Origin Energy is confidently expecting a solid rise in 2011 profit of up to 15%, according to upbeat guidance issued by the group yesterday.
The company, which reported its 2010 result yesterday, said it also expects underlying earnings before interest, tax, depreciation and amortization to increase by about 35%, “based on current market conditions”.
The company revealed 10% rise in its 2010 underlying profits to $585 million, but that didn’t win approval from investors and the shares slipped 29c, or 1.8%, to $15.31.
Perhaps the reason for this disappointment was comments from CEO Grant King, suggesting that it was time for coal seam gas producers in Queensland to look at merging their respective interests.
He told analysts that it was time the various groups, which include Santos and its partner, Petrobras, Shell/Petrochina (which is completing the takeover of Arrow), BG Group and others to look at talking merger.
Origin is a major player in the sector through its 50% sale of its coal seam gas interests to US giant ConocoPhillips a couple of years ago.
Origin and ConocoPhillips have plans for their own LNG export plant, but haven’t signed any customers yet.
Four LNG project are due to start in Queensland in the next three to four years based on producing LNG from coal seam methane.
Analysts are concerned that there won’t be enough demand to support every development, or at least some of their ambitious timetables and Mr King’s call was interpreted as confirmation that Origin and Conoco realise they may miss the bus when it comes to major export sales and completing their plans, hence the weakening in the Origin share price yesterday.
On its crucial $35 billion Australia Pacific LNG project with Conoco, Origin said it would consider a final investment decision in the next year.
“Over the next year” Origin will consider a final investment decision to proceed with the Australia Pacific LNG project, purchasing electricity assets to be sold by the government of New South Wales and developing wind, geothermal and solar energy opportunities, it said yesterday.
"Total expenditure on gas and oil exploration activities is expected to be around $170 million with the majority of expenditure in the first half of the 2011 financial year.
"Embedded in the guidance is an assumption that some elements of this program may be unsuccessful and will therefore be expensed as part of the underlying performance of the business in the 2011 financial year," Origin said yesterday.
Apart from this concern, Origin’s 2010 profit rise was based on a strong performance in its electricity businesses – including a 70% rise in pre-tax earnings in generation and a 20% improvement in earnings from its power retailing business.
On a statutory basis, profits slumped 91% to $612 million, but this came after the company earned an extraordinary profit of $6.7 billion from selling those coal seam gas assets to Conoco in 2009.
In the year ahead, Origin expects a bigger increase in underlying profits of 15%, thanks to the first full-year contributions from the Darling Downs power station in Queensland and several gas projects.
However, analysts say any signs of progress on the NSW power privatisation and its Queensland LNG ambitions are likely to be the key driver of its share price, as we saw yesterday.
The company held its final dividend steady at 25c a share. That made a total for the year of 50c a share.
Oil Search reported a sharp rise in 2010 interim profit, driven by higher prices and increased sales.
But the increase in prices was much greater at 47%, compared to a rise in output of around 5%.
The Papua New Guinea-based oil and gas group yesterday said in its half year profit report that net profit after tax for the six months to June 30 was $US52.86 million, up 48.6% on first half of 2009 when it made $35.58 million.
In Australian dollars, profit rose 18.1%, to $59.1 million, up from $50.1 million in the first half of 2009.
Oil Search said its profit jump was driven by firmer realised oil prices and an increase in the volume of oil sales.
The realised price for oil was up 47% in the six months to June this year to $US51.84 per barrel, while saleable oil production was up just 5% to 3.2 million barrels.
Oil Search confirmed 2010 full year production would be between 7.2 and 7.4 million barrels of oil equivalent (mmboe).
Revenue was up 49.4% to $US276.6 million for the six months to June.
Oil Search declared an interim dividend of 2 USc per share, unfranked.
"Oil Search had a pleasing profit performance in the first half of 2010," said chief executive Peter Botten in the statement.
Total oil and gas production was up 4% to 3.95 million barrels of oil equivalent.
That increase was mostly due to the success of Oil Search’s ADT2 ST3 well, Oil Search said.
But the company said the commencement of full scale activities at the huge $US15 billion PNG LNG project had an inflationary impact on labour and contractor costs, while higher oil prices have led to g
