Origin plunges to $2.2b loss, while Woodside profit up on stronger oil prices

Posted

August 16, 2017 11:38:32

Origin Energy has plunged deeper into the red, reporting a full-year $2.2 billion loss.

Key points:

  • Origin Energy announces a record full year loss on heavy oil-related impairment charges
  • Woodside’s interim profit boosted by higher prices and lower costs
  • Market reacts positively to results, sending both companies’ shares up around 4pc

It was a significant blow out on last year’s $628 million loss, but was not unexpected given the company had already flagged impairment charges of $3.1 billion.

Origin chief executive Frank Calabria described the result as a solid operational performance, significantly impacted by a non-cash impairment charge related to the price of oil.

“This year, we’ve made good progress towards our commitments, delivering a $1 billion reduction in debt and improving business performance,” Mr Calabria said.

That debt could be cut further from $9 billion to $2 billion, pending the expected sale of the company’s Lattice Energy assets.

Underlying earnings, stripping out the impairment charges, rose by 50 per cent to $550 million.

Investors appeared to focus on that number and, at 11:00am (AEST), Origin shares were up 4.2 per cent to $7.15.

Despite the big write-down in the value of the company’s stake in the APLNG joint venture in Gladstone, Queensland, Mr Calabria said the facility was world class and operating 10 per cent above its nameplate capacity.

Mr Calabria acknowledged the hardship rising energy prices were causing Australian households and said the company was continuing to simplify its offers and add new low-cost renewables into the company’s generation mix.

“Bringing energy prices down will require a whole of industry response, including networks, generators and retailers,” he said.

“We will continue to advocate for policy certainty, particularly the adoption of a clean energy target as the critical action needed to stimulate further investment in supply and deliver a genuine reduction in prices.”

The company was generally positive about its outlook, forecasting earnings would be 14-21 per cent higher next year.

Origin again failed to pay a dividend as it continues to wrestle its debt down.

Woodside also bounces on solid profit

The news was better for Australia’ biggest oil and gas producer, Woodside Petroleum, which reported a 49 per cent jump in half-year profit, supported by high prices and lower production costs.

For the six months to July, Woodside’s net profit was $US507 million ($650 million), which was roughly in line with expectations.

The company surprised with a stronger than anticipated cash flow, up 170 per cent to $570 million, which helped fuel a 44 per cent jump in interim dividend.

Woodside cut production costs by 6 per cent compared to the previous corresponding period, taking its breakeven cost of production down to $US34 per barrel.

At the same time, the average realised price was up 10 per cent to $US43 a barrel.

RBC energy analyst Ben Wilson said, while the headline result was in line with forecasts, the company had done well boosting cashflows that, in turn, had delivered better-than-expected dividends and debt reduction.

Investors agreed and, at 11:00am (AEST), Woodside’s shares has surged more than 5 per cent to $30.66.

Topics:

company-news,

oil-and-gas,

stockmarket,

australia

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