Origin Energy Limited: Recent developments

  • Feb 20, 2019 AEDT
  • Team Kalkine
Origin Energy Limited: Recent developments

Energy player, Origin Energy Limited (ASX: ORG) made an announcement on 19th February 2019 that it has entered into an agreement to sell its Ironbark project in Queensland's Surat Basin to Australia Pacific LNG for $231 million which is subject to ACCC and foreign investment approvals. The reserves of this project stand at 192 PJ of 3P reserves and 129 PJ of 2P reserves. It is not a surprise move as Origin had already announced in August 2018 that it is looking at the strategic options for this asset while entering the stage 1 Front end engineering design.

The CEO of Origin said that the sale of this asset is the best way to maximise the potential out of it. The gas can be brought to the market at a much lower price by efficiently utilising the nearby gas and water processing infrastructure that Australia Pacific is equipped with. But Origin will continue to get the benefits out of all the developments in Ironbark through its investments in Australia Pacific LNG which represents 37.5% stake of the company and its role as an upstream operator for Ironbark.

In due course of the sale of the asset, Origin expects to book a non-cash impairment of $34 million in the half-yearly result of 2019. The company also expects to get tax benefits of $68 million by the sale of the asset which will offset the net impact to statutory profit.

A major development was announced by the company on 15th February 2018 that it had entered into an agreement to acquire OC Energy for $58 million. The company would pay $33 million upfront for the deal with deferred payment of $25 million. The decision has been taken primarily to expand the centralised energy services business which offers serviced hot water, natural gas and electricity via embedded networks.

On 31st January 2019, Origin Energy Limited announced its quarterly result for the year ended 31st December 2018. On the revenue front, Origin has delivered its highest quarterly commodity revenue of $740.9 million (Origin's share of Australia Pacific LNG) from Integrated gas which is 45% more than the revenue in the same quarter last year which was $509.8 million. This increase in the revenue was primarily due to the increased realised price of LNG.

However, due to lower usage and customer number, the electricity sales volume saw a plunge of 5% to 8.7 TWh from the sales volume of the same quarter last year which was 9.2 TWh. Highest sales volume came from the business segment with 4.9TWh, and retail segment contributed to the remaining 3.8 TWh.

Looking at the natural gas sales volume, it marginally increased by 1% from 64.2PJ to 65PJ compared to same quarter last year but decreased by significant 21% when compared to the previous quarter of the same year, indicating fluctuating demand. Here also the business segment outshined the retail segment by generating sales of 58PJ and the remaining 7PJ being contributed by retail segment. Queensland and Victoria remained the significant regions of natural gas sales for the company in the entire quarter.

The shares of the company closed the trading session at A$7.590, down 0.914% as on 20 February 2019. The stock has generated a YTD return of 21.20% so far.


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