Origin Energy Limited · ASX:ORG
Origin Energy — HY2019 Earnings Presentation
49 slides from Origin Energy's earnings presentation, Feb 21, 2019
Slide 1: Origin Energy 2019 Half Year Results
Origin Energy 2019 Half Year Results Half year ended 31 December 2018 Frank Calabria, CEO and Lawrie Tremaine, CFO 21 February 2019
Slide 2: Outline
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
Slide 3: Performance Highlights
Performance Highlights Frank Calabria, CEO 3 21 February 2019 2019 Half Year Results Announcement
Slide 4: HY2019 financial summary
HY2019 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
Slide 5: Highlights
Highlights • $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 • $237 million NCOIA in Integrated Gas, after servicing project finance – Stable pr
Slide 6: We are committed to our stakeholders
We are committed to our stakeholders Safe & Engaged People Getting Energy Right for Customers ▪ Employee engagement improved in recent years ▪ Addressing affordability with price reductions ▪ TRIFR increased to 3.4 from 2.2 in FY2018 ▪ Improving transparency through policy ▪ Improved process safety
Slide 7: Addressing affordability and reliability
Addressing affordability and reliability Regulatory environment Origin taking a leading role • Range of regulatory challenges • Reliable generation – Reference bill / Default Market Offer − Maintaining high Eraring output – ‘Big Stick’ policy − Progressing generation upgrades – Gas security policies
Slide 8: Domestic energy market context
Domestic energy market context Renewables growing Lower forward prices Increased competition Solar and wind capacity Electricity Churn rates (GW) (A$/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
Slide 9: LNG market context
LNG 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 dema
Slide 10: Strategy to deliver value in the future energy world
Strategy 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 gro
Slide 11: Operational priorities aligned to our strategy
Operational 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 contract
Slide 12: Dividend reinstated
Dividend 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 politica
Slide 13: Financial Review
Financial Review Lawrie Tremaine, CFO 13 21 February 2019 2019 Half Year Results Announcement
Slide 14: Strong performance in HY2019
Strong 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 - $m 754 351 115 total operations2 Underlying ROCE (rolling 12 months) 8.6% 6.7% 1.9% A
Slide 15: Underlying profit increased 53%
Underlying profit increased 53% Movements in Underlying Profit ($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 Prof
Slide 16: Energy Markets Underlying EBITDA up 2%
Energy 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 (-$111 million) 1 HY18 Electricity Gas Other HY19 • Hig
Slide 17: Integrated Gas Underlying EBITDA up 43%
Integrated Gas Underlying EBITDA up 43% Movements in Underlying EBITDA ($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) (-$97 million) • Mix change, lower LNG partially
Slide 18: Cash from Operating & Investing up 115%
Cash from Operating & Investing up 115% ($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
Slide 19: Proportionate free cash flow and returns
Proportionate 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 exc
Slide 20: Stronger balance sheet, lower interest cost
Stronger 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$63 million) 0x • Redeem €1.0 billion hybrid in Sept-19
Slide 21: Managing commodity price risk
Managing commodity price risk FY2019 oil hedging FY2020 oil hedging 90 FY19 effective price 90 FY20 effective price Effective oil price (U$/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
Slide 22: Portfolio management focused on value creation
Portfolio 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 fie
Slide 23: Operational Review
Operational Review Frank Calabria, CEO 23 21 February 2019 2019 Half Year Results Announcement
Slide 24: Energy Markets
Energy Markets 24 21 February 2019 2019 Half Year Results Announcement
Slide 25: Flexible portfolio adapting to changing market
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 - Busine
Slide 26: Our gas portfolio is a competitive strength
Our 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
Slide 27: Our flexible electricity portfolio is transitioning
Our 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 • Increa
Slide 28: Covered for peak demand
Covered 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
Slide 29: Balancing share and value in Retail
Balancing 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
Slide 30: Targeting a step change in our Retail business
Targeting 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 (<$145/cust) 16.1 159 166 166 149 Jun
Slide 31: Integrated Gas
Integrated Gas 31 21 February 2019 2019 Half Year Results Announcement
Slide 32: Stable production and higher realised prices
Stable production and higher realised prices APLNG production APLNG average realised APLNG average realised (ORG share) domestic gas price LNG price (PJ) (A$/GJ) (US$/mmbtu) 127 127 10.13 7.23 5.20 4.13 HY18 HY19 HY18 HY19 HY18 HY19 • Domestic price increase reflects revenue on oil-linked sales to Q
Slide 33: Cost out on track
Cost out on track Cost per well (A$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
Slide 34: $1.9 billion free cash flow at APLNG
$1.9 billion free cash flow at APLNG APLNG uses of cash (A$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 $1.9 billion • HY2019 cash from APLNG to Origi
Slide 35: FY2019 breakeven guidance update
FY2019 breakeven guidance update Change to Breakeven guidance (US$/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 Fi
Slide 36: Beetaloo
Beetaloo 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
Slide 37: Outlook
Outlook Frank Calabria, CEO 37 21 February 2019 2019 Half Year Results Announcement
Slide 38: FY2019 outlook
FY2019 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 - $1.6 billion (unc
Slide 39: Appendix
Appendix 39 21 February 2019 2019 Half Year Results Announcement
Slide 40: FY2019 breakeven guidance update
FY2019 breakeven guidance update Prior FY2019 Updated FY2019 100% APLNG (A$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
Slide 41: Electricity forward prices by state
Electricity 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 $50 Jul
Slide 42: Statutory to Underlying Profit
Statutory to Underlying Profit Reconciliation from Statutory to Underlying Profit HY2019 HY20181 Change Change ($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 operatio
Slide 43: Segment summary
Segment 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
Slide 44: Disciplined capital allocation
Disciplined 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
Slide 45: Origin's generation opportunities
Origin’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 s
Slide 46: Important Notices
Important 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 re
Slide 47: Important Notices
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
Slide 48: For more information
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.originenerg
Slide 49: Thank You
Thank You es ©