As Origin Energy Ltd (ASX: ORG) moves toward the start-up of its Australia Pacific LNG (APLNG) project expected in mid-2015, complications from a weaker Aussie dollar and the collapse of world crude oil prices have lead the integrated energy producer to a $25 million reported earnings loss on the back of lower interim revenue.
The market is reacting relatively well to the earnings results, with Origin Energy shares down only 0.12% to $12.71 in morning trade.
Underlying half-year net profit was $346 million before non-cash items such as fair value changes of financial instruments and debt due to the falling Aussie dollar. Operating income was stable because Origin was able to take advantage of gas sources which will be used towards the upcoming start of LNG exportation later this year. Origin produced less of its own gas and kept expenses down.
Chairman Gordon Cairns talked about the change that will take place when the APLNG project is completed and running: "We have previously stated that the 2015 and 2016 financial years will be transitional years for Origin as the energy markets businesses mature and LNG production in Queensland commences."
Here are the half-year results highlights:
Revenue reported revenue $6.95 billion, down 4%
Earnings before interest, tax, depreciation and amortisation (EBITDA) underlying EBITDA $$1.08 billion, steady with previous corresponding period
Net profit after tax (NPAT) reported NPAT was a negative $25 million, down from $322 million / underlying NPAT was $346 million, down 9% from $381 million
Earnings per share reported EPS was -2.3 cents per share, down from 29.3 cps / underlying EPS was 31.3 cents per share, down 10% from 34.6 cps
Dividend per share interim dividend of 25 cents per share declared, same as this time last year.
Origin expects the APLNG project's remaining capex needs should not exceed budgeted figures. The first LNG processing plant, or "train", should be operational by mid-2015 and the second in mid financial year 2016.
Estimates are for around $2 billion in capex to be spent from now until the start of train 2 production. This could change due to several factors, one being the price of LNG, which is based on crude oil prices. Origin acknowledges that sustained lower oil prices could change expected growth in revenue, earnings and cash flow. That is a concern among investors and analysts because the possible changes can't be sufficiently projected until APLNG production is in full operation.
One positive point is that as the APLNG project reaches completion, capex will taper down as the revenue and potential earnings begin to flow in. This will also help the recent weakness in Origin's energy market business which supplies electricity and gas to retail and commercial customers. Increased competition has seen Origin's customer account numbers decline. In addition, as more people are generating solar-powered electricity in homes, that can affect Origin's revenue.
