Origin Energy’s Shares Uplifted On ASX After Reaffirming The FY19 Guidance

Origin Energy

Origin Energy Limited (ASX: ORG) has reaffirmed its FY 2019 guidance in the 2018 Investor Day Briefing, following which the share price of Origin increased by 3.566 percent on 7 December 2018.

Origin Energy is expecting its 2019 Underlying Profit to be higher than FY 2018, and it also expects further debt reduction in FY 2019.  As per the FY19 guidance, the Underlying EBITDA of the company is expected to be in the range of $1,500-1,600 million. Further, the company is expecting the costs of $60-65 million and Capital expenditure (ex-APLNG) of $385-445 million in FY 2019.

The liquefied natural gas (LNG) hedging cost of $75-85 million is expected in FY 2019 at current market prices. Further, the oil hedging cost of $145 million (including premiums) is expected in 2019 at an average lagged oil price above US$75/bbl. The company is targeting an operating breakeven of US$22-26/boe and distribution breakeven of US$39-44/boe in FY 2019.

In the Investors day briefing, the company also informed about the Global trends in energy markets and the current opportunities which are arising from changes in technology and customer mindset. The company discussed the new business models which are around connected customer experiences. The company also informed that it is opposing the draft legislation which was recently put before Parliament as it will increase the investment risk in the generation and may drive up the prices for customers.

The company also reported that the pre-tax returns on capital employed from the company’s energy markets business over the past five years have averaged 9.7 percent. The company’s new business models are going to connect distributed assets and data to customers. The company is planning to develop a platform which will connect millions of distributed assets. The company is also planning to develop a leading digital and analytics capability by leveraging machine learning and Artificial Intelligence which will optimize the future decentralized portfolio.

The company is continuing to prioritize the debt repayment until the target capital structure is reached. Provided that the market conditions do not materially change, or the regulatory and political environment does not adversely impact operations or prospects, the company expects a fully franked 20 cents per share (cps) dividend for FY 2019 with a 10 cps fully franked interim dividend declared in the first half of FY 2019. The company is planning to announce a dividend policy based on a free cash flow ratio at the FY2019 full-year results.

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In the next 18 months, the company is planning to redeem €1.0 billion (A$1.4 billion) hybrid and around $50 million annualized saving. The company is also planning to refinance A$1 billion with new 7-10 year tenor debt.  Currently, Origin Energy is having two strong and diversified cash-generating businesses, and it is expecting a further upside potential in its Integrated Gas business.

Meanwhile, the share price of the company has fallen by 30.26 percent in the last six months, as on 6 December 2018. ORG’s shares traded at $6.970 with a market capitalization of circa $11.84 billion as on 7 December 2018 (AEST 1:52 PM).


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