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Origin Energy Update

Origin reported statutory loss of $589 million for the year ended 30 June 2016 which was a slight improvement on 2015 (loss of $658 million). The Energy Markets segment continued to drive the result as an improvement in natural gas volumes and margins, a stable electricity contribution (albeit slightly lower volumes) and expense management all helped the bottom line. The Integrated Gas segment continues to struggle with a ~22% decline in underlying EBITDA to $386 million.

 

Over the year Origin reduced net debt from $13.1 billion to $9.1 billion and they are targeting adjusted net debt to be below $9 billion in 2017. From a credit perspective, adjusted debt / EBITDA fell to 5.3x from 6.7x and on a forward basis adjusted leverage should fall to 4.2x in 2017. At the full year results the company decided not to pay a final dividend and to use the funds to repay debt.

 

APLNG continues to be an extremely messy project with EBITDA in the first four months (+$119million) offset by out of the money ramp agreements with Queensland Gas Company (the Australian subsidiary of BG Group). While production is increasing for Train 1 and Train 2 is expected to be completed in 2017, there is still a large amount of uncertainty surrounding the project.

 

Click here for updated research on Origin Subordinated Notes (ASX: ORGHA).