https://www.engineeringnews.co.za

Origin slashes jobs as it swings to a loss

Origin slashes jobs as it swings to a loss

Photo by Bloombeg

20th August 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

Font size: - +

PERTH (miningweekly.com) – The share price of ASX-listed Origin Energy tumbled nearly 13% on Thursday as the company swung to a loss for the 2015 financial year and reported that it would slash some 800 jobs by 2017.

Origin on Thursday reported a statutory loss of A$658-million for the financial year ended June 30, compared with the statutory profit of A$530-million reported in the previous financial year, on the back of declining oil prices.

The company said the loss reflected a noncash impairment charge of A$705-million, primarily relating to Origin’s shareholding in Contact Energy, as well as to Origin’s upstream assets.

Underlying profit was reported at A$682-million, down 4% from the A$713-million reported in 2014.

“We have consistently stated that the 2015 and 2016 financial years are transitional years for Origin, as we complete the final stages of our investment in Australia Pacific liquefied natural gas (LNG),” chairperson Gordon Cairns said.

“Work on the Australia Pacific LNG project is nearing completion and the project remains on track to commence sustained production from Train 1 from the second quarter of the 2016 financial year and from Train 2 about six months later.”

While the project would start sustained production in 2016, LNG exports from the project would not be recognised on Origin’s income statement until a performance test of Train 1 was satisfied, which would likely be only the second half of 2016.

The 2017 financial year would be the first year in which a full year of operation from both the LNG trains would be recorded.

Origin has warned that if oil prices continued to remain at current spot prices, the linkage of LNG prices to oil prices would significantly reduce the contributions from the Australia Pacific LNG project, relative to prior expectations.

At an oil price of A$100/barrel, Origin expected its share of cash flow from the Australia Pacific LNG project to be around A$900-million a year, on average, from 2017 onward. However, for every A$10/barrel change in the oil price, Origin’s expected cash flow from the project would reduce by A$200-million.

Meanwhile, MD Grant King pointed out that the company had made strong progress to reduce the project’s total upstream cost structure by some A$1-billion a year and, during the full-year, initiatives were implemented to reduce yearly upstream costs by some A$650-million, with a targeted additional A$350-million in 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 cost savings of A$200-million from the 2017 financial year,” Grant said.

As part of this cost saving initiative, Origin on Thursday said it would reduce staff numbers by around 800 by the 2017 financial year, saying that the redundancy and restructuring costs were expected to largely offset any savings made in 2016.

The company had also combined its exploration and production, and LNG businesses, into a single unit, called Integrated Gas, while growth capital expenditure for 2016 would decline to around A$650-million.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

Latest Multimedia

Magazine video image
Magazine round up | 29 March 2024
Updated 20 minutes ago

Showroom

Yale Lifting Solutions
Yale Lifting Solutions

Yale Lifting Solutions is a leading supplier of lifting and material handling equipment in Southern Africa. Yale offers a wide range of quality...

VISIT SHOWROOM 
Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.065 0.113s - 156pq - 2rq
Subscribe Now