Origin Energy 2019 Half Year Results Half year ended 31 December 2018 - Frank Calabria, CEO and Lawrie Tremaine, CFO 21 February 2019
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Origin Energy 2019 Half Year Results Half year ended 31 December 2018 Frank Calabria, CEO and Lawrie Tremaine, CFO 21 February 2019
Outline 1. Performance Highlights - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 2 21 February 2019 2019 Half Year Results Announcement
Performance
Highlights
Frank Calabria,
CEO
3 21 February 2019 2019 Half Year Results AnnouncementHY2019 financial summary
Statutory Profit Underlying Profit NCOIA3 – Total operations
$796 million $592 million $754 million
45.3 cps 33.7 cps
Up $932 million on HY20181 Up $204 million or 53% on Up $403 million or 115% on HY2018
HY20181,2
Underlying ROCE Adjusted Net Debt Dividend
(12 month rolling)
8.6% $6,058 million 10 cps
declared
Up from 6.7% in HY20181,2 Down $438 million from June 18 Reinstatement of dividend
1) HY2018 represents continuing operations
2) HY2018 has been restated to include certain electricity hedge premiums within Underlying earnings ($57 million pre-tax, $40 million post-tax)
3) Net Cash flow from Operating and Investing Activities (NCOIA). HY2018 cashflow has been restated to reflect a reclassification of movements in futures
exchange collateral balances to operating cash flow, previously in financing cash flows (HY2018: $135 million outflow)
4 21 February 2019 2019 Half Year Results AnnouncementHighlights
• $621 million NCOIA in Energy Markets
– Increase in earnings driven by short-term wholesale gas sales
Strong cash
– Steady output from Eraring, despite a planned unit outage
flows from two
core businesses • $237 million NCOIA in Integrated Gas, after servicing project finance
– Stable production and higher realised prices at APLNG
– $393 million cash from APLNG, partly offset by Origin hedge costs
• APLNG unit cost reductions on track
Focused on – June 2019 run-rate targets: operating breakeven of $100 million from Energy Markets
• Stronger balance sheet, lower interest cost
Disciplined – 32% gearing
capital – APLNG US$4.5b refinance resulting in ~A$100 million p.a. higher
management distributions over the FY2020-FY2025 period (Origin share)
• 10 cps dividend declared
5 21 February 2019 2019 Half Year Results AnnouncementWe are committed to our stakeholders
Safe & Engaged People Getting Energy Right for Customers
▪ Employee engagement improved in recent years ▪ Addressing affordability with price reductions
▪ TRIFR increased to 3.4 from 2.2 in FY2018 ▪ Improving transparency through policy
▪ Improved process safety performance advocacy and The Energy Charter
▪ Organisation-wide safety programs underway to ▪ Ongoing digital transformation – 66% digital
improve safety performance sales increase since HY2017
Partnering with our Communities Transitioning to a Clean Energy Future
▪ $126 million regional procurement in HY2019 ▪ 306 MW contracted solar online in HY2019
▪ Committed to long lasting relationships with our ▪ Targeting a further 773 MW contracted wind
Traditional Owner groups and solar online by 2020
▪ $24 million awarded by Origin Foundation since ▪ Committed to halving emissions by 2032
2010 ▪ TCFD adopted in FY2018
6 21 February 2019 2019 Half Year Results AnnouncementAddressing affordability and reliability
Regulatory environment Origin taking a leading role
• Range of regulatory challenges • Reliable generation
– Reference bill / Default Market Offer − Maintaining high Eraring output
– ‘Big Stick’ policy − Progressing generation upgrades
– Gas security policies • Customer price relief
− Held or reduced tariffs from 1 July 2018
– Government underwriting generation
despite higher wholesale costs in NSW
– No clear federal policy on energy and − Further reduced prices for concession
climate change customers not on a discount from 1
– Proposed return of NEG under Labor January 2019
− No increases for customers in our hardship
program since 2016
• Energy Charter – Industry-led initiative
addressing customer expectations
• Step change in our retail business to
transform the customer experience
• Advocating for the right policy settings
• APLNG remains a significant supplier to the
domestic market
7 21 February 2019 2019 Half Year Results AnnouncementDomestic energy market context
Renewables growing Lower forward prices Increased competition
Solar and wind capacity Electricity Churn rates
(GW) (A$/MWh)
25
30%
250
20
25%
200
15
150 20%
10 5%
8%
100 15%
5
0 50 10%
Jul-17
Jul-18
Jul-19
Mar-20
Mar-21
Mar-18
Mar-19
Nov-19
Nov-20
Nov-17
Jul-20
Nov-18
Jul-16
Jul-17
Jul-18
Oct-18
Oct-16
Jan-17
Oct-17
Jan-18
Apr-18
Apr-17
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Wind Solar Distributed Solar QLD NSW
VIC SA Market Origin
Source: AEMO Source: AEMO Source: AEMO, Origin analysis
8 21 February 2019 2019 Half Year Results AnnouncementLNG market context
Asia LNG demand 2018-2025 (MTPA)
200
180
CAGR: • Strong CY2018 LNG prices:
160 +7.7%
− robust Asian demand
− low inventory levels in Europe
140
109 − liquefaction project delays
102
120 92
87 • China monthly import record in
82 Jan-19 (6.8 million tonnes)
100 74
66
59 • Asian demand expected to
80
increase led by China
60
• Significant new Australian and US
supply expected during 2019 –
40 80
68 71 74 77 2022
60 65
55
20
0
2018 2019 2020 2021 2022 2023 2024 2025
China Asia Other
Source: IHS Connect
9 21 February 2019 2019 Half Year Results AnnouncementStrategy to deliver value in the future energy world
Our strategies
Connecting customers to the energy and technologies of the future
Energy Markets Integrated Gas
Leading Embrace a Develop
Accelerate
customer decentralised Low cost resources to
towards clean
experience and digital operator meet growing
energy
and solutions future gas demand
Disciplined capital management
Employees Customers Communities Shareholders
10 21 February 2019 2019 Half Year Results AnnouncementOperational priorities aligned to our strategy
Simplified retail business centred around the customer
• Targeting >$100 million cost out by FY2021
• New revenue streams (Adjacencies, Centralised Energy Services)
Competitive energy supply in a changing world
Energy Markets
• Targeting 243 MW contracted solar and wind online in H2 FY2019
• Targeting 530 MW contracted wind online in 2020 (at low $50/MWh)
• >100 MW conversion to fast-start generation under consideration
• Shoalhaven expansion – subject to policy settings
Low cost onshore operator
• $500 million cost reduction on track
• Targeting further reductions to ~US$35/boe distribution breakeven
• Investing in exploration
Integrated Gas
Beetaloo opportunity
• Restarting exploration in CY2019 following moratorium
• Targeting two independent liquids-rich gas plays
• Multi decade opportunity
11 21 February 2019 2019 Half Year Results AnnouncementDividend reinstated • The Board has determined to pay a 10 cps HY2019 interim dividend fully franked dividend in respect of HY2019 Ex-dividend date: 1 March 2019 • Provided that market conditions do not Dividend pay date: 29 March 2019 materially change and the regulatory and Amount: 10 cps political environment do not adversely impact operations, we expect to announce Franking: 100% a 10 cps fully franked final dividend at the 2019 full year results • A dividend policy will be announced at the FY2019 full year results 12 21 February 2019 2019 Half Year Results Announcement
Financial
Review
Lawrie Tremaine,
CFO
13 21 February 2019 2019 Half Year Results AnnouncementStrong performance in HY2019
HY2019 HY20181 Change (%)
Statutory Profit/(Loss) $m 796 (136) n/a
Underlying Profit $m 592 388 53
Underlying EBITDA $m 1,727 1,435 20
Net cash from operating and investing activities -
$m 754 351 115
total operations2
Underlying ROCE (rolling 12 months) 8.6% 6.7% 1.9%
Adjusted Net Debt $m 6,058 7,887 (23)
Adjusted Net Debt/Adjusted Underlying EBITDA 3.1x 5.6x (45)
Dividends declared cps 10 - n/a
1) HY2018 represents continuing operations unless stated otherwise and has been restated to include certain electricity hedge premiums within Underlying
earnings ($57 million pre-tax, $40 million post-tax).
2) HY2018 cashflow has been restated to reflect a reclassification of movements in futures exchange collateral balances to operating cash flow, previously in
financing cash flows (HY2018: $135 million outflow).
14 21 February 2019 2019 Half Year Results AnnouncementUnderlying profit increased 53%
Movements in Underlying Profit ($m)
(2)
(97)
221 63
18
Higher APLNG- Debt reduction,
commodity related reduced 592
prices hedging interest margin
388
HY18 EM EBITDA Share of IG - Other Net financing Tax / Other HY19
Underlying APLNG Profit costs Underlying
Profit Profit
1
1) HY2018 represents continuing operations unless stated otherwise and has been restated to include certain electricity hedge premiums within Underlying
earnings ($57 million pre-tax, $40 million post-tax).
15 21 February 2019 2019 Half Year Results AnnouncementEnergy Markets Underlying EBITDA up 2%
Movements in Underlying EBITDA ($m)
(5)
(53) 76
852
834
Electricity gross profit down 7% to $719 million:
• Lower volumes - usage and customer numbers
(-$28 million)
• Price relief, competition & discounts
(-$111 million)
1
HY18 Electricity Gas Other HY19
• Higher wholesale margin as Large Business sales
reprice to market (+$86 million)
HY2019 HY20181 Change
Underlying EBITDA ($m) 852 834 18 Gas gross profit up 24% to $398 million:
Electricity • Higher volumes from short-term sales to wholesale
Volumes sold (TWh) 18.2 18.9 (0.7) customers (+$32 million)
Gross Profit ($m) 719 772 (53)
• Higher Business margins reflecting market driven
Gross Profit ($/MWh) 39.6 40.9 (1.3)
prices (+$44 million)
Average customers (‘000) 2,654 2,686 (32)
Gas
Volumes sold (PJ) 125.5 114.1 11.4
Gross Profit ($m) 398 321 76
Gross Profit ($/GJ) 3.2 2.8 0.4
Average customers (‘000) 1,148 1,116 32
1) HY2018 represents continuing operations unless stated otherwise and has been restated to include certain electricity hedge premiums within Underlying
earnings ($57 million pre-tax, $40 million post-tax).
16 21 February 2019 2019 Half Year Results AnnouncementIntegrated Gas Underlying EBITDA up 43%
Movements in Underlying EBITDA ($m)
54 (30)
(97)
396
(53)
900
Share of APLNG EBITDA up 54% to $1,042 million:
630 Integrated Gas
Share of APLNG Other • Realised LNG price up 40% to US$10.13/mmbtu
(+$367 million) (-$97 million)
• Mix change, lower LNG partially offset by higher
1
HY18 LNG Volume LNG Price Domestic Opex and Commodity HY19 domestic gas sales
Revenue other income Hedging
• Higher royalties and gas purchases, partially offset by
realised operating cost savings
HY2019 HY20181 Change
Integrated Gas – Other -$142 million comprises:
- Share of APLNG ($m) 1,042 675 367 • Oil and LNG hedging costs of $129 million; and
- Integrated Gas Other ($m) (142) (45) (97)
• Origin overhead costs of $13 million
Underlying EBITDA ($m) 900 630 270
APLNG 100%
Sales volumes (PJ)
- Natural Gas 104 97 7
- LNG 236 253 (17)
Realised price (A$/GJ)
- Natural Gas 5.20 4.13 1.07
- LNG 13.28 8.81 4.47
1) HY2018 represents continuing operations unless stated otherwise.
17 21 February 2019 2019 Half Year Results AnnouncementCash from Operating & Investing up 115%
($m) HY2019 HY20181,2 Change
Energy Markets 802 604 198 • Two strong cash flow generating businesses
Integrated Gas (146) (46) (100) • Energy Markets HY2019 cash conversion3
94%; 85% excluding movements in futures
Corporate (including tax paid) (103) (141) 38
exchange collateral of $74 million
Cash from operating activities 553 417 136 • HY2019 distribution from APLNG ($393
million) exceeds FY2018
Capital expenditure (193) (138) (55)
• Capex includes periodic generation
Net distributions from APLNG 393 40 353
maintenance ($92 million)
Interest received 1 - 1
Net Cash from Operating and
754 320 434
Investing Activities (NCOIA)
NCOIA – discontinued
- 31 (31)
operations
NCOIA – total operations 754 351 403
1) HY2018 represents continuing operations unless stated otherwise and has been restated to include certain electricity hedge premiums within Underlying
earnings ($57 million pre-tax, $40 million post-tax).
2) HY2018 cashflow has been restated to reflect a reclassification of movements in futures exchange collateral balances to operating cash flow, previously in
financing cash flows (HY2018: $135 million outflow).
3) Cash from operating activities / Underlying EBITDA.
18 21 February 2019 2019 Half Year Results AnnouncementProportionate free cash flow and returns
Proportionate Free Cash Flow1 Proportionate Free Cash Flow2 Yield Underlying ROCE3
20% 10%
Up 59% or 1,075
1,000 17%
$398 million 8.6%
900
14% 7.7%
8%
800 15%
700 677 716
600 6%
4.9%
500 10%
397 7%
400 4%
300
5%
200
359 2%
280
100
-
HY18 HY19 0% 0%
Origin excl APLNG Origin share of APLNG FY17 FY18 CY18 FY17 FY18 CY18
• Proportionate free cash flow represents the cash available across Origin and share of APLNG available to service debt,
reinvest in growth and deliver shareholder returns
1) HY2018 cashflow is continuing operations and has been restated to reflect a reclassification from financing to operating cashflows of movements in futures
exchange collateral balances.
2) Free Cash Flow Yield based on 12 month rolling Proportionate Free Cash Flow and 30 day VWAP for Origin of $7.31 per share at 20/2/19.
3) FY2017 and FY2018 represent continuing operations and have been restated to include certain electricity hedge premiums within Underlying earnings.
19 21 February 2019 2019 Half Year Results AnnouncementStronger balance sheet, lower interest cost
Adjusted Net Debt/Adjusted
Underlying EBITDA1
6x
5x
4x Origin
3x
Target (2.5 - 3.0x)
• Close to target capital structure
2x • Extending tenor, reducing refinance risk
1x • Decreased interest expense (A$63 million)
0x • Redeem €1.0 billion hybrid in Sept-19, saving
HY18 FY18 HY19 A$50 million p.a.
Target Debt/EBITDA
Debt maturity profile at 31 Dec 20182 ($b) APLNG refinance
2.5
• Refinancing US$4.5 billion (Sept-18 – Feb-19)
2.0 • Upon settlement resulting in:
– ~A$100 million p.a. higher cash distribution
1.5 to Origin over the period FY2020-FY2025
– ~US$3.50/boe reduction in distribution
1.0
breakeven
0.5
-
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29
Capital Markets Debt Hybrid 1) HY2018 represents continuing operations and has been restated to include
Loans & Bank Guarantees - Drawn Loans & Bank Guarantees - Undrawn certain electricity hedge premiums within Underlying earnings ($57 million
pre-tax, $40 million post-tax.
2) Includes post 31 December 2018 refinancing of US$250 million 10 year US
private placement and ~A$550 million (A$ equivalent) via a term loan facility
20 21 February 2019 2019 Half Year Results Announcement
with maturities ranging from 7.0 to 7.4 years.Managing commodity price risk
FY2019 oil hedging FY2020 oil hedging
90 FY19 effective price 90 FY20 effective price
Effective oil price (U$/bbl)
Effective oil price (US$/bbl)
FY19 effective price after FY20 effective price after
80 80 hedging
hedging
70 70
60 US$5/bbl 60
hedge loss
50 50
40 40
40 50 60 70 80 90 40 50 60 70 80 90
FY19 average market oil price (US$/bbl) FY20 average market oil price (U$/bbl)
HY2019 outcomes FY2020 oil hedging
• Oil hedge cost of US$5/bbl over 11 mmbbl • $27 million1 hedge premium
• 11.6 mmbbl hedged at US$48/bbl floor
− A$73 million (including A$17 million premium)
• 3.4 mmbbl capped at US$85/bbl
• LNG hedge and trading cost $56 million mostly
• Estimated Origin JCC exposure of ~23 mmboe
associated with fixed price JKM contracts
FY2019 expected outcomes $190 - $210 million cost FY2020 expected LNG hedge & trading outcomes
• Oil: $115 - $125 million (including $34 million premium) • Estimated LNG hedge cost of $50 - $60 million
• LNG: $75 - $85 million • Cameron/ENN FY2020 value at forward prices
1) AUD/USD: 0.72
$27 million loss
21 21 February 2019 2019 Half Year Results AnnouncementPortfolio management focused on value creation
Rationalising the portfolio
• $231 million sale of Ironbark to APLNG - existing nearby APLNG
infrastructure allows development to occur efficiently
• Exiting LPG Vietnam ~$15 million net cash flow expected in FY2019
• Sale of depleted Heytesbury gas fields to Lochard Energy
Acquisition in growing centralised energy services sector
• $58 million acquisition of OC Energy – approximately 55,000 existing
customers and a further ~30,000 contracted customers expected as
developments are completed
• Builds on existing business – provides scale benefits
22 21 February 2019 2019 Half Year Results AnnouncementOperational
Review
Frank Calabria,
CEO
23 21 February 2019 2019 Half Year Results AnnouncementEnergy Markets 24 21 February 2019 2019 Half Year Results Announcement
Flexible portfolio adapting to changing market
Generation output (GWh) Natural Gas sales mix (PJ)
2,000
160
1,600 Steady output at Eraring
140
Generation
Generation
120
1,200
100
Business -
Business - Wholesale
800 Gas volumes
diverted to Wholesale
80
wholesale gas
customers
400 60
Business - Business -
40 C&I C&I
-
Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Dec-18
20
Eraring (GWh) Gas (GWh) Average Eraring output Retail Retail
-
HY18 HY19
• Eraring availability factor 82% despite an 11 • Decline in gas-fired generation as it plays more
week maintenance outage at one unit of a firming role to renewables allowed more
gas to be directed to wholesale market
25 21 February 2019 2019 Half Year Results AnnouncementOur gas portfolio is a competitive strength
Natural gas external sales (PJ)
250 Retail
customers
200
150 Flexible
Business - supply Business -
100 C&I portfolio Wholesale
50
Generation
0
FY14 FY15 FY16 FY17 FY18 FY19
H1 H2
• Gas growth underpinned by strong supply position
• Enabled additional sales volumes to large wholesale customers
• Will continue to direct gas to the highest value market and optimise seasonality
26 21 February 2019 2019 Half Year Results AnnouncementOur flexible electricity portfolio is transitioning
Energy Position (TWh)
20
Short position
Short position • Continued stable production from Eraring
9%
15
Swap
contracts
Swap • 1 TWh reduction in gas fired generation as it
-3%
contracts
shifts to firming role for renewables
Gas
Gas -32%
10 • Increase in contracted renewables as 306 MW
of low cost PPAs came online
• Higher pool purchases and lower contracted
-2%
5 Coal (Eraring)
Coal (Eraring)
swap volumes
• Energy procurement costs increased by
$8.80/MWh driven primarily by green
22%
-
Renewables Renewables
regulatory schemes, as well as higher hedging
HY18 HY19 costs and generation fuel costs
27 21 February 2019 2019 Half Year Results AnnouncementCovered for peak demand
VIC & SA price Origin VIC & SA position
24 Jan 2019 24 Jan 2019 at 7pm
MW
15,000 3,000
10,000 2,000
$/MWh
Max Temperature
5,000 SA: 45.8°C 1,000
VIC: 40.8°C
0 -
Peak demand Supply
2:00
9:30
17:00
21:30
0:30
8:00
12:30
14:00
5:00
3:30
11:00
18:30
15:30
20:00
6:30
23:00
Retail Business
VIC SA Generation (inc Pelican Point) Renewable PPAs
Hedge contracts
Source: AEMO
• Baseload and peaking generation able to effectively respond on extreme demand days
28 21 February 2019 2019 Half Year Results AnnouncementBalancing share and value in Retail
Customer accounts Customer activity Customer movement
(‘000) (‘000 customers) 15 (‘000 customers)
HY2019
4,000 1,400
10
1,200
5
3,000
1,000 0
800 (5)
2,000
600 (10)
400 (15)
1,000
(20)
200
(25)
- 0
Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 NSW VIC QLD SA
HY18 HY19
Electricity Gas Wins Retains Electricity Gas
• Stable customer base with ~1% • Customer lifetime value • Net customer loss of
total loss since June 2016 approach to attract and retain 28,000 in HY2019
(primarily electricity)
29 21 February 2019 2019 Half Year Results AnnouncementTargeting a step change in our Retail business
Transform Target market
Grow new
customer leading cost
revenue streams
experience position
Energy Markets – Cost to serve Centralised Energy Services customers
(‘000)
($171/cust)
Interaction NPS
21.7 21.5 85
18.0
46 ($100m cost out 17
by FY2021 12
Effortless digital experience
11
•
Dec-17 Jun-18 Dec-18
Residential Business
30 21 February 2019 2019 Half Year Results AnnouncementIntegrated Gas 31 21 February 2019 2019 Half Year Results Announcement
Stable production and higher realised prices
APLNG production APLNG average realised APLNG average realised
(ORG share) domestic gas price LNG price
(PJ) (A$/GJ) (US$/mmbtu)
127 127 10.13
7.23
5.20
4.13
HY18 HY19 HY18 HY19 HY18 HY19
• Domestic price increase reflects revenue on oil-linked sales to QGC and incremental sales at market
• LNG price mainly reflects higher realised oil prices
32 21 February 2019 2019 Half Year Results AnnouncementCost out on track
Cost per well (A$m/well)1 Operating cost (A$/GJ)2,3
2.4
1.3
1.2
1.9 1.1 1.1
1.7 1.0
1.2 1.2
FY18 FY18 HY19 Run Rate June 2019 FY18 FY18 HY19 Run Rate June 2019
Baseline (Actual) (Actual) (Current) (Target) Baseline (Actual) (Actual) (Current) (Target)
• Cost per well and operating cost per GJ targets remain on track
• Savings delivered through:
− Implemented smaller, leaner asset led model
− Simplified well design approach and competitive tendering ($/well)
− Streamlined maintenance and reduced electricity costs ($/GJ)
1) Standard vertical unfracked Surat well
2) Excludes pipeline and major turnaround maintenance costs
3) FY2018 $/GJ restated to exclude pipelines and major turnaround maintenance costs
33 21 February 2019 2019 Half Year Results Announcement$1.9 billion free cash flow at APLNG
APLNG uses of cash (A$m) (100%)
• Effective oil price of US$73/bbl 4,000
• $1.2 billion distributable cash flow 3,500
after debt service (Origin’s 37.5% $1.2 billion
distributable
share $447 million). 3,000 cash flow $1.9
billion
• HY2019 cash from APLNG to Origin free cash
2,500
of $393 million ($116 million HY2018) flow
• Remaining $54 million (Origin share) 2,000
retained by APLNG for operational
and debt requirements 1,500
1,000
500
-
HY18 HY19
Distributable cash flow Project finance principal
Project finance interest Capital expenditure
Working capital and other Operating costs
34 21 February 2019 2019 Half Year Results AnnouncementFY2019 breakeven guidance update
Change to Breakeven guidance (US$/boe)
US$39-44/boe US$39-42/boe
(1.1) 0.9 (2.3) 1.3 (0.8)
17 - 18 16
22 - 26 23 - 26
Prior FY19 FX rate 1 Sales mix Capital Operating Net interest Updated FY19
Guidance expenditure expenses paid Guidance
Operating breakeven Project Finance
• Change in sales mix, adversely impacting breakeven metric despite expected cash flow benefits
− Higher customer nominations on long-term LNG contracts offset by lower spot LNG gas sales
• Lower capital expenditure due to well cost savings, scope and timing changes
• Higher operating expenses due to additional gas purchases to offset reduced non-operated production
• Decrease in project finance costs primarily due to refinancing
• Detailed breakdown in Appendix
1) FX Rate: Prior guidance 0.75 AUD/USD, updated guidance 0.72 AUD/USD
35 21 February 2019 2019 Half Year Results AnnouncementBeetaloo
Facts:
• 70% interest in 18,500km2 permit
• Four, stacked, unconventional plays
• 6.6 TCF 2C contingent resource relating
to Velkerri B shale dry gas play
Preparation for CY2019 drilling continues
• Sacred site clearances completed
• Water monitoring bore drilling
• Ensign 963 drilling rig secured
Stage 2 appraisal
• Two horizontal wells to be drilled,
fracture stimulated, and put on extended
Best
Measured and Estimated Parameters Units
Estimate3 production test, targeting:
P50 area (from Contingent Resource
km2 1,968 − Kyalla shale liquids-rich gas
area distribution)
Original Gas In Place (OGIP)1 (Gross) TCF 61.0 − Velkerri shale liquids-rich gas
2C Contingent Resource (Gross) TCF 6.6 • Results expected over 2019/2020
2C Contingent Resource (Net to Origin)2 TCF 4.6
1) OGIP presented is the product of the P50 Area by the P50 OGIP per km 2.
2) Net to Origin’s 70% interest in EP76, EP98, and EP117.
3) Origin is not aware of any new information or data that materially affects the information included in the announcement to the ASX on 15 February 2017 and all
material assumptions and technical parameters underpinning these estimates continue to apply and have not materially changed.
36 21 February 2019 2019 Half Year Results AnnouncementOutlook
Frank Calabria,
CEO
37 21 February 2019 2019 Half Year Results AnnouncementFY2019 outlook
Provided that market conditions do not materially change and the regulatory and political
environment do not adversely impact operations
Origin expects higher Underlying Profit compared to FY2018 and further debt reduction
Energy Markets
• Underlying EBITDA of $1.5 - $1.6 billion (unchanged)
− Lower Electricity gross profit expected in H2 FY2019 compared to H2 FY2018
▪ Price relief initiatives ($60 million);
▪ LREC trading gains in the prior period not repeating ($30 million)
▪ Continued impacts of retail competition and lower usage.
− Stable Natural Gas gross profit in H2 FY2019 compared to H2 FY2018
APLNG (100%)
• Production range of 665-685 PJ and 250-300 operated wells drilled
• Long-term LNG buyers have not exercised downward nomination flexibility in CY2019
• Operating breakeven of US$23-26/boe and distribution breakeven of US$39-42/boe
Corporate/Other
• Costs of $60-65 million at EBITDA
• Capex of $385-445 million, excluding APLNG capex and OC Energy acquisition
• 10 cps fully franked final dividend
38 21 February 2019 2019 Half Year Results AnnouncementAppendix 39 21 February 2019 2019 Half Year Results Announcement
FY2019 breakeven guidance update
Prior FY2019 Updated FY2019
100% APLNG (A$m)
Guidance1 Guidance1 • Lower capex due to well cost savings,
Capex – Sustain 1,450 1,320 scope and timing changes
Capex – E&A 200 140 • Higher opex due to additional gas
Opex – pre capitalisation2 1,570 1,690 purchases
Spot LNG & domestic revenue (1,350) (1,050)
• Decrease in project finance principal
due to refinancing
Operating breakeven 1,870 2,100
• Net financing costs increased as
Operating breakeven (US$/boe) 22 – 263 23 - 263 refinancing savings were offset by a
lower FX rate and one off refinancing
Net interest paid 460 490
costs
Project finance principal 860 820
• Change in sales mix – higher
Distribution breakeven 3,190 3,410 customer nominations on oil-linked
Distribution breakeven contracted volumes offset by lower
39 – 443 39 - 423 spot LNG gas sales
(US$/boe)
Sales Volumes 100% APLNG Prior FY2019 Updated FY2019
(PJ) Guidance Guidance
Contract LNG 427 461
Domestic & Spot LNG 232 200
Total Sales Volumes 659 661
Contract LNG (mmboe) 56.4 60.8
1) FX Rate: Prior guidance 0.75 AUD/USD, updated guidance 0.72 AUD/USD.
2) Operating costs estimate reflects royalties payable at the breakeven oil price. Royalties payable increases as oil price increases.
3) Range represents variability around work program scope, operating costs and non oil-linked revenue.
40 21 February 2019 2019 Half Year Results AnnouncementElectricity forward prices by state
$110 $110
VIC NSW
$100 $100
A$/MWh
A$/MWh
$90 $90
$80 $80
$70 $70
$60 $60
$50 $50
Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17
$110 $110
QLD SA
$100 $100
A$/MWh
A$/MWh
$90 $90
$80 $80
$70 $70
$60 $60
$50 $50
Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17
41 21 February 2019 2019 Half Year Results AnnouncementStatutory to Underlying Profit
Reconciliation from Statutory to Underlying Profit
HY2019 HY20181 Change Change
($m) ($m) ($m) (%)
Statutory Profit/(Loss) - continuing operations 796 (136) 932 n/a
Statutory Profit/(Loss) – discontinued operations - (71) 71 n/a
Statutory Profit/(Loss) - total operations 796 (207) 1,003 n/a
Items Excluded from Underlying Profit (post-tax):
Fair value and foreign exchange movements 158 (154) 312 n/a
Oil and gas derivatives 76 (91) 167 n/a
Electricity derivatives (58) (42) (16) 38
FX and interest rate derivatives (24) 41 (65) n/a
Other assets/liabilities 214 (7) 221 n/a
Foreign exchange loss on LNG financing (50) (55) 5 (9)
Disposals, impairments and business restructuring 46 (595) 641 n/a
Total Items Excluded from Underlying Profit (post-tax) 204 (749) 953 n/a
Underlying Profit - total operations 592 542 50 9
Underlying Profit/(Loss) - discontinued operations - (154) 154 n/a
Underlying Profit - continuing operations 592 388 204 53
1) HY2018 has been restated to include certain electricity hedge premiums within Underlying earnings ($57 million pre-tax, $40 million post-tax)
42 21 February 2019 2019 Half Year Results AnnouncementSegment summary
Energy Markets Integrated Gas Corporate
Total continuing
Half year ended 31 Share of APLNG Other operations
December
($m)
1,2 1,2
HY2019 HY2018 HY2019 HY2018 HY2019 HY2018 HY2019 HY2018 HY2019 HY2018
Underlying EBITDA 852 834 1,042 675 (142) (45) (25) (29) 1,727 1,435
Underlying EBIT 656 663 307 86 (150) (53) (25) (29) 788 666
Underlying
656 663 307 86 (35) 62 (336) (423) 592 388
Profit/(Loss)
Operating cash flow 802 604 - - (146) (46) (103) (141) 553 417
Investing cash flow (180) (124) 393 40 (10) (10) (2) (4) 201 (98)
NCOIA 621 481 393 40 (156) (56) (105) (144) 754 320
1) HY2018 represents continuing operations unless stated otherwise and has been restated to include certain electricity hedge premiums within Underlying
earnings ($57 million pre-tax, $40 million post-tax)
2) Net Cash flow from Operating and Investing Activities (NCOIA). HY2018 cashflow has been restated to reflect a reclassification of movements in futures
exchange collateral balances to operating cash flow, previously in financing cash flows (HY2018: $135 million outflow)
43 21 February 2019 2019 Half Year Results AnnouncementDisciplined capital allocation
Origin capital HY2019 HY2019 Project detail
expenditure
• Power of Choice
Mandatory $15 million
• LPG
• Periodic generation maintenance
Sustain $130 million • LPG
• Solar and Energy Services
• QPS repower (unit 1)
Committed
$48m million • Digitisation
Growth
• Beetaloo – Stage 2 E&A
$193 million
• Tracking consistent with full year guidance of $385 - $445 million
44 21 February 2019 2019 Half Year Results AnnouncementOrigin’s generation opportunities
Mt Stuart Power Station
4 MW grid battery installation
On track for completion mid-2019
Darling Downs Power Station
Option for site expansion
Eraring
Flexible operations projects to
support renewable penetration
Additional transmission available
to support battery storage options
Shoalhaven Pump Hydro
Quarantine Power Station
Potential expansion of
Unit 1 fast-start repower in final Stockyard Hill (contracted PPA) generation capacity by 235 MW
stages of commissioning 530 MW expected online 2020
Feasibility to be completed
Additional conversion to fast-start
2019
under consideration
Mortlake Power Station
Expansion option for 3 new turbines
Option for a grid scale battery
(55 MW additional capacity per Existing generation
turbine) Option for additional gas turbines
Contracted PPAs
45 21 February 2019 2019 Half Year Results AnnouncementImportant Notices Forward looking statements This presentation contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. Such statements are not statements of fact and there can be no certainty of outcome in relation to the matters to which the statements relate. These forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events or results expressed or implied by such statements. Those risks, uncertainties, assumptions and other important factors are not all within the control of Origin and cannot be predicted by Origin and include changes in circumstances or events that may cause objectives to change as well as risks, circumstances and events specific to the industry, countries and markets in which Origin and its related bodies corporate, joint ventures and associated undertakings operate. They also include general economic conditions, exchange rates, interest rates, regulatory environments, competitive pressures, selling price, market demand and conditions in the financial markets which may cause objectives to change or may cause outcomes not to be realised. None of Origin Energy Limited or any of its respective subsidiaries, affiliates and associated companies (or any of their respective officers, employees or agents) (the Relevant Persons) makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward looking statement or any outcomes expressed or implied in any forward looking statements. The forward looking statements in this presentation reflect views held only at the date of this presentation. Statements about past performance are not necessarily indicative of future performance. Except as required by applicable law or the ASX Listing Rules, the Relevant Persons disclaim any obligation or undertaking to publicly update any forward looking statements, whether as a result of new information or future events. No offer of securities This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose of any securities in Origin, in any jurisdiction. 46 21 February 2019 2019 Half Year Results Announcement
Important Notices All figures in this presentation relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the reporting period ended 31 December 2018 (the period) compared with the reporting period ended 31 December 2017 (the prior corresponding period), except where otherwise stated. Origin’s Financial Statements for the reporting period ended 31 December 2018 are presented in accordance with Australian Accounting Standards. The Segment results, which are used to measure segment performance, are disclosed in note A1 of the Financial Statements and are disclosed on a basis consistent with the information provided internally to the Chief Executive Officer. Origin’s Statutory Profit contains a number of items that when excluded provide a different perspective on the financial and operational performance of the business. Income Statement amounts presented on an underlying basis such as Underlying Consolidated Profit, are non-IFRS financial measures, and exclude the impact of these items consistent with the manner in which the Chief Executive Officer reviews the financial and operating performance of the business. Each underlying measure disclosed has been adjusted to remove the impact of these items on a consistent basis. A reconciliation and description of the items that contribute to the difference between Statutory Profit and Underlying Consolidated Profit is provided in the Operating and Financial Review. This presentation also includes certain other non-IFRS financial measures. These non-IFRS financial measures are used internally by management to assess the performance of Origin’s business and make decisions on allocation of resources. Further information regarding the non-IFRS financial measures and other key terms used in this presentation is included in this Appendix. Non-IFRS measures have not been subject to audit or review. Certain comparative amounts from the prior corresponding period have been re-presented to conform to the current period’s presentation. A reference to Australia Pacific LNG or APLNG is a reference to Australia Pacific LNG Pty Limited in which Origin holds a 37.5% shareholding. Origin’s shareholding in Australia Pacific LNG is equity accounted. A reference to $ is a reference to Australian dollars unless specifically marked otherwise. All references to debt are a reference to interest bearing debt only. Individual items and totals are rounded to the nearest appropriate number or decimal. Some totals may not add down the page due to rounding of individual components. When calculating a percentage change, a positive or negative percentage change denotes the mathematical movement in the underlying metric, rather than a positive or a detrimental impact. Measures for which the numbers change from negative to positive, or vice versa, are labelled as not applicable. 47 21 February 2019 2019 Half Year Results Announcement
For more information Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Liam Barry Senior Manager, Investor Relations Email: liam.barry@originenergy.com.au Office: +61 2 9375 5991 Mobile: + 61 401 710 367 www.originenergy.com.au 48 21 February 2019 2019 Half Year Results Announcement
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