Oil prices hit Origin

20th August 2020 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – Falling oil and liquefied natural gas (LNG) prices have seen ASX-listed Origin Energy report a significant fall in profits and earnings for the full year ended June.

The company has reported statutory profits of A$83-million for the 12 months ended June, compared with the A$1.21-billion in the previous financial year, while underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased from A$3.23-billion to A$3.14-billion.

Underlying Ebitda for Integrated Gas was A$1.74-billion, 8% lower than the prior year, primarily reflecting a change in accounting treatment for dewatering and workover costs at Australia Pacific LNG.

Origin told shareholders on Thursday that the fall in Ebitda also reflected the softer electricity growth profit in the energy markets, following the introduction of retail price regulation.

Meanwhile, free cash flow increased from A$1.53-billion to A$1.64-billion in the year, driven by record production from the Australia Pacific LNG project, as well as record cash distribution to Origin.

“We have faced significant challenges as a community this year amid bushfires, ongoing drought, and the Covid-19 pandemic. Throughout, our focus has been on maintaining reliable energy supply, keeping our people safe, supporting our customers who have been financially impacted, as well as supporting the broader community,” said Origin CEO Frank Calabria.

“Despite the external challenges, Origin’s underlying business performance continued to improve across the year, driving growth in free cash flow, which allowed further debt reduction, disciplined investment in growth opportunities and distributions to shareholders.”

Calabria noted that with the pandemic causing a reduction in electricity and gas demand, Origin was able to utilise the flexibility of its generation fleet and wholesale gas portfolio, as well as portfolio flexibility at Australia Pacific LNG, to adapt to market conditions and mitigate impacts on the business.

“Strong field performance helped drive record production for Australia Pacific LNG and we also received record cash distributions back to Origin.

“We have continued to focus on growth and take steps to respond to the rapidly changing energy market, establishing a strategic partnership with fast-growing UK retailer and technology company, Octopus Energy. We are progressing with plans to customise Octopus’ unique technology platform, Kraken, and adopt its globally distinctive retail operating model, with the aim of delivering a superior customer experience at market-leading cost.”

Looking ahead at the 2021 financial year, Australia Pacific LNG production is expected to be lower at 650 PJ to 680 PJ, reflecting anticipated lower demand with strong field capability to increase production in response to changes in demand.