Origin Energy Ltd (ASX: ORG) couldn't have picked a better day to announce its interim results – which were never going to be pretty – with the oil price enjoying a surge overnight by around 8% as investors globally reacted to speculation that major producing countries would look to freeze production levels.
Whether that positive lead from the oil price carries over to investor enthusiasm (or lack of) for Origin's results remains to be seen…
Here are the key points from Origin's profit announcement for the six months ending December 31:
- Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations fell 5% to $807 million
- Underlying profit from continuing operations dropped 21% to $243 million
- Interim dividend was slashed from 25 cps to 10 cps (both unfranked)
- Net debt reduced 30% to $9.3 billion
- The highlight from the result was the Energy Markets division which achieved a 16% rise (equating to $100 million) in underlying EBITDA to $721 million
Outlook:
Having reduced debt by $5.5 billion during the period – thanks primarily to a large, discounted capital raising and the sale of its stake in CONTACT EN FPO NZX (ASX: CEN) – the Chairman Mr Gordon Cairns noted that the group had initiated cash preservation measures to reduce debt to below $9 billion in financial year (FY) 2017.
Origin has also been proactive at cost saving initiatives. Managing Director Mr Grant King noted that:"A $1 billion planned reduction in APLNG's upstream operating costs has been achieved six months ahead of schedule. Our Electricity and Natural Gas Cost to Serve continues to fall and Energy Markets remains on track to achieve a targeted $100 million cost reduction by the end of FY16. We also remain on target to deliver $200 million in functional cost savings from FY17 and during the past 12 months, employee numbers have reduced by 1,900 across the business."
Guidance:
Origin has provided the following guidance for underlying EBITDA for the full year to 30 June 2016 of between $1.45 billion and $1.55 billion.
For FY 2017, Origin has provided guidance of between $1.9 billion and $2.1 billion in EBITDA. Both forecasts exclude the contribution from APLNG.
With regards to APLNG, the guidance range is for an underlying EBITDA contribution of between $30 million and $80 million in FY 2016 and an underlying EBITDA of between $650 million and $750 million in FY 2017.
