domestic gas sales and production.
In Australia Pacific LNG’s Upstream Project, Origin Energy reports that drilling and gathering operations are progressing to plan with 821 wells drilled at year end. The first train of the Condabri Central Gas Processing Facility was commissioned in June 2014, while Condabri Central Train 2, Reedy Creek Train 1, Condabri South Train 1 and Orana Train 1 have also now reached mechanical completion. The Condabri water treatment facility is in commissioning while construction of the remaining gas and water treatment processing facilities remain on plan.
In addition, purified water for agricultural purposes was delivered to 13 farms as part of the Fairymeadow Road Irrigation Pipeline project. Construction of the 530 km main gas transmission pipeline is complete with commissioning progressing to plan.
In Australia Pacific LNG’s Downstream Project, all Outside Battery Limit and Inside Battery Limit (Train 1) modules are in place. Train 2 modules are also being delivered, with all modules expected to be set by the end of calendar 2014. Piping and cable installation is progressing, as are preparations for commissioning.
LNG tank construction continued ahead of schedule with welding complete on all inner tank rings. Roof module installation was completed on Tank A and commenced on Tank B. Tank A was hydrostatically tested. Construction of the LNG jetty, loading platform, formworks and concreting for berthing dolphins continued.
Origin Energy expects the 2015/16 financial years to be a transitional period for the company with the commencement of LNG production in Queensland and in particular by Australia Pacific LNG in mid-2015. Increasing LNG production will result in expanding gas margins and an improving supply/demand balance in electricity markets. Origin’s energy markets businesses are maturing and operating in a consolidated, lower growth and more competitive environment. Investment in generation and retail systems is essentially complete. In view of these developments, Origin’s key priorities over the next few years include improving returns in its energy market businesses and delivering growth in the natural gas and LNG businesses.
Adapted from press release by Callum O'Reilly
Read the article online at: https://www.lngindustry.com/liquefaction/21082014/origin-energy-reports-statutory-profit-1257/