Origin Energy Lifts Outlook After Ironbark Impairment
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Yes, there is life after years of board inaction and overspending on LNG for Origin Energy.
Last week it warmed us up to expect another round of impairments (on its ironbark gas field in Queensland) and write downs totalling more than $600 million pre tax - which was smaller though than over $3 billion in the past couple of years.
That set up another loss, this time for the six months to December, which the company duly confirmed yesterday.
But rather than wobble, the shares surged 8% at one stage before easing back to end the day up just over 5% at $8.76.
The energy retailer and gas exporter reported underlying earnings before interest, tax depreciation and other movements jumped 51% to $A1.49 billion.
While the loss for the period narrowed to $A207 million, from $A1.56 billion in the six months to December 31, 2016.
And to top it off the raised guidance for full-year underlying EBITDA from its energy markets division to a range of $A1.78 billion to $A1.85 billion, a rise of $50 million.
It also reaffirmed guidance for its LNG export unit.
CEO Frank Calabria, said in the statement: We are seeing positive momentum in the performance of the business. Notwithstanding our statutory loss of $207 million, the improvement in Origin’s underlying profit reflects a strong operating performance by the business in the first half of FY2018.
But what analysts really liked was the continuing cost cutting and commitment to paying down debt. So there is no interim dividend and so far in 2017-18 it has spent $A1 billion this year, taking its debt-to-EBITDA ratio from 5.9 times down to 3.9.
And Origin says it will redeem its 500 million euro ($US785 million) capital securities, due in 2071, this year.
Revenues rose% cent year on year, from $6.085 billion to $7.262 billion, while operating cash flows increased from $386 million to $552 million.
Mr Calabria was positive on the results, despite the loss.
“Notwithstanding our statutory loss of $207 million, the improvement in Origin’s underlying profit reflects a strong operating performance by the business in the first half of FY2018,” Mr Calabria said.
Origin’s gas division was the standout performer – excluding Lattice Energy. It lifted earnings 120% year on year, from $287 million in the first half of 2017 to $630 million in the first half of 2018.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.