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APLNG makes $1 billion promise to Origin as profits dive

Business

The Origin-led APLNG project would deliver a $1 billion payout to the company this year, marking a dramatic turnaround the sector in Queensland.

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The three LNG projects near Gladstone have had a decade of underperformance and a reported billions in losses through writedowns.

But Origin said cash flows to Origin from Australia Pacific LNG were estimated to be greater than $1 billion in FY2022, net of oil hedging based on an assumption of a realised $US68 a barrel oil price. 

Origin owns 37.5 per cent of APLNG so the total distribution to its owners is likely to be closer to $3 billion.

Australia Pacific LNG was also expected to have stable production of between 685-710 petajoules reflecting strong field performance and a distribution breakeven of between $US20-$25 a barrel.

It generated a payout of more than $700 million to Origin this year.

The company also reported a statutory loss of $2,291 billion for the full-year ended 30 June 2021, primarily comprising $2.2 billion in write downs and a deferred tax liability it announced earlier this year.

 Its underlying profit of $318 million reflected lower commodity prices both in the Energy Markets and Integrated Gas divisions. This was partially offset by lower operating costs in Australia Pacific LNG, retail cost savings, lower interest expense and oil hedging gains.

Origin chief executive Frank Calabria said operating conditions were challenging due to low prices and the impacts of COVID-19 across our key commodities of electricity, natural gas and oil. 

Energy Markets headwinds wre expected to persist into 2022, though this should be largely offset by the strong performance of the integrated gas business, which includes APLNG.

  “There were a number of operational highlights across Origin’s two businesses, contributing to stable cash flows. Australia Pacific LNG was outstanding, safely curtailing output when the market was subdued, and rapidly ramping up production when demand recovered, matching previous daily production records and shipping a record 130 cargoes for the year. Improved field performance and successful appraisal led to a very high reserves replacement ratio.

“Strong field capability and improved productivity helped deliver record low costs, with a distribution breakeven almost half what it was just three years ago, which supported a strong cash distribution to Origin.

“The generation fleet continued to have very high reliability, and Origin was able to respond with increased supply to support reliability and cover unplanned outages at a number of other plants across the NEM. Origin also boosted gas supply and transport arrangements to help address the expected future supply shortage in southern markets forecast by AEMO.

An unfranked final dividend of 7.5 cents a share will be paid.

Underlying EBITDA for its energy markets business was down $991 million. Lower electricity gross profit was driven primarily by the impact of lower wholesale prices on tariffs, higher network and metering costs, and assistance provided to customers adversely affected by the pandemic, partially offset by a reduction in the cost of energy. Lower gas margins were driven by a combination of lower gas tariffs, the roll-off of long-term capacity contracts and higher supply costs.

 

 

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